One of the primary duties of a property management firm is to ensure that a real estate asset is being properly maintained.
While some firms are set up to complete the majority of these services in house, most will use third-party service providers to perform at least some of these tasks. Therefore, the contract between the management company and the service provider becomes a critical document. This month, we are going to review some of the key components that any property management service contract should include.
One of the most important things actually isn’t a component at all, it’s the document. While nearly all service providers will have a standard document associated with their specific business, we recommend that the property manager not only have a standard document of their own reviewed by counsel, but push to use this with all of the service providers. In doing so, this will ensure that the most important components are included and enforceable. As with any negotiation, leverage is the key here – whoever has more leverage will usually be able to influence whose form is used. However, this is one of the items to which we try to strongly adhere.
There are five basic components that should be included. The first is the very reason the agreement exists – general guidelines and performance. This outlines the nature of the work or services that are to be completed, how it will be done, where it will be done and for whom it will be done. Think of this as the summary of a book, as it provides an overview of the agreement.
The second component details the ex-act scope of services to be completed. This section outlines the specific service needs of the property and expectations of the provider. For example, a snow removal contract will include under what conditions that snow and ice will be removed, what areas will be plowed or shoveled, when they will be treated and other requirements. The more specific this section is, the less chance there is for misunderstandings to occur, so be sure that this component is detailed and precise. Click here to download entire article.