PROPERTY MANAGEMENT AGREEMENT
Being the owner of rental property can be both a blessing and a curse. You have a wonderful source of income but yet you must deal with the demands of your tenants requests, general maintenance and keeping your units leased. Depending on your situation, you may choose to find a third party to handle those headaches for you. Your best option in this situation is to find a property manager. When you hire a property manager, you need to put into place a well crafted property management contract. This contract will define the roles of the property manager, provide them with powers to perform various duties and protect you and your asset. You need to make sure you understand the responsibilities of the property manager, your responsibilities as the landlord and/ or owner and make sure you are protected if the manager does not fulfill their obligations.
- The first basic part of the management contract you must understand is what services the property manager has agreed to perform and how much they will charge for these services. You need to understand what services are included in the management fee, what services can be performed for an additional fee and what services will not be performed under any circumstances.
The management fee is the most common type of fee that a property manager will charge. Pay close attention to how this fee is broken down. Do not immediately rule out a property manager because it seems they are charging a higher fee. Property managers who charge a lower initial fee may be charging more for “extra duties” such as filling vacancies, paying bills, maintenance issues, and eviction procedures. You need to craft the management agreement very closely to determine what services are actually included in the management fee and what services are considered extra and require additional payment.
For services that are considered extra, the agreement should clearly spell out how you will be charged for these duties. Is it a flat fee, a percentage fee or will the fee be determined on a case by case basis before the service is performed? Also, be sure to exclude some services you do not want the property manager to perform under any circumstances. This will vary from company to company but common exclusions include refinancing a property or extensive remodeling. Make sure the manager is obligated to do anything you consider an absolute necessity, such as finding tenants, collecting rent or handling emergencies.
- The second part of the contract that you must understand is your responsibilities as the landlord/ owner. This section of the contract will define what you are obligated to do by signing the agreement and what you are prevented from doing.
Two examples of obligations of the property owner are:
- Set Up and Maintain a Reserve Fund—The landlord is responsible for putting a specific amount of money into a reserve fund that the property manager can use for daily obligations, maintenance issues, and emergencies. You are also responsible for making sure that the fund never falls below a specific amount.
- Obtain and Maintain the Proper Insurance—The management agreement should specify the types of insurance and the amount of coverage you must obtain. It should also note if the property management company must be included under your coverage.
- A common point in these contracts will be limitations on the property manager’s liability. It is known as the hold harmless clause. In general, this clause will protect the property manager, except in cases where they have been negligent. The property manager is not, however, responsible for the negligence of third parties they hire. For example, a property manager is not responsible if they hire a contractor, and the contractor causes damage to the property.
To protect yourself, you should make sure there is a “reasonable care” clause in the agreement. For example, the manager will not be held liable if “reasonable care” has been taken when hiring a third party—a.k.a they should do their research and not hire a contractor with a history of complaints against them.
- You want to try and avoid signing a long agreement until you have proven results from, and confidence in, the management company. Unfortunately, most management companies will not sign a contract for less than a year. In this case, you will want to carefully review the termination clause and make sure you are able to terminate the contract if you are unhappy with the service.
- Make sure the management agreement has a clear termination or cancellation clause. It should state why and when the property manager/management company has the right to terminate the contract and when you, the landlord, have the right to terminate the contract. You must usually give between 30 and 90 days’ notice to terminate the contract. Make sure the agreement also states that the property management company must give you at least 30 days’ notice if they decide to terminate the contract.
- You may have to pay a fee for terminating the contract early. This fee will vary from a few hundred dollars to having to pay all fees the management company would have accumulated over the remaining length of the contract. Be sure to negotiate this fee in the event you wind up terminating the contract early on and are forced to pay fees for a lengthy period.
- You may want to craft a contract that does not require cause for you to terminate the agreement but prevents the property manager from being able to just ‘walk away’. You will also want a clause that prevents you being charged a penalty if the management company is terminated or fails in any of its duties.
- There should also be a list of duties that must take place upon termination and the time window they must be completed within. For example, the property management company must provide the property owner with copies of all tenants’ leases within 14 days of contract termination; or that all money owed to either party must be paid within 30 days of contract termination.
