Thursday, February 9, 2017

What to Look for in a Property Management Contract

I found this article Posted by Jordan Muela in Property Management Articles at

As a property manager, we always get asked about the management contract.  Jordan does a great job of explaining and then breaking down 3 parts of the Management Contract.   Although, some reflections may not be done in Arizona, it is great example of some portions of the Contract. Jordan Notes: This is designed to be a helpful overview of property management contracts, but keep in mind that I am not a lawyer and this does not constitute legal advice.

What to Look for In a Property Management Contract

The contract you sign with a property management company should not be viewed as a mere formality, but rather the sole determiner of what services you or will not receive, what costs you will incur and what rights you will have in the relationship.
Choosing to not thoroughly read the contract is no different that choosing to not interview a property manager before you hire them. The contract is designed to eliminate confusion and create a clear mutual understanding of how the relationship will function in all foreseeable circumstances where a dispute could arise.Property management contract
Don’t let positive impressions about the company’s professionalism and ethics make you less attentive when reviewing the actual terms of the contract.
The "fine print" may seem like a chore to read through, but not doing so can lead to misunderstandings about the property management fees, the property management services that are included, the way tenants are treated and what you must do and/or owe in the event you want to end the relationship. Make sure to ask questions about anything that isn't crystal clear.
Also, don’t wait till the end of your search to ask for the contract; get a copy from each company early on while you are still talking to and interviewing multiple property management companies. This way you get a clear picture of what each company is truly offering early on while you have a number of options available.

A Three Part Guide to Breaking Down Management Contracts

Most property management contracts aren't exactly what you would call spellbinding. This guide is meant to cut through the legal jargon and help you see both what is in the contract and how it will affect your relationship with the management company.
Remember that nothing is set in stone and if you take issue with a certain point, feel free to ask about it and see if they are flexible. While hiring a lawyer to review the property management contract is not absolutely necessary, it is recommended if you feel unqualified or just want to make sure you aren't missing anything.

Responsibilities and Representations

Posted by Jordan Muela in Property Management Articles
While contracts can range in size from 3-10 pages, 5-6 is average. Some are comprehensive, while others are very basic. While we can't tell you what exactly what the agreements you see will look like, there is a good bet they will contain some of the items outlined below. Remember that each management company must be viewed in its entirety when compared against another. While some issues are more important than others, making a true comparison between the property management companies you interview requires taking into account the full scope of their management fees and services.
Here are some things to pay attention to in the property management contracts you review:

Introductory paragraph(s)

Most contracts start off by stating this is a legally binding exclusive management agreement and then naming the parties to the agreement and the legal address of the property being managed. This is also typically the section that communicates the broker will be working on behalf of the owner in the managing of the property. Terms like "Grant", "Employ", and "Appoint" all communicate that the owner is transferring agency to the broker. Agency is defined as:
Agency: n. the relationship of a person (called the agent) who acts on behalf of another person, company, or government, known as the principal. "Agency" may arise when an employer (principal) and employee (agent) ask someone to make a delivery or name someone as an agent in a contract. The basic rule is that the principal becomes responsible for the acts of the agent, and the agent's acts are like those of the principal (

Broker Responsibilities (AKA "Authority and Powers")

This is the section of the contract that should specify exactly what services you will be receiving and how those services will be performed. We have already covered the majority of this section in the following posts:
Two people exchaning a contract and a set of keys
  • Handling Tenant and owner Funds 
  • Property Maintenance and Inspections
  • Setting and Collecting Rent
  • Marketing, Screening and Retaining Tenants
Make sure that the contract contains a due diligence clause (AKA "best effort") where the management company states that they will do their best in the management of the property.

Extra duties

Some contracts contain a list of services that the agreement does not include or qualify as "work exceeding normal management duties". If this clause exists you need to find out what items are listed and what the billing rate is for these services. If a billing rate is listed, it likely may be "an hourly fee equal to the current monthly management fee". Otherwise the contract may state the fee shall be agreed upon before the work begins, in which case you want to find out more so there are no surprises down the road in the event you need any of these services.  If the list is simply services they don’t provide under any circumstances then make sure you are comfortable foregoing, or outsourcing the items listed. Services typically listed are things like modernization, refinancing, fire restoration, rehabilitation, process serving, advising on proposed new construction and assisting sales agents or appraisers. That said, sometimes the list can be more comprehensive and include things you might have assumed would be included in the management fee so its important to check the contract.

