Managing your rental property can be a hassle, especially if you're managing several properties. A good solution to this problem is to work with a property manager.
A property manager will be responsible for dealing with prospective tenants, property maintenance, rent payments, and any other leasing activities/legal proceedings.
Property owners who want to leave management to another individual must draft an Illinois property management agreement.
Today, we'll cover everything you need to know to ensure you have a safe leasing experience throughout the entire agreement.
Property Management Agreement
To put it simply, an Illinois property management agreement is a document that will allow you (as a property owner) to grant someone else permission to manage your property.
The agreement, in essence, will outline all the responsibilities and rights that the new property manager will have for the property. Moreover, the agreement will have the financial terms surrounding the property.
In most cases, the property manager will earn a commission from every rental property they supervise.
However, some property owners decide to offer a flat fee in cases of single-tenant-occupied properties or vacant units.
According to these laws, every property manager must first get a real estate license for any activity that counts as "broker activity."
Now, what are those "broker activities"? Here's a detailed list:
- Managing prospective tenants
- Supervising rents collected
- Advertising the rental property
A property manager must first pass a managing broker exam plus pay an initial license fee to obtain their real estate license. Those who want to have a real estate management company should comply with extra requirements, including:
- Holding a valid broker's license
- Being either a salesperson or a manager for the past three years.
The state of Illinois also offers potential brokers a "Residential Leasing Agent License." This real estate license is easier to obtain by individuals, but it doesn't provide all the authority benefits that a regular property manager license does.
What To Include
Now, what should you include in your property management agreement? Thankfully, the document is rather simple to draft. Keep reading for more information on everything you should include:
Include the information of all parties involved in the property management agreement, which in this case would be the property management and you.
You should include the names and mailing addresses of both parties.
Then, you must specify the information of the property (or properties) you want your property manager to rent/lease/manage. This section should include:
- Type of property (residential or commercial)
- Property address
- Description of the property
Terms of the Agreement
Here, you will specify the terms of the agreement, including the start and end date. Moreover, you can include an additional clause that specifies what will happen when the term expires.
In most cases, people either terminate the contract or continue on a monthly basis. Either party can terminate the lease, as long as they provide written notice 30 days before the lease ends.
Property Manager's Rights and Responsibilities
This is one of the most important sections of the agreement, as you will explain all the permissions you will grant the property manager.
Generally speaking, some of the most common factors property managers work with include:
- Right to create rental agreements for the property (you can specify which types of leases they can create)
- Right to manage rental payments and expenses paid for the property
- Right to collect security deposits
In this section, you will outline all the fees you will pay the property manager for each service they provide. This includes management, new leases, renewals, evictions, etc.
Miscellaneous Terms You Should Include
- Insurance policy
- The right to use a lockbox to enter the property
- Sale of the premises
- Repairs and maintenance
- Lead-based paint disclosures
- Financial statements
- Record keeping
- Owner's responsibilities and representations
- Property's insurance coverage
- Lease alterations
- Attorney Fees
It's vital that you go over each clause carefully with your attorney and potential property manager to ensure you're complying with state law and that both parties get reasonable terms for this agreement.
If you're interested in other real estate laws from the state of Illinois, make sure to check these links from DoorLoop:
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:
Understanding the law is an essential step in ensuring everyone gets a fair deal in real estate agreements.
Giving a licensed manager permission to manage your property is something that can get a lot of weight off of your shoulders, but you must ensure you're drafting a document with appropriate terms first.
We hope this article has helped you understand everything surrounding Illinois property management agreements.
Do Property Managers Need to Be Licensed in Illinois?
Yes. Every property manager needs to apply for a real estate license before legally operating a property in Illinois.
What Is the Fee for a Broker's License?
Today, the application fee is $125, and the renewal fee for an unexpired license is $75 per year.
Do Property Managers Draft Leases?
Yes. If the property owner wants to, they can give permission to their managers to draft rental leases.
How Much Do Property Managers Charge in Illinois?
It depends on the manager. Typically, managers charge between 8% and 12% of monthly rent plus expenses.