Remember, you are placing the control and operation of your asset in the hands of a third party. You want to ensure you retain control of how your asset is managed without the day to day hassle of being involved. Do not let a property manager dictate their terms or you force your will upon them, but work together so you each may benefit from the relationship.
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PROPERTY MANAGEMENT AGREEMENT
This Property Management Agreement (“Agreement”) is made [DATE], by and between [PROPERTY OWNER NAME] (the “Owner”) and [AGENT NAME], (the “Agent”).
1. APPOINTMENT OF MANAGING AGENT
1.1. Appointment and Acceptance. Owner hereby appoints Agent as sole and exclusive Agent of Owner to lease and manage the property described in paragraph 1.2 upon the terms and conditions provided herein. Agent accepts the appointment and agrees to furnish the services of its organization for the leasing and management of the Premises; and Owner agrees to pay all expenses in connection with those services.
1.2. Description of Premises. The Property to be managed by Agent under this Agreement is known as [PROPERTY TYPE DESCRIPTION], located at [PROPERTY ADDRESS], located in [COUNTY], [STATE].
1.3. Term. The term of this Agreement shall be for an initial period of [YEARS] (the “initial term”) from the [BEGIN DATE] to [END DATE] and including the last day of [MONTH OF END DATE], and thereafter shall be automatically renewed from year to year unless terminated as provided in sections 21 or 27 herein. Each of said one-year renewal periods is referred to as a “term year.”
1.4. Management Office. [ADDRESS OF PROPERTY MANAGER].
2. BANK ACCOUNTS
2.1. Operating (And/Or) Reserve Account(s). Agent shall establish a separate account(s) known as the Operating (and/or) Reserve Account(s), separate and apart from Agent’s corporate accounts, for the deposit of receipts collected as described herein, in a bank or other institution whose deposits are insured by the federal government. Such depository shall be selected by the Agent. However, Agent shall not be held liable in the event of bankruptcy or failure of a depository. Funds in the Operating (and/or) Reserve Account(s) remain the property of Owner subject to disbursement of expenses by Agent as described in this Agreement.
2.2. Initial Deposit and Contingency Reserve. Immediately upon commencement of this Agreement, Owner shall remit to Agent the sum of $[ACCOUNT MINIMUM] to be deposited in the Operating (and/or) Reserve Account(s) as an initial deposit representing the estimated disbursements to be made in the first month following the commencement of this Agreement, plus an additional sum of $[ADDITIONAL DEPOSIT] as a contingency reserve. Owner agrees to maintain the contingency reserve stated above at all times in Operating (and/or) Reserve Account(s) to enable Agent to pay the obligations of Owner under this Agreement as they become due. Owner and Agent shall review the amount of the contingency reserve from time to time and shall agree in writing on a new contingency reserve amount when such is required.
2.3. Security Deposit Account. Agent shall, if required by law, maintain a separate interest-bearing account for tenant security deposits and advance rentals. Such account shall be maintained in accordance with applicable state or local laws, if any.
2.4. Fidelity Bond. Agent shall cause all personnel who handle or are responsible for the safekeeping of any monies of Owner to be covered by a fidelity bond in the amount of $[BOND AMOUNT] with a company determined by Agent. Such bond shall be secured at Agent’s expense. If a fidelity bond cannot be obtained, an arrest and conviction bond shall be obtained at Agent’s expense. Owner shall save Agent harmless from any loss or damages caused by such personnel if no bond can be obtained.
3. COLLECTION OF RENTS AND OTHER RECEIPTS
3.1. Agent’s Authority. Agent shall collect (and give receipts for, if necessary) all rents, charges and other amounts receivable on Owner’s account in connection with the management and operation of the Premises. Such receipts (except tenant’s security deposits and advance rentals, which shall be handled as specified in paragraphs 2.2 and 3.3 hereof; and special charges, which shall be handled as specified in paragraphs 3.2 hereof) shall be deposited in the Operating (and/or) Reserve Account(s) maintained by Agent for the Premises.
3.2. Special Charges. If permitted by applicable law, Agent may collect from tenants any or all of the following: an administrative charge for late payment of rent, a charge for returned or non-negotiable checks, a credit report fee, an administrative charge and/or broker’s commission for subleasing. Agent need not account to Owner for such charges and/or commission.