Legal compliance

Some contracts have a section entitled "Equal Housing Opportunity" which outlines compliance with fair housing laws. This is only part of the equation. Here is an example of a more comprehensive legal compliance clause:
"The parties will comply with all obligations, duties, and responsibilities under the Texas Property Code, fair housing laws, and any other statute, administrative rule, ordinance, or restrictive covenant applicable to the use, leasing, management, or care of the property." ( pdf)


This clause addresses the issue of the Agent expending its own funds to pay owner bills. Many contracts clearly indicate that the management company is not required to advance the owner funds. Others go further stating that while not required to advance funds, the firm retains the RIGHT, at its sole discretion, to advance funds to cover necessary expenses. The owner is of course obligated to make immediate repayment, and there may be fees if repayment is late (1.5% of invoice per month is average).

Owners representation

The purpose of this clause is pretty straight-forward, you are simply disclosing the facts about the property, your ability to enter into the agreement etc. Read it carefully and make sure you let the company know if there are any potential conflicts or if you are not sure about certain points.

Owners responsibilities/Duties

Here is where the owner’s responsibilities in the relationship are outlined; pay close attention to see what you will be committing yourself to. The following are some of the items that may be included, some being more common than others. The contract may specify that the owner agrees to:
  • Not hire any other company to lease or manage the properties included in the agreement while the contract is in effect.
  • Not take any action that would jeopardize the management company’s ability to offer the property for rent in compliance with fair housing laws.
  • Abide by restrictions on entering the property. This will vary, but the basic idea is that owners can not enter their property whenever they want once it is occupied as this would be in violation of the tenants rights. The restriction may only require informing the tenant before hand, or it may require the owner to notify the agent and work through them to schedule a visit.
  • Transfer security deposits paid by existing tenants to the management company (This may not be applicable depending on the laws in your state).
  • Provide broker with all necessary records and documents the management company will need to do their job.
  • Reimburse the management company for expenditures they make on behalf of the owner in the management of the property.
  • Immediately notify the management company in the event the owner’s representations as described in the contract are no longer valid or if other circumstances have arisen that are legally required to be disclosed to the agent, are necessary for the agent to know to perform their duties, or would affect the habitability of the property.
  • Immediately inform the manager in the event the owner has missed payments (becomes delinquent) for financial obligations related to the property such as property taxes, insurance, HOA fees, and most importantly, the mortgage payment. 
  • Not rent the property to anyone without the management company’s prior consent. 
  • Not deal or negotiate with current or prospective tenants about anything related to the management or leasing of the property, but instead refer them directly to the broker.
  • Maintain property in a condition necessary for it to comply with all relevant laws.
  • Set-up and maintain a reserve 
    • These funds are used to paying day to day operating expenses making sure that services are performed promptly and bills are paid in a timely manner. A reserve of $200-$500 is normal for single family properties. The owner is obligated to maintain this reserve fund.
  • Maintain Insurance - See below.


Find out what kind of insurance and what amount of coverage they require you to maintain. The contract will likely require that the policy cover the management company in the same manner as the owner and require notification in the event coverage is changed in the future. In some cases the contract may actually authorize the manager to purchase insurance on your behalf (at your expense) in the event you lack sufficient coverage now or in the future.
Keep reading to find out how the terms of your management contract will effect your, or your management companies decision to break off the relationship early.

Contract Termination

Posted by Jordan Muela in Property Management Article

Term (AKA "Duration of agreement", "Retainer period")

Most property management companies require a 1-2 year contract period with very few offering month to month services. Bear in mind that the contract will be legally binding upon its execution (signing), even though the start date or "effective period" may begin later. After the initial or "primary" term is over, the contract may automatically renew itself for another term repeating the process each time the expiration date occurs. Find out how long of a term the auto-renewal will commit you to, it could be longer that the initial term was for, which would be important to know. Also, in the event that you want to prevent this automatic renewal from taking place, you might have to provide written notice at least 15-30 days before it takes place.

