Property management agreements are necessary when a property owner hires a property management company or manager to manage, operate, and control their rental unit.
Generally, the property manager is a licensed real estate agent that has the legal capacity to collect rent, advertise available units, negotiate leases, hire labor for maintenance and repairs, and act on behalf of the property owner.
In terms of fees, property managers generally receive a monthly fee or a percentage of the total monthly rent they collect.
Property Management Agreement
This is a legal document that defines the relationship between a property management company and a property owner.
Furthermore, it also outlines the responsibilities and obligations of each party. Both parties must sign the agreement.
Applicable Laws
According to § 12-10-201, property managers need to have a real estate license if they carry out real estate broker's duties and activities.
However, this does not apply to on-site employees of apartment complexes, buildings, or condominiums.
In these cases, the on-site manager is only allowed to perform "customary duties," including general property upkeep and repairs.
What to Include
It's crucial to review your property management agreement to ensure it has all the necessary clauses and disclosures.
Here are crucial things that you need to include in a Colorado property management agreement:
Fees and Services
The property management company must ensure that the fees they are entitled to are clearly stated in the agreement.
There needs to be a separate section dedicated to fees and services to ensure there is no misunderstanding between the property manager and owner.
Termination Clause
Is the contract a month-to-month agreement? Are there any fines or penalties for early termination?
These are all things that need to be stated clearly.
Escrow Reserve
A property management company generally collects an escrow reserve from the landlord. This money belongs to the property owner and is put into a bank account and used for certain expenses relating to the rental property.
These funds may be used during the month when expenses or repairs need to be paid. This amount needs to be stated clearly in the agreement.
Rent Payments to Property Owners
A property manager collects rent from the tenant on behalf of the landlord. The agreement needs to state when the property manager needs to transfer the funds to their owner-clients to ensure there is no misunderstanding or dispute regarding the matter.
Ideally, the contract must state by which day of each month the transaction needs to be made.
The property management company must also ensure that the rental fees comply with the relevant laws.
Maintenance
When it comes to lease agreements, maintenance is a major factor. The property management company is generally responsible for overseeing this.
However, there needs to be a clear clause stating when the management company needs to involve the owner. This will depend on a set monetary threshold.
Guarantees
This states which of the two parties will be liable for legal fees if the property manager places a tenant and the tenant needs to be evicted.
It is generally the owner-client; however, property managers can "guarantee" the tenant.
Evictions
Generally, the Colorado property management company will be responsible for handling the legal eviction process. All eviction laws need to be complied with.
Build Your Own
While you may have gotten a lot of useful information here, you may still find it a little difficult to draft your own property management agreement. If that's the case, all hope isn't lost!
DoorLoop provides you with three convenient options that cover those who want a prebuilt or customizable template for their property management agreements. Check out the options below:
- Word
- Custom
Do You Need One?
Colorado has strict real estate laws. A property management agreement is necessary in order to protect the relationship between property owners, tenants, and managers.
If you need comprehensive property management software to help manage your rental portfolio, DoorLoop has the perfect service for you!
Webinar
DoorLoop hosted this webinar with attorney Michael Larranaga from Larranaga Law to help answer many of your legal questions. Michael specializes in real estate law in Colorado and we covered:
- Creating a residential lease agreement
- Landlord-tenant issues and laws
- Grounds to evict a tenant
- Eviction process
- Preventing delays or fines
- Hiring an Attorney vs DIY
- Post COVID legal changes
- Security deposit laws
Feel free to learn more and watch this webinar for free.