3.3. Security Deposits. Agent shall collect, deposit, and disburse tenants’ security deposits in accordance with the terms of each tenant’s lease. Agent shall pay tenants interest upon such security deposits only if required by law to do so; otherwise, any interest earned on tenant security deposits is to be retained by Agent as compensation for administering these funds. Agent shall comply with all applicable state or local laws concerning the responsibility for security deposits and interest, if any.
4. DISBURSEMENTS FROM OPERATING (AND/OR) RESERVE ACCOUNT(S)
4.1. Operating Expenses. From the Operating (and/or) Reserve Account(s), Agent is hereby authorized to pay or reimburse itself for all expenses and costs of operating the Premises and for all other sums due Agent under this Agreement, including Agent’s compensation under section 17.
4.2. Debt Service. Owner shall give Agent advance written notice of at least 30 days if Owner desires Agent to make any additional monthly or recurring payments (such as mortgage indebtedness, general taxes, or special assessments, or fire, steam boiler, or other insurance premiums) out of the proceeds from the Premises. If Owner notifies Agent to make such payments after the beginning of the term of this Agreement, Agent shall have the authority to name a new contingency reserve amount pursuant to paragraph 2.1 of this Agreement, and Owner shall maintain this new contingency reserve amount at all times in the Operating (and/or) Reserve Account(s).
4.3. Net Proceeds. To the extent that funds are available, and after maintaining the cash contingency reserve amount as specified in paragraph 2.1, Agent shall transmit cash balances to Owner periodically, as follows: monthly. Such periodic cash balances shall be remitted to the following person(s), in the percentage(s) specified, and at the address(es) shown on the attached Schedule A.
5. AGENT NOT REQUIRED TO ADVANCE FUNDS
In the event that the balance in the Operating (and/or) Reserve Account(s) is at any time insufficient to pay disbursements due and payable under paragraphs 4.1 and 4.2 above, Owner shall, immediately upon notice, remit to Agent sufficient funds to cover the deficiency and replenish the contingency reserve. In no event shall Agent be required to use its own funds to pay such disbursements. Nor shall Agent be required to advance any monies to Owner, to the Security Deposit Account, or to the Operating (and/or) Reserve Account(s).
If Agent elects to advance any money in connection with the Premises to pay any expenses for Owner, such advance shall be considered a loan subject to repayment with interest, and Owner hereby agrees to reimburse Agent, including interest as provided in paragraph 17.7, and hereby authorizes Agent to deduct such amounts from any monies due Owner.
6. FINANCIAL AND OTHER REPORTS
By the tenth day of each month, Agent shall furnish Owner with a statement of cash receipts and disbursements from the operation of the Premises during the previous month. In addition, Agent shall, on a mutually acceptable schedule, prepare and submit to Owner such other reports as are agreed on by both parties.
It is important for the Owner to review these statements each month. Monthly reports are held open to correct errors for 90 days, and then become final, subject to an annual audit that may be required by the Owner per paragraph.
6.1. Owner’s Right To Audit. Owner shall have the right to request periodic audits of all applicable accounts managed by Agent, and the cost of such audit(s) shall be paid by Owner.
Agent is authorized to advertise the Premises or portions thereof for rent, using periodicals, signs, plans, brochures, or displays, or such other means as Agent may deem proper and advisable. Agent is authorized to place signs on the Premises advertising the Premises for rent, provided such signs comply with applicable laws. The cost of such advertising shall be paid out of the Operating (and/or) Reserve Account(s). All advertising shall make clear that Agent is the manager and NOT the Owner of the Premises. Newspaper ads that share space with other properties managed by the Agent shall be prorated based on: Actual lineage of the ad devoted to the Owner’s property plus a prorated share of any headlines and/or signature lines.
8. LEASING AND RENTING
8.1. Agent’s Authority To Lease Premises. Agent shall use all reasonable efforts to keep the Premises rented by procuring tenants for the Premises. Agent is authorized to negotiate, prepare, and execute all leases, including all renewals and extensions of leases (and expansions of space in the Premises, if applicable) and to cancel and modify existing leases. Agent shall execute all leases as agent for the Owner. All costs of leasing shall be paid out of the Operating (and/or) Reserve Account(s). No lease shall be in excess of [YEARS] year(s) without written approval by Owner. The form of the lease shall be agreed upon by Owner and Agent.