Owner Termination

The termination clause is a very important piece of the contract. It will dictate under what circumstances you or the manager can end the relationship prematurely and what penalties or costs you will incur. Without an exit plan, you might find yourself trapped if the relationship doesn’t work out. Find out how much notice the management company requires before allowing termination of the contract (30 days is normal but some companies require up to 90). Also, does the contract require "cause" as a prerequisite to being able to provide this notice? If so, the agreement needs to spell out what exactly qualifies as "cause".
A pink termination notice slip in tucked in someones coat sleeve
Will there be any fees or penalties for terminating the contract early? Not all managers charge a fee; if they do it’s either a straight forward flat fee (300-500$), or something conditional. Conditions can vary widely, from having to pay a fee if you cancel during the initial vacancy period, to only having to pay a fee if you cancel after a tenant has been landed, or within the first 12 months. Worse case scenario? We've seen contracts that in the event of early termination still require the payment of monthly management fees for the duration of the remaining lease term(s) and others that require the total management fee for the life of the contract (based on scheduled rents) to be paid upfront as a pre-requisite to early termination.
Ideally, you want a contract that allows for termination without cause with 30 days notice. Bear in mind that while this clause is a legitimate way for the management firm to protect itself from making an upfront investment in a property only to have the owner bail, it also speaks to the company’s faith in its ability to satisfy its clients needs. If they are having to implement extreme switching costs (termination fees) in order to retain clients, this is a bad sign.
There should also be some provision to allow you to exit the contract without penalty in the event that the manager is not able to secure a tenant within an extended period of time (3-4 months).
When you do decide to terminate, make sure your written termination date reflects the exact contract term expiration date, otherwise you could be liable for the penalties mentioned above.

Agent Termination

Pay close attention to the circumstances in which the management company cancels the contract, the notice they will give you and the financial implications it will have. Below are some excerpts from real contracts that describe circumstances which allow the management to elect to terminate the contract:
... if the agent in its sole discretion deems the continuation of the agreement subjects itself to liability or is in breach of its duties to the tenants or any other persons. (pdf:
If Broker determines that Broker cannot continue to effectively provide leasing and management services to Owner for any reason at any time during this agreement... (pdf:
...should Owner fail to promptly fund repairs required by any city, county, or state law, regulation or ordinance and/or to maintain the condition of the property being rented in a habitable condition as required by either the rental agreement and/or applicable California code sections or appellate decisions, of if the Owner fails to promptly comply with any government issued Notice of Corrections or court orders. (pdf:
...Owner has made any misrepresentation of material fact regarding the real property, the tenant, and/or the status of the landlord-tenant relationship, if any, or has been or is not acting in strict conformity with this Express Property Management Agreement and Authorization, or fails in any way to cooperate with the Agent in managing this real property (pdf:
Bear in mind that some contracts don't even contain an agent termination clause, but if they do, they can include a very broad and general list of circumstances. Make sure the contract entitles you do adequate notice (30 days) in event that this does take place. Lastly, find out what the financial ramifications of agent termination will be. Worse case scenario, you could be dealing with a situation like the one outlined below:
In the event that this (name withheld) Agreement and Authorization is terminated for cause as allowed by this section, said termination will not release nor relieve Owner of its responsibilities for payment to Agent of expenses and management fees for the full term of this (name withheld) Agreement.

Duties upon Termination

Once you or the management company has decided to sever the relationship, there are still important things that need to happen to make for a clean break. Owners need to make a final payment to the management company to settle the account and the contract should cover the following tasks for the management company:
  • Provide owner with a final financial report along with remaining rents on hand minus agents fees and funds needed to cover all outstanding expenses the manager has incurred in the course of managing the property. There should be some time parameter dictating how quickly this will take place after termination. Also, check if the contract contains a clause giving the manager permission to withhold owner funds, either all or a portion like the reserve, for a certain period of time. This is usually for 30-60 days and is done in order to make sure all expenses are paid, such as those already incurred but not yet invoiced. 
  • Provide owner with necessary records and documents. This would include a list of tenant security deposit obligations, copies of tenants’ leases and other instruments entered into on behalf of the owner.
  • Provide owner with a record of tenant security deposit obligations.
  • Transfer security deposits either to the owner, or the owner’s new agent minus the relevant deductions as dictated by the contract.
  • Provide tenants written notice of the exact dollar amount of the security deposit and inform them that the owners or owner’s new agent is now responsible for returning their security deposit.
  • Provide tenants written notice that they are no longer managing the property, and provide them contact information for the owner’s new agent or designee.


