If you’re thinking about signing a property management company contract without carefully reviewing it, you should reconsider.
The fine print can be tricky at times, and you’ll want to make sure that you’re certain of the parameters of their contract before you sign.
If you’re an investor, we’ve provided a resource below of things to keep in mind before you sign a contract with a property management company in Texas.
Read the Fine Print of Your Texas Property Management Contract
Not all contracts are created equal. While some management companies produce fair contracts that are mutually beneficial, some try to take advantage of their clients. For this reason, always read the fine print.
Be Aware of Hidden Fees
Hidden fees are a big thing to be aware of when you’re reading through a property management contract.
Here are six common property fees that you should never pay:
- Add-On Fees: Add-on fees refer to any fee that you have to pay in addition to your basic service. Essentially, you will be charged for each additional thing your management company does.
- Commission Fees: Some management companies try to take a commission if you decide to sell your house in the future. Some investors are not interested in keeping their properties for the long haul so they should be especially aware of this hidden fee.
- Termination Fees: Termination fees are largely outdated now, but some companies still try to include this. A termination fee refers to a charge you would have to pay if you decide to no longer use the management company’s services.
- Fees to Replace or Evict Tenants: This, of course, refers to a fee the management company would charge in the event that a tenant needs to be evicted or replaced -- this is in addition to the initial fee for placing the tenant.
- Fees During Vacancies: There may be times when your property is vacant. Some companies will continue to charge you during this downtime, but this is definitely to your disadvantage. You should not be paying fees when your property is not accruing revenue.
- Marked-Up Maintenance Fees: Some management companies charge a fee each time they have to coordinate a repair on your property. In fact, some may charge 7 to 10% of the cost of a maintenance repair.
Know the Contract Term
Before you sign a property management contract, make sure you know the exact term period.
For example, some companies may charge you for the entire period of the term, even if you’ve fired them.
You don’t want to be liable for payments to a company that you no longer want to work with. If they’re performing poorly, you should be able to fire them without penalty, and you should not feel obligated to stick with them because you have to pay them either way.
Know Exactly What and When You’re Being Charged
Each contract should give an explanation for things you may be charged for, and when you should be expected to pay.
You and your management company should have a mutual understanding of when fees are due. For example, you should know when to pay a lease fee. Some companies expect this money up front, and others only expect payment once a tenant is placed.
Understand What Responsibilities You Have
Since you and your management company will be working together, it’s important to have clear expectations of one another. This also includes what your role may be in managing the property.
While the management company may carry most of the responsibilities of managing your property, there are times that your input is needed. For example, they may need you to approve a new tenant or a property repair.
In these examples, the management company may have an expectation of your response time. If it’s summer in Texas, they will likely want you to approve the repair of a broken A/C unit within 48 hours.
Knowing the company’s expectations of you is an important part of creating a healthy professional working relationship.
Know If the Texas Property Management Contract Is State-Mandated or Company-Created
From a legal perspective, you need to make sure you’re not entering an agreement that may be harmful to you.
One way to avoid this is asking if the agreement is state-mandated or if it is created by the company.
An agreement created by the company may overstate their ability to avoid issues of liability. For example, though it may not be legal to do so, a company might claim they are indemnified no matter what happens — even in the case of negligence.
Be on the lookout for companies trying to fit in language that keeps them from taking any responsibility for issues that may arise on your property.
Texas Contracts Might Be Different Than Other States
If you’re purchasing a rental property out of state, you may not be familiar with laws that might affect DFW landlords.
A Texas property management contract might reflect some of these differences. For instance, in Texas, you can evict tenants in thirty days. This is different than in some other states that might allow tenants a longer period before eviction.
You and your management company should include information about evictions in the contract. Also, keep in mind that some management companies charge an extra fee for evictions.
Another important thing that should be in the contract is information about fair housing laws. Since your management company is likely in charge of finding new tenants, you’ll want to know that they will abide by fair housing laws. This protects you and your management company from breaking discrimination laws.
Final Thoughts on Texas Property Management Contracts
Remember, not all contracts are the same. You want to be careful not to enter into an agreement that may be harmful to you in the future.
Make sure you’re not subject to hidden fees and be aware of the length of the contract term. Understand what your responsibilities are and exactly what services you’re paying for. Take notice of any differences a Texas contract may have compared to another state’s contracts.
Finally, pay special attention to any part of the contract that deals with liability obligations, especially if the agreement was written by the company.
Though it is not a necessity, it may be helpful to have a lawyer look over a contract before you put down your signature.