8.2. No Other Rental Agent. During the term of this Agreement, Owner shall not authorize any other person, firm or corporation to negotiate or act as leasing or rental agent with respect to any lease for space in the Premises. Owner agrees to promptly forward all inquiries about leases to Agent.
8.3. Rental Rates. Agent is authorized to establish and change or revise all rents, fees, or deposits, and any other charges chargeable with respect to the Premises.
8.4. Enforcement of Leases. Agent is authorized to institute, in Owner’s name, all legal actions or proceedings for the enforcement of any lease term, for the collection of rent or other income from the Premises, or for the evicting or dispossessing of tenants or other persons from the Premises. Agent is authorized to sign and serve such notices as Agent deems necessary for lease enforcement, including the collection of rent or other income. Agent is authorized, when expedient, to settle, compromise, and release such legal actions or suits or reinstate such tenancies. Any monies for such settlements paid out by Agent shall not exceed [MAXIMUM SETTLEMENT TO AGENT] without prior approval by Owner. Attorneys’ fees, filing fees, court costs, and other necessary expenses incurred in connection with such actions and not recovered from tenants shall be paid out of the Operating (and/or) Reserve Account(s) or reimbursed directly to Agent by Owner. Agent may select the attorney of its choice to handle such litigation.
9.1. Agent’s Authority to Hire. Agent is authorized to hire, supervise, discharge, and pay all servants, employees, contractors, or other personnel necessary to be employed in the management, maintenance, and operation of the Premises. All employees shall be deemed employees of the Owner, and Agent shall not be liable to Owner or others for any act or omission on the part of such employees.
9.2. Owner Pays Employee Expenses. All wages and fringe benefits payable to such employees hired per paragraph 9.1 above, and all local, state, and federal taxes and assessments (including but not limited to Social Security taxes, unemployment insurance, and workers’ compensation insurance) incident to the employment of such personnel, shall be paid by Agent out of the Operating (and/or) Reserve Account(s).
9.3. Agent’s Authority to File Returns. Agent shall do and perform all acts required of an employer with respect to the Premises and shall execute and file all tax and other returns required under the applicable federal, state, and local laws, regulations, and/or ordinances governing employment, and all other statements and reports pertaining to labor employed in connection with the Premises and under any similar federal or state law now or hereafter in force. In connection with such filings, Owner shall upon request promptly execute and deliver to Agent all necessary powers of attorney, notices of appointment, and the like. Owner shall be responsible for all amounts required to be paid under the foregoing laws, and Agent shall pay the same from the Operating (and/or) Reserve account(s).
9.4. Workers’ Compensation Insurance. Agent shall, at Owner’s expense, maintain workers’ compensation insurance covering all liability of the employer under established workers’ compensation laws.
9.5. Hold Harmless, Labor Laws. Agent shall be responsible for compliance with all applicable state or federal labor laws. Owner shall indemnify, defend, and save Agent harmless from all claims, investigations, and suits, or from Owner’s actions or failures to act, with respect to any alleged or actual violation of state or federal labor laws. Owner’s obligation with respect to such violation(s) shall include payment of all settlements, judgments, damages, liquidated damages, penalties, forfeitures, back pay awards, court costs, litigation expenses, and attorneys’ fees.
10. MAINTENANCE AND REPAIR
Agent is authorized to make or cause to be made, through contracted services or otherwise, all ordinary repairs and replacements reasonably necessary to preserve the Premises in its present condition and for the operating efficiency of the Premises, and all alterations required to comply with lease requirements, governmental regulations, or insurance requirements. Agent is also authorized to decorate the Premises and to purchase or rent, on Owner’s behalf, all equipment, tools, appliances, materials, supplies, uniforms, and other items necessary for the management, maintenance, or operation of the Premises. Such maintenance and decorating expenses shall be paid out of the Operating (and/or) Reserve Account(s). This section applies except where decorating and/or maintenance are at tenants’ expense as stipulated in a lease.