If either party breaches the contract, how long will they have to fix the problem before the other party has the right to terminate the contract? (Ranges from 0 to 30 days)

Mediation and Arbitration

Does the contract specify the usage of a mediator or arbitrator to resolve disputes? If so who preside and what is the process? Who pays for their services? Note that there is a difference between mediation and arbitration.

Attorneys fees

In the event legal proceedings are required to settle a dispute about the contract, will the prevailing party be entitled to reasonable attorney’s fees? Check to see if the contract puts a cap this amount, if so the entity with more cash may have an inherent advantage in the event of dispute.

Indemnification and Boiler Plate Items

Posted by Jordan Muela in Property Management Articles

Liability and Indemnification

All contracts will have a section that addresses what the management company can and cannot be held liable for.
Some contracts are broader and more comprehensive than others in terms of what the firm requires the owner to indemnify them from.
Indemnify: To compensate for loss or damage; to provide security for financial reimbursement to an individual in case of a specified loss incurred by the person. (
To get an idea of what the management company may ask you to hold them harmless from, here is an excerpt from a contract with a pretty comprehensive liability and indemnification clause:
Liability and Indemnification:
  1. Broker is not responsible or liable in any manner for personal injury to any person or for loss or damage to any person's real or personal property resulting from any act or omission not caused by Broker's negligence, including but not limited to injuries or damages caused by:
    1. Other brokers, their associates, inspectors, appraisers, and contractors who are authorized to access the property;
    2. Acts of third parties (for example, vandalism, theft, or other criminal acts);
    3. Freezing or leaking water pipes;
    4. A dangerous condition or environmental condition on the property; or
    5. The property's non-compliance with any law or ordinance.
  2. Broker is not responsible or liable in any manner for:
    1. Any late fees or other charges Owner incurs to any creditor caused by late or insufficient payments by any tenant in the Property; or
    2. Damages to Owner caused by a tenant's breech of lease.
  3. Owner agrees to protect, defend, indemnify, and hold Broker harmless from any damage, costs, attorney's fees, and expenses that:
    1. Are caused by Owner, negligently or otherwise;
    2. Arise from Owners failure to disclose any material or relevant information about the Property;
    3. Are caused by the Owner giving incorrect information to any person; or
    4. Are related to the management of the property and are not caused by Broker, negligently or otherwise.
  4. Owner is responsible and liable for all contracts and obligations related to the Property (for example, maintenance, service, repair and utility agreements) entered into before or during this agreement by Owner or by Broker under Broker's authority under this agreement. Owner agrees to hold Broker harmless from all claims related to any such contracts. (pdf:
While the contract almost always holds the property management company liable its for acts of negligence, as you can see above, they are not liable for the negligent acts of those whom they hire to work on their (your) behalf. While it would be unreasonable to expect them to be responsible for all the actions of the 3rd parties they hire, they should at least be held responsible in the event that they hire someone who has a history of bad work and they either knew about it or should have known. This can be accomplished by adding a reasonable care clause like the one below
"Agent may perform any of its duties through Owner's or Agent’s attorneys, Agents, or employees and shall not be responsible for their acts, defaults or negligence if reasonable care has been exercised in their appointment and retention." (pdf:
Bookshelf with legal books

Boiler plate legalese

The following are common clauses found at the end of many contracts.

Entire Agreement

This provision establishes that regardless of what you talked about with the management company before hand, this contract is the final version of the agreement and supersedes all prior written and oral proposals.


The contract should contain a clause stating the contract can only be modified by a written agreement executed by both parties.


Could the management company transfer their contract with you to another management company without your consent? Some contracts allow for this, so make sure there is a requirement that your approval is a perquisite for the management company transferring or "assigning" your contract to another firm.

