Seven clauses to read carefully in a property management agreement

Management agreements are not long, and owners still tend to read only the fee. These are the clauses worth your attention — whoever you sign with.

1. What the fee is charged on

"8% of rent" is ambiguous on purpose. Collected rent or scheduled rent? If it is scheduled rent, you pay the fee on months where nothing was collected. Get the words collected rent in writing.

2. The maintenance authorization limit

Look for the dollar amount the manager may spend without asking you, and whether you can change it. If the agreement does not name a number, the number is unlimited.

Also look for what counts as an emergency that bypasses it. A broad emergency definition makes the threshold decorative.

3. Maintenance markup and coordination fees

Search the document for "markup", "administrative fee", "coordination fee" and "supervision fee". A 10% markup on $3,000 of annual maintenance is $300 a year that never appears in the headline rate.

4. Leasing and renewal fees

Placement fees vary from a flat fee to a full month's rent. Renewal fees vary from nothing to several hundred dollars. Over a five-year hold with one turnover and four renewals, this line can outweigh the management fee difference entirely — so do that arithmetic before you compare percentages.

5. Termination

• How much notice is required?
• Is there a termination fee?
• Are you required to honour existing leases with that manager after termination?
• Who holds the deposits, and how are they transferred?

A 90-day notice period with a termination fee is not unusual. It is also not something you want to discover on the day you decide to leave.

6. Who the manager may hire

Some agreements permit the manager to use an affiliated or in-house maintenance company. That is not inherently a problem — it is often faster and cheaper — but it should be disclosed, and you should retain the right to decline and use your own contractor. If an affiliate relationship exists and the agreement does not mention it, that is the part to ask about.

7. Reporting obligations

What are you actually entitled to receive, and when? "Periodic statements" is not a commitment. A named date is.

If you already have an agreement in place and would like a straight reading of what it says, send it to us. We will tell you what your notice period is and what switching involves — including if the honest answer is that you should stay where you are.

This is general information about what to look for in a contract, not legal advice. For advice about your specific agreement, consult a Texas attorney.