10.1. Approval For Exceptional Maintenance Expense. The expense to be incurred for any one item of maintenance, alteration, refurbishing, or repair shall not exceed the sum of [MAINTENANCE EXPENSE LIMIT], unless such expense is specifically authorized by Owner, or is incurred under such circumstances as Agent shall reasonably deem to be an emergency. In an emergency where repairs are immediately necessary for the preservation and safety of the Premises, or to avoid the suspension of any essential service to the Premises, or to avoid danger to life or property, or to comply with federal, state, or local law, such emergency repairs shall be made by Agent at Owner’s expense without prior approval.
11. CONTRACTS, UTILITIES AND SERVICES
Agent is authorized to negotiate contracts for nonrecurring items of expense, not to exceed [RECURRING CONTRACTS AMOUNT LIMIT] unless approved by Owner, and to enter into agreements in Owner’s name for all necessary repairs, maintenance, minor alterations, and utility services. Agent shall, in Owner’s name and at Owner’s expense, make contracts on Owner’s behalf for electricity, gas, telephone, fuel, or water, and such other services as Agent shall deem necessary or prudent for the operation of the Premises. All utility deposits shall be the Owner’s responsibility, except that Agent may pay same from the Operating (and/or) Reserve Account(s) at Owner’s request.
12. RELATIONSHIP OF AGENT TO OWNER
The relationship of the parties to this Agreement shall be that of Principal and Agent, and all duties to be performed by Agent under this Agreement shall be for and on behalf of Owner, in Owner’s name, and for Owner’s account. In taking any action under this Agreement, Agent shall be acting only as Agent for Owner, and nothing in this Agreement shall be construed as creating a partnership, joint venture, or any other relationship between the parties to this Agreement except that of Principal and Agent, or as requiring Agent to bear any portion of losses arising out of or connected with the ownership or operation of the Premises. Nor shall Agent at any time during the period of this Agreement be considered a direct employee of Owner. Neither party shall have the power to bind or obligate the other except as expressly set forth in this Agreement, except that Agent is authorized to act with such additional authority and power as may be necessary to carry out the spirit and intent of this Agreement.
13. SAVE HARMLESS
Owner shall indemnify, defend, and save Agent harmless from all loss, damage, cost, expense (including attorneys’ fees), liability, or claims for personal injury or property damage incurred or occurring in, on, or about the Premises.
14. LIABILITY INSURANCE
Owner shall obtain and keep in force adequate insurance against physical damage (e.g., fire with extended coverage endorsement, boiler and machinery, etc.) and against liability for loss, damage, or injury to property or persons which might arise out of the occupancy, management, operation, or maintenance of the Premises. The amounts and types of insurance shall be acceptable to both Owner and Agent, and any deductible required under such insurance policies shall be Owner’s expense. Agent shall be covered as an additional insured on all liability insurance maintained with respect to the Premises. Liability insurance shall be adequate to protect the interests of both Owner and Agent and in form, substance, and amounts reasonably satisfactory to Agent. Owner agrees to furnish Agent with certificates evidencing such insurance or with duplicate copies of such policies within 30 days of the execution of this Agreement. If Owner fails to do so, Agent may, but shall not be obligated to, place said insurance and charge the cost thereof to the Operating (and/or) Reserve Account(s). Said Policies shall provide that notice of default or cancellation shall be sent to Agent as well as Owner and shall require a minimum of 30 days’ written notice to Agent before any cancellation of or changes to said policies.
15. AGENT ASSUMES NO LIABILITY
Agent assumes no liability whatsoever for any acts or omissions of Owner, or any previous owners of the Premises, or any previous management or other agent of either. Agent assumes no liability for any failure of or default by any tenant in the payment of any rent or other charges due Owner or in the performance of any obligations owed by any tenant to Owner pursuant to any lease or otherwise. Nor does Agent assume any liability for previously unknown violations of environmental or other regulations which may become known during the period this Agreement is in effect. Any such regulatory violations or hazards discovered by Agent shall be brought to the attention of Owner in writing, and Owner shall promptly cure them.
16. OWNER RESPONSIBLE FOR ALL EXPENSES OF LITIGATION
Owner shall pay all expenses incurred by Agent, including, but not limited to, reasonable attorneys’ fees and Agent’s costs and time, and any liability, fines, penalties or the like, in connection with any claim, proceeding, or suit involving an alleged violation by Agent or Owner, or both, of any law pertaining to fair employment, fair credit reporting, environmental protection, rent control, taxes, or fair housing, including, but not limited to, any law prohibiting or making illegal discrimination on the basis of race, sex, creed, color, religion, national origin, or mental or physical handicap, provided, however, that Owner shall not be responsible to Agent for any such expenses in the event Agent is finally adjudged to have personally, and not in a representative capacity, violated any such law. Nothing contained in this Agreement shall obligate Agent to employ legal counsel to represent Owner in any such proceeding or suit.