Time is of the essence

"A phrase that, when inserted in a contract requires that all references to specific dates and times of day noted in the contract be interpreted exactly.
Failure to act within the time required constitutes a breach of the contract. The general rule is that time is not of the essence unless the contract expressly so provides. As a result, with respect to real estate transactions, the modern view is that time is not of the essence unless the parties have manifested such an intent." (

Governing Law; Venue

This clause determines which states’ laws will govern the interpretation of the contract, and may also specify the jurisdiction (county) in which all disputes are to be initiated and resolved.


This clause allows the contract to remain valid and enforceable even if a specific clause is found to be otherwise. This way a legal error in the contract does not require the entire agreement be done away with.

Call TOP NOTCH PROPERTY MANAGEMENT & SALES today with any questions you may.  We would be happy to discuss them with you. 
We can be reached at 928-772-4801 or 
you can email your questions to

Wednesday, February 8, 2017

Wacky Wednesday - The rest of the Dumb Laws

Hello everyone!

I hope you enjoyed last weeks dumb laws.  I really think some of them are funny.   As promised, here is the balance of the USA states for your mid-week laugh...

Lets talk Laws - MORE Crazy laws!

Mississippi - In Tylertown - It is unlawful to shave in the center of main street. I can understand, shave at home. 

Missouri - Columbia - Though clotheslines are banned, clothes may be draped over a fence.  I think a clothesline would look better.

Montana - It is illegal to have a sheep in the cab of your truck without a chaperone.  Uh, ok!

Nebraska - Drivers on mountains should drive with caution near the right hand edge of the highway.  There are no mountains in Nebraska.  If a child burps during church, his parent may be arrested.  That is crazy.  AND...It is Illegal to go whale fishing.  Is Nebraska by an ocean?

Nevada - It is illegal to drive a camel on the highway.  Drive a camel?  Don't you ride a camel?  Also, apparently camels are an issue in Nevada. 

New Hampshire - You may not tap your feet, nod your head, or in any way keep time to the music in a tavern, restaurant, or cafe.  Sounds like fun times in New Hampshire, NOT!

New Jersey -  You may not slurp your soup.  This sounds very challenging to me. 

New Mexico - Idiots may not vote.  Could someone explain to me how they determine who is an "idiot"?

New York - It is against the law to throw a ball at someone’s head for fun.  Oh man!  There goes all of the fun. 

North Carolina - Elephants may not be used to plow cotton fields.  What?  Elephants, did we really have elephants in North Carolina where this was necessary? 

North Dakota - It is illegal to lie down and fall asleep with your shoes on.  Sorry folks!

Ohio - It is illegal to get a fish drunk.  Do people actually do this? 

Oklahoma - Oklahoma will not tolerate anyone taking a bite out of another’s hamburger.  Sorry, no sharing in OK. 

Oregon - Drivers may not pump their own gas.  This creates a little problem at today's gas stations.  Uh oh!

Pennsylvania - Fireworks stores may not sell fireworks to Pennsylvania residents. So.. can an Arizona resident buy them and use them in PN? 

Rhode Island - No one may bite off another's leg.  WOW, wonder how this got on the books.

South Carolina - Horses may not be kept in bathtubs.  Apparently horses came inside back in the day. 

South Dakota - No horses are allowed into Fountain Inn unless they are wearing pants. Wait, what?  Pants?

Tennessee - It is legal to gather and consume roadkill. Yea, but who does this?

Texas - It is illegal to sell one’s eye.  Apparently this was a problem..yikes!

Utah - It is illegal not to drink milk.  What if you are allergic? Then what.

Vermont - Women must obtain written permission from their husbands to wear false teeth.  Husbands know best..haha

Virginia - You may not engage in business on Sundays, with the exception of almost every industry.  OK, what industry can do business on Sunday? I'm confused. 

Washington - The harassing of Bigfoot, Sasquatch or other undiscovered subspecies is a felony punishable by a fine and/or imprisonment.   Is Bigfoot real or not real?  Such a debate. 

West Virginia - Whistling underwater is prohibited.  Who knew?

