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Property Management Contracts

People who by property (real estate) do so for a number of reasons. The most common reason is that it will be your home. The other two (which, amongst our clients, now run neck and neck) are that you want a vacation (holiday) home or that you want an investment. In some case, you want both - a place that you can use for your holidays and which can be rented out (let) for the rest of the time to either contribute to or cover the costs of owning the property.

If you are an investor you will almost certainly need to appoint a property management company.

Increasing number of holiday home owners also appoint a property management company, even if they do not intend to let the property.

What is a property management company?

A property management company is a company whose business it is to management property! That management can involve looking after the fabric of the building (including arranging for cleaning etc.); it can involve arranging for the letting (renting out) of the building or both.

Sometimes property management is the sole activity of the company and sometimes it is a department within a larger organisation such as an estate agency (realtor).

Who can set up a property management company?

This varies from country to country.

In some countries, property management is a completely unregulated activity and so anybody can set up a property management business. In other countries it is tightly regulated. People running property management businesses have to be professionaly qualified and licenced. In some countries looking after the fabric of the building does not require any form of qualification but rental management does.

Do I need to use a property management company?

Our clients who make the most money out of owning property tend not to use a management company. Unfortunately, our clients who make the least money from their property also do not use property management companies!

If you have the time, the skill and the inclination to manage the property yourself then you are free to do so. You will, of course, still (usually) need some local help for repairs, welcoming visitors, cleaning etc.

Do not underestimate the amount of time involved. You will have to deal with many rental enquiries, arrange for cleaning, arrange for repairs, arrange for the payment of bills and so on. A guest who has arrived from New York for his precious week's holiday will want the shower fixing now, not in two or three days time. So the time that you need to spend on the management may not necessarily be at times of your choosing.

If you do not have the time, the skill and the inclination, do yourself a favour and appoint a property management company to look after your property!

If you merely own a holiday (vacation) home, which you do not intend to rent out, you may think that there is no purpose in appointing a property manager. However, many such owners now do so. The property management company will take the responsibility of checking the property from time to time to make sure that everything is in order. They will arrange for any repairs that may be needed. They may also pay your bills. They may put some food and a bottle of champagne in the fridge in time for your arrival. This service can take quite a lot of stress out of the ownership of a holiday home.

How do I choose a property management company?

This is a very important choice. There are some excellent property management companies and there are some really bad ones. If you choose a bad one, your home will be badly maintained and you will suffer endless complaints - and demands for refunds - from tenants. Worse still, you will probably not make many lettings in the first place and some of the rent received will be illegally syphoned off into their pockets.

Check out what is available

There are often a number of choices avaiable to you. Speak to them all. Look also at the possibility of making an informal arrangement with, say, the lady who lives next door to your house - but don't expect her to offer the same level of service that you would demand from a professional company.

Check out their website

For property lettings, the internet is now probably the most important tool. Do these people have a good website? Do they have a good range of properties available? Are there lots of pictures and enough information to help you decide whether to rent the property? Is it easy to see availability? Is it easy to book? Is there are clear contact name, address and telephone number? Would you want to deal with them?

Be a mystery shopper

Contact the companies that interest you to get details of some properties that they are renting out. Are you impressed by what arrives? Does it make you want to rent from this company?

Visit them

Make a shortlist of companies in which you are still interested and arrange to go and see them. Flashy premises are not necessarily the sign of a good property management company, but are they at least welcoming and do they give you a sense of being efficient?

Talk to them

Discuss your requirements. Tell them about your property. Ask them for how many weeks they would expect to be able to rent out your property given what you have told them about when you would want to use it yourself. How much would they expect to rent it for? How do they vet tenants? How do they price the rent charged (there are quite a number of options for this from a fixed weekly rental varying by season to sophisticated demand led systems such as those used by airlines)? Do they take security deposits? What services will they provide? How much are their charges and, most importantly, are there lots of hidden extras? In particular, is 'meeting and greeting' guests included in the price? In some markets this is considered essential and in others unimportant. Does their fee include cleaning? Do they seem to know what they are talking about and are you comfortable dealing with them?

Ask to see their terms of business

Take the trouble to read these! Sometimes they contain clauses that are grossly unfair or impractical.

Inspect some properties under management

Insist on going to visit one or two properties which they currently manage. If, when you get there, they are dirty or there is scum on the swimming pool, yours is likely to look the same. It will then either not rent out or you will have disatisfied customers. In this case you are likely to have to make refunds.

Take up references

These people are going to be handling a great deal of your money. You are entitled to references. Ideally, the references should be people who - like you - live outside the country as your requirements are rather different from those of a local customer.

Make sure you have a property written contract

This should set out, clearly, both your rights and your obligations and it should contain a clear and low cost arrangement for dealing with any disputes that might arise between you. This is an important contract and it may well be worth asking your lawyer to have a look at it. Make sure that the contract allows you to cancel your use of the company if they fail to deliver the services promised.

Checking up on the company

The main danger in using a rental management company - an even bigger danger than poor service - is that they cheat you. Of course, a good company will not do and if you have chosen well you should not have this problem. But it is very tempting for the person behind the desk to take the rent in cash and put it in his pocket, expecially when he knows that you are thousands of miles away and are unlikely to discover what he has done.

Tell the company, even if it is not true, that you have friends who also have rental properties in the area and that each time you are in the area you each check up on each others' properties.

Put a telephone in the house. Put an entry in your diary - twice per week. Phone the house and see whether anyone picks up the phone. If they do, you want to see some income in the accounts for that week!

Self help

However good your rental management company may be at finding tenants, you will make a lot more money if you also find some yourself.

You have access to a large pool of potential tenants, which your rental company will not have access to. These are your family, your friends, the people you work with, your neighbours, parents at your children's schools etc. Use every opportunity to tell them about your property and to try to get them to use it. Insist, however, that they make the arrangements through the rental management company as this reduces the delicate issue of dealing with the cash.

If you can find even six or seven people per year to rent the house, this will help your profitability enormously.

Keep records

Encourage everybody who stays in the property to leave behind their contact details and then market to them. They also have friends and family and, if they enjoyed the use of your property, they will recommend it to others. If they really enjoyed it they may well come back! Should you offer them a small discount if they do? If you are in the fortunate position of owning several properties around the world, don't forget to tell them. If they enjoyed staying in your property in Nice and you also have a property in Miami why would the go to the trouble of staying anywhere else if they want to visit the city?

Next steps

Please look at the Legal Guides, videos, MP3 seminars and other materials set out to the right of this page.

If you would like us to help you, please complete our Client Pack and send it back to us. We will contact you to clarify your requirements and then introduce you to the person most appropriate to deal with your case.

If you do not find the information that you need, please send us an email explaining your problem and we will contact you.

© The International Law Partnership Ltd. Page last revised 8th February 2010

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