16.1. Fees for Legal Advice. Owner shall pay reasonable expenses incurred by Agent in obtaining legal advice regarding compliance with any law affecting the Premises or activities related to them. If such expenditure also benefits others for whom Agent in this Agreement acts in a similar capacity, Owner agrees to pay an apportioned amount of such expense.
17. AGENT’S COMPENSATION AND EXPENSES
As compensation for the services provided by Agent under this Agreement (and exclusive of reimbursement of expenses to which Agent is entitled hereunder), Owner shall pay Agent as follows:
17.1. For Management Services. The greater of (i) $ ______________ per month or (ii) ________% of the total monthly gross receipts from the Premises, payable by the 25th day of the current month for the duration of this Agreement. Payments due Agent for periods of less than a calendar month shall be prorated over the number of days for which compensation is due. The percentage amount set forth in (ii) above shall be based upon the total gross receipts from the Premises during the preceding month.
The term “gross receipts” shall be deemed to include all rents and other income and charges from the normal operation of the Premises, including, but not limited to, rents, parking fees, laundry income, forfeited security deposits, pet deposits, other fees and deposits, and other miscellaneous income. Gross receipts shall NOT be deemed to include the special charges listed in paragraph 3.2, or excess interest on security deposits (from paragraph 3.3), or income arising out of the sale of real property or the settlement of fire or other casualty losses and items of a similar nature.
17.2. For Apartment Leasing. New 1 Year lease is ½ of 1st month’s rent; Renewal of a 1 Year lease is ¼ of 1st month rent.New 6 Month lease is ¼ of 1st month’s rent; Renewal 6 Month lease is 1/8 of 1st month rent.
17.3. For Commercial Leasing. Not applicable
17.4. For Modernization (Rehabilitation/Construction) Repairs & Replacements. 5% of the gross amount of any single contract or bill exceeding [EXPENSE LIMIT] will be charged for supervision, unless handled directly by the Owner.
17.5. For Fire Restoration. Same as paragraph 17.4.
17.6. For Other Items of Mutual Agreement. The Agent is to have the privilege of re-writing any insurance, at competitive rates, on the property expiring during the life of this contract, but will not be held responsible for the writing of said insurance. A company of comparable rating must be used. The Owner understands that the Agent is directly involved as a partner in a full-line insurance agency. At the Owner’s direction, the Agent will secure competitive bids yearly.
17.7. Interest on Unpaid Sums. Any sums due Agent under any provision of this Agreement, and not paid within 10 days after such sums have become due, shall bear interest at the rate of 10% per annum.
Owner represents and warrants: That Owner has full power and authority to enter this Agreement; that there are no written or oral agreements affecting the Premises other than tenant leases, copies of which have been furnished to Agent; that there are no recorded easements, restrictions, reservations, or rights of way which adversely affect the use of the Premises for the purposes intended under this Agreement; that to the best of Owner’s knowledge, the property is zoned for the intended use; that all leasing and other permits for the operation of the Premises have been secured and are current; that the building and its construction and operation do not violate any applicable statutes, laws, ordinances, rules, regulations, orders, or the like (including, but not limited to, those pertaining to hazardous or toxic substances); that the building does not contain any asbestos, urea, formaldehyde, radon, or other toxic or hazardous substance; and that no unsafe condition exists.
19. STRUCTURAL CHANGES
Owner expressly withholds from Agent any power or authority to make any structural changes in any building, or to make any other major alterations or additions in or to any such building or to any equipment in any such building, or to incur any expense chargeable to Owner other than expenses related to exercising the express powers vested in Agent through this Agreement, without the prior written consent of the senior management of the Owner. However, such emergency repairs as may be required because of danger to life or property, or which are immediately necessary for the preservation and safety of the Premises or the safety of the tenants and occupants thereof, or required to avoid the suspension of any necessary service to the Premises, or to comply with any applicable federal, state, or local laws, regulations, or ordinances, shall be authorized pursuant to paragraph 10.1 of this Agreement, and Agent shall notify Owner appropriately.
