Property Management Agreements

what is important - and what a property management agreement CAN'T tell you



When you (as a property owner) enter into a legal relationship with a property management company you will need to sign a Property Management Agreement. This agreement outlines the legal terms and obligations of the relationship.

Below we highlight the 8 most important parts of a Property Management Agreement you should review before you enter into this legal relationship. Be sure to read to the end, as we tell you the most important things that the agreement CAN'T tell you.

1. How Easy Is It To Cancel The Agreement?

This may sound like a strange thing to review in the agreement, but we believe it is one of the most important parts of the agreement because it shows the property management companies willingness to give you flexibility in allowing you to leave if you are ever unhappy with their service. A property management company should not handcuff you or force you to work with them, nor should they charge you termination fees or penalties if you leave. Ideally, you want a month-to-month agreement, allowing you to potentially leave anytime you want – and without penalty!

-Our management agreement is month-to-month with NO termination fees or penalties


2. Are The Fees Hidden In the Agreement?

You can expect the company to charge fees for the services they provide, but are those fees transparent and fair?

If the fees are ‘hidden’ throughout the agreement that could be an indication that the company is not being transparent in what they will charge you.

-View our fee structure at the link below https://www.rentgrace.com/pricing

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3. Was the Agreement Prepared By An Attorney?

The state of Colorado requires by law that an attorney prepare a Property Management Agreement specific for the company, and this must be disclosed in the agreement.

If the agreement does not have language stating it was prepared by ‘xxx Law Firm’ then you should assume the company is not operating under the required laws of Colorado.

-Our management agreement is prepared by the Colorado law firm Tschetter / Sulzer PC


4. How Much Money Do I Have To Place In Reserve?

Your Colorado property management company should open a banking trust account for you and you will need to fund this account with what is commonly referred to as a reserve. This money is used to fund your account and may also be used to pay expenses on the property that are incurred before or after you receive the rental income each month.

Reserve amounts vary, but you should expect this amount to be anywhere from a few hundred dollars, up to one full months rent.

-We require an escrow reserve of $300


5. How Fast Do I Get My Money?

When a tenant pays rent, how quickly does the property management company process the accounting of those funds and pay you?

You want your money quickly! So be sure you will receive it no later than the 15th day of the month.

-We close our accounting cycle on the 10th day of each month and disburse funds through a secure ACH transfer directly into your bank account


6. What Is The Maintenance Trigger?

One of the reasons you hire a property management company is so that YOU don’t have to be bothered with the day-to-day issues and problems that happen – including routine maintenance and repair items.

Eventually the toilet is going to run, the sink is going to drip, and the oven is going to break.

For the protection of your property and to comply with health and safety laws, your property management company MUST have strong maintenance protocols in place. These protocols should clearly define when repairs are tenant vs owner responsibility, what constitutes a maintenance emergency, when to repair vs replace, and when you (as the owner) should be involved.

Be sure you understand when you will have to become involved in repair requests.

-We handle all repair issues and don’t bother you for items under $500


7. What Are The Guarantees?

Two of the common fears we hear from owners are:

  1. What if my tenant does not paid rent and has to be evicted?
  2. What if a pet does damage to my property?

If either of those things happen how will the property management company respond and what will they do to help?

While it can’t be guaranteed that a tenant will always pay on time – will your property management company re-rent the property for free? Or better yet will they pay the legal fees on your behalf?

While it can’t be guaranteed that a pet won’t do damage to the property – will your property management company pay for any of the pet damage themselves?

While guarantees like these are not common – ask “What DO you guarantee for me!”

-We will pay you up to $1,000 in legal fees or pet damage. Click here for details https://www.rentgrace.com/risk_guarantee


8. Who Handles Evictions?

Although evictions should be rare, if a legal problem must be addressed, will the property management company do it for you or will they hand the problem back to you?

You want to be sure that the company will handle ALL legal problems on your behalf.

Beware of any management agreement language that requires YOU to involve YOUR legal counsel in cases of tenant eviction.

-Although rare, if an eviction is necessary, we oversee the entire legal process from start to finish


What the Property Management Agreement Can’t Tell You-

Because Property Management Agreements are written by attorneys to outline the legal relationship between you and the company, they can’t tell you what you need to know most.

They can’t describe the most important parts of your new relationship– things like integrity, honesty, professionalism, communication, compassion, wisdom, and the list goes on.

These are the most important things to consider before entering into a relationship with a property management company.

-You are NOT entering into a transaction, as much as you are entering into a relationship.

I hope this information will help you make an informed decision for your property management needs. Please consider me a resource if I can help you in any way!

Marc Cunningham, Owner / Marc@RentGrace.com / 303-255-1990 x11