Wisconsin - Whenever two trains meet at an intersection of said tracks, neither shall proceed until the other has.  So, who goes first?  This is definitely not clear. 

Wyoming - You may not take a picture of a rabbit from January to April without an official permit. I cannot remember the last time I took a picture of a rabbit, apparently an issue in Wyoming. 

There you have it folks!  I hope you smiled a little for your mid-week Wacky Wednesday blog.

Have a great rest of your week and a good weekend from all of us at Top Notch Property Management & Sales.

Call us if you need us!  928-772-4801

All of these dumb laws were courtesy of - you can see all of them at their website.  

Wednesday, February 1, 2017

Wacky Wednesday - Dumb Laws!

Hi Everyone!!

I was thinking about my next blog and really hit writers block!  Do I talk about property management or something funny and it hit me.... Let's do Wacky Wednesday!

Well, what exactly is Wacky Wednesday?  Well here at Top Notch this new created Wednesday blog will have fun and interesting laws or videos or ??? to give us a boost mid-week.  Oh don't worry, I will also post informative information about property management & Real estate, this is just for us to un-wind some!

I think it will be fun and my hope is that it will also make you laugh a little.  So here goes...

Lets talk Laws - Crazy laws!

Alabama  - Bear wrestling matches are prohibited.  BUT, they would be entertaining.

Alaska - It is considered an offense to push a live moose out of a moving airplane.  Would a moose actually go on an airplane?

Arizona - Donkeys cannot sleep in bathtubs.  I really did not know this was a problem.
Prescott - No one is permitted to ride their horse up the stairs of the county court house.  mmm, ok!

Arkansas - It’s strictly prohibited to pronounce “Arkansas” incorrectly.  Am I missing something, how else would you say it... AR-Kansas!

California - No vehicle without a driver may exceed 60 miles per hour. Really?  I hope this never happens - watch out.

Colorado - Car dealers may not show cars on a Sunday.  Must be a little hard on business.  I am guessing Sunday's are busy. 

Connecticut - You can be stopped by the police for biking over 65 miles per hour.  Is this even possible?

Delaware - Rehoboth Beach - No person shall pretend to sleep on a bench on the boardwalk.  Sorry folks, no resting with your eyes closed on the benches.  

Florida - If an elephant is left tied to a parking meter, the parking fee has to be paid just as it would for a vehicle.  An elephant?  Do they have these problems in Florida?

Georgia - No one may carry an ice cream cone in their back pocket if it is Sunday.  Maybe I need to try this?  (but not in Georgia).

Hawaii - Coins are not allowed to be placed in one’s ears. Curious how this law got on the books?

Idaho - You may not fish on a camel’s back.  What?  Does Idaho have camels?  

Illinois - You may be arrested for vagrancy if you do not have at least one dollar bill on your person.  Is there a dollar police?  Who really carries cash now a days.  Busted!

Indiana - Waitresses may not carry drinks into a restaurant or bar.   So, do the people go get their own drinks?  I'm confused!

Iowa - Tanning bed facilities must warn of the risk of getting a sunburn.  Wait, "sun" burned, isn't this inside a facility.  Who monitors this?

Kansas - Pedestrians crossing the highways at night must wear tail lights.  Do they sell these somewhere  in case you need them?

Kentucky - One may not dye a duckling blue and offer it for sale unless more than six are for sale at once.  A blue duck?  I want one...

Louisiana - Persons could land in jail for up to ten years for stealing an alligator.  IF you can catch it and keep it without getting eaten. 

Maine - You may not step out of a plane in flight.  Highly advised not to do this!

Maryland - Thistles may not grow in one’s yard.  Oh goodness, how do you prevent this? 

Massachusetts - No gorilla is allowed in the back seat of any car.  OK, good to know!   I wish I could put my pet gorilla in the back seat.  What???

Michigan - The last Sunday in June of every year was named "log cabin day".  Cool!  I wonder how they celebrate this great day. 

Minnesota - A person may not cross state lines with a duck atop his head.   Silly, just put the duck in a bag.

That should tide us over for this week.  Tune in next week for the remainder states....

Have a great rest of your week and a good weekend from all of us at Top Notch Property Management & Sales.

Call us if you need us!  928-772-4801