20. BUILDING COMPLIANCE
Agent does not assume and is given no responsibility for compliance of the Premises or any building thereon or any equipment therein with the requirements of any building codes or wit any statue, ordinance, law, or regulation of any government body or of any public authority or official thereof having jurisdiction, except to notify Owner promptly or forward to Owner promptly any complaints, warnings, notices, summonses received by Agent relating to such matters. Owner represents that to the best of Owner’s knowledge the Premises and all such equipment comply with all such requirements, and Owner authorizes Agent to disclose the ownership of the Premises to any such officials and agrees to indemnify and hold Agent, its representatives, servants, and employees, harmless of and from all loss, cost, expense, and liability whatsoever which may be imposed by reason of any present or future violation or alleged violation of such laws, ordinances, statues, or regulations.
21.1. Termination by Either Party. This Agreement may be terminated by either Owner or Agent, with or without cause, at the end of the initial term or of any following term year upon the giving of 30 days’ written notice prior to the end of said initial term or following term year.
21.2. Termination for Cause. Notwithstanding the foregoing, this Agreement shall terminate in any event, and all obligations of the parties hereunder shall cease (except as to liabilities or obligations which have accrued or arisen prior to such termination, or which accrue pursuant to paragraph 21.3 as a result of such termination, and obligations to insure and indemnify), upon the occurrence of any of the following events:
21.2.1. BREACH OF AGREEMENT – Thirty (30) days after the receipt of notice by either party to the other specifying in detail a material breach of this Agreement, if such breach has not been cured within said thirty (30) day period; or if such breach is of a nature that it cannot be cured within said thirty (30) day period but can be cured within a reasonable time thereafter, if efforts to cure such breach have not commenced or/and such efforts are not proceeding and being continued diligently both during and after such thirty (30) day period prior to the breach being cured. HOWEVER, the breach of any obligation of either party hereunder to pay any monies to the other party under the terms of this Agreement shall be deemed to be curable within thirty (30) days.
21.2.2. FAILURE TO ACT, ETC. – In the event that any insurance required of Owner is not maintained without any lapse, or it is alleged or charged that the Premises, or any portion thereof, or any act or failure to act by Owner, its agent and employees with respect to the Premises, fails to comply with any law or regulation, or any order or ruling of any public authority, and Agent, in its sole discretion, considers that the action or position of Owner or its representatives with respect thereto may result in damage or liability to Agent, or disciplinary proceeding with respect to Agent’s license, Agent shall have the right to terminate this Agreement at any time by written notice to Owner of its election to do so, which termination shall be effective upon the service of such notice. Such termination shall not release the indemnities of Owner set forth herein.
21.2.3. EXCESSIVE DAMAGE – Upon the destruction of or substantial damage to the Premises by any cause, or the taking of all or a substantial portion of the Premises by eminent domain, in either case making it impossible or impracticable to continue operation of the Premises.
21.2.4. INADEQUATE INSURANCE – If Agent deems that the liability insurance obtained by Owner per section 14 is not reasonably satisfactory to protect its interest under this Agreement, and if Owner and Agent cannot agree as to adequate insurance, Agent shall have the right to cancel this Agreement upon the service of notice to Owner.
21.3. Termination Compensation [AGENT COMPENSATION] Month Minimum. If (i) Owner terminates this Agreement before the end of the initial term of any subsequent term year as provided in paragraph 21.1 above for any reason other than for a breach by Agent under paragraph 21.2(a) above, or if (ii) Agent terminates this Agreement for a breach by Owner under paragraph 21.2(a) above or pursuant to the provisions of paragraphs 21.2(b) or 21.2(d) above, then in any such event, Owner shall be obligated to pay Agent as liquidated damages an amount equal to the management fee earned by Agent, as determined under paragraph 17.1 above, for the calendar month immediately preceding the month in which the notice is given to Agent or to Owner, multiplied by the number of months and/or portions thereof remaining from the termination date until the end of the initial term or term year in which the termination occurred. Such damages, plus any amounts accruing to Agent prior to such termination, shall be due and payable upon termination of this Agreement. To the extent that funds are available, such sums shall be payable from the Operating (and/or) Reserve Account(s). Any amount due in excess of the funds available from the Operating (and/or) Reserve Account(s) shall be paid by Owner to Agent upon demand.
