During the process of hiring a property management company, the Homeowners Association (HOA) will have to face the challenge of reviewing the property management contract. Most companies will have a standard contract, but don’t sign right away. You’ll want to pay special attention to the fine print and details, such as terms, cancellation rights, and fees. If things aren’t crystal clear, ask as many questions as you need. Not doing so can lead to misunderstandings down the line. And don’t worry – you’ll be able to make any changes if needed. 

A property management contract can be broken down into these categories:

1. Responsibilities and Fees

This is the section of the contract that should list out the services that are being agreed upon 

and how those services will be performed. This section will also break down the fees. Take some extra time to see how the fees are broken down and if there are extra fees for certain services. You’ll also find details about what your responsibilities as the HOA are in this section. Pay special attention here because you’ll want to know what you’re agreeing to. 

 

2. Termination Clause

Make sure the contract has a clear termination or cancellation clause. This section will detail under what circumstances you or the property manager can end the relationship and what fees will be incurred. Some specific things to look out for are:

  • Notice to Terminate: Make sure there’s a specified number of days.
  • Fee for Early Termination: Fees often will vary from a few hundred dollars to having to pay all fees the management company would have been paid for the remaining length of their contract.
  • Reason to Terminate: You’ll want a contract that does not require cause to terminate the contract.
  • Obligations Upon Termination: There will be a list of responsibilities that must happen upon termination and the time window it must be completed within.

 

3. Liability and Other Common Items

All property management contracts will list out what the company can and cannot be held liable for. This section is sometimes referred to as the “hold harmless” clause and protects management companies, except where they have been negligent. The property manager is not responsible for the negligence of vendors they hire. To protect yourself, include a “reasonable care” clause in the contract. This means that the property manager is not liable if, and only if, “reasonable care” has been taken when hiring the vendor – they did their research and did not hire a vendor with a history of complaints.

Other common clauses you may run into are:

  • Entire Agreement: The contract is the final version of the agreement and supersedes all prior written and oral proposals.
  • Modification: The contract can only be modified by a written agreement executed by both parties.
  • Assignments: The property management company can transfer their contract to another management company without your consent.
  • Governing Law; Venue: What states’ laws will govern the contract’s interpretation.

 

Most importantly, once you have reviewed the contract, have your HOA’s attorney (if you don’t have one, find an experienced attorney in the area) to review the contract. The attorney can alert you if there are any issues and changes needed. Once you get the green light, it’s time to sign and build that lasting relationship with your property management company!

 

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