WHAT IS A MANAGEMENT AGREEMENT? A Management Agreement is the term used fairly widely referring to the contract used between a Management Company and an Owner of a property. What is included in these agreements varies widely. Not just geographically. You can see quite a disparity in contracts used by companies in the same town. Some companies will charge a monthly fee for vacant properties, others may not. Some companies will make a profit on repairs, others may not. Some companies will hold the security deposit, others may not. Some companies may negotiate fees, others may not.

DO YOU KNOW WHAT YOU SIGNED? Sounds like a pretty simple question, but most people will sign 1000s of papers in their lifetime without reading them. Now, don't get me wrong, I am guilty of this, too. However, sitting on the other side of the desk on this document, I know how important it is. The management agreement is a very important document that assigns duties, obligations, liabilities, fees, and limitations on both parties. And most of the time it is dealing with a fairly large asset. Not to mention that depending on how your assets are structured (trusts, LLCs, corporations, etc...), you may be exposed to even more liability than just the value of the property being managed under the agreement.

YOU SEE, I GET CALLS ON A DAILY BASIS ASKING FOR CLARIFICATION, things like: "John, what is this charge for?" or "John, I didn't give you permission to do that!"

Oh, yes you did.

PLEASE DON'T MISUNDERSTAND, I AM NOT SAYING THAT FACETIOUSLY. You see, my job is to take care of the property for the owner who has charged me with this. For instance, here is a line from our management agreement that causes a lot of questions:

•To contract for repairs or alterations at a cost to Owner not to exceed $250.00.

That line means that if a repair needs to be done, and the price is not over $250.00, I am going to get it done. However, I get more than a few calls asking why I did a repair. The answer is usually the same, "because it was broken".

I AM NOT GOING TO GET INTO WHETHER A REPAIR NEEDS TO BE DONE, that is a different post. I am simply trying to express the importance of understanding what you are signing. The MANAGEMENT AGREEMENT is a very important document. It allows the Management Company to do a number of things in your name that you are responsible for!  For instance, if the tenant calls and tells the management company about mold, and the management company does not respond correctly, you could be held responsible for the management company's actions. It is very similar to power of attorney. Would you have a suit against the management company? Probably, but it would still be a long, arduous process. Better to understand the agreement and avoid entering into a contract that you don't want to be in.

OK, JOHN, HOW DO I DECIDE IF I SHOULD SIGN? Let me start by saying this: A good company is not going to want you to sign an agreement that you are not comfortable with. That is a recipe for complications down the road. That said, my personal opinion is that you should either 1) understand and feel comfortable with everything in the agreement or 2) have an attorney look it over. However, I must offer a "heads-up". If you pay an attorney to look over a document, they are going to find something. Please be aware that just because they found something doesn't necessarily mean it needs to be changed. It may just need to be completely understood.

I WOULD LOVE TO BE YOUR RESOURCE FOR ANSWERING ANY QUESTIONS YOU MAY HAVE ABOUT PROPERTY MANAGEMENT. Please do not hesitate to call or e-mail me. And remember,  real estate is a very good investment. Oh, and by the way,