21.4. Owner Responsible For Payments. Upon termination of or withdrawal from this Agreement, Owner shall assume the obligations of any contract or outstanding bill executed by Agent under this Agreement for and on behalf of Owner and responsibility for payment of all unpaid bills. In addition, Owner shall furnish Agent security, in an amount satisfactory to Agent, against any obligations or liabilities which Agent may have properly incurred on Owner’s behalf under this Agreement. Agent may withhold funds for ninety (90) days after the end of the month in which this Agreement is terminated, in order to pay bills previously incurred but not yet invoiced and to close accounts. Agent shall deliver to Owner, within ninety (90) days after the end of the month in which this Agreement is terminated, any balance of monies due Owner or of tenant security deposits, or both, which were held by Agent with respect to the Premises, as well as a final accounting reflecting the balance of income and expenses with respect to the Premises as of the date of termination or withdrawal, and all records, contracts, leases, receipts for deposits, and other papers or documents which pertain to the Premises.
21.5. Sale of Premises. In the event that the Premises are sold by Owner during the period of this Agreement, Agent shall have exclusive rights of representation in the sale as stated in a specific sales agreement to be negotiated separately. Upon transfer of ownership, this Agreement shall terminate by mutual consent of Owner and Agent under the terms and conditions as determined by a letter of intent and subsequent formal agreement.
In the event of any sale, the Agent shall receive a [SALE COMMISSION] sales commission based on the gross sales price. This exclusive right-to-sell shall survive the termination of this agreement for 120 days.
22. INDEMNIFICATION SURVIVES TERMINATION
All representations and warranties of the parties contained herein shall survive the termination of this Agreement. All provisions of this Agreement that require Owner to have insured or to defend, reimburse, or indemnify Agent (including, but not limited to, paragraphs 2.1, 2.3, 5, 8.4, 9.2, 9.5, 13, 14, 15, 16, 17.7, 20, 21.3, and 21.4) shall survive any termination; and if Agent is or becomes involved in any proceeding or litigation by reason of having been Owner’s Agent, such provisions shall apply as if this Agreement were still in effect.
All headings and subheadings employed within this Agreement and in the accompanying List of Provisions are inserted only for convenience and ease of reference and are not to be considered in the construction or interpretation of any provision of this Agreement.
24. FORCE MAJEURE
Any delays in the performance of any obligation of Agent under this Agreement shall be excused to the extent that such delays are caused by wars, national emergencies, natural disasters, strikes, labor disputes, utility failures, governmental regulations, riots, adverse weather, and other similar causes not within the control of Agent, and any time periods required for performance shall be extended accordingly.
25. COMPLETE AGREEMENT
This Agreement, including any specified attachments, constitutes the entire agreement between Owner and Agent with respect to the management and operation of the Premises and supersedes and replaces any and all previous management agreements entered into or/and negotiated between Owner and Agent relating to the Premises covered by this Agreement. No change to this Agreement shall be valid unless made by supplemental written agreement executed and approved by Owner and Agent. Except as otherwise provided herein, any and all amendments, additions, or deletions to this Agreement shall be null and void unless approved by Owner and Agent in writing. Each party to this Agreement hereby acknowledges and agrees that the other party has made no warranties, representations, covenants, or agreements, express or implied, to such party, other than those expressly set forth herein, and that each party, in entering into and executing this Agreement, has relied upon no warranties, representations, covenants, or agreements, express or implied, to such party, other than those expressly set forth herein.
26. RIGHTS CUMULATIVE; NO WAIVER
No right or remedy herein conferred upon or reserved to either of the parties to this Agreement is intended to be exclusive of any other right or remedy, and each and every right and remedy shall be cumulative and in addition to any other right or remedy given under this Agreement or now or hereafter legally existing upon the occurrence of an event of default under this Agreement. The failure of either party to this Agreement to insist at any time upon the strict observance or performance of any of the provisions of this Agreement, or to exercise any right or remedy as provided in this Agreement, shall not impair any such right or remedy or be construed as a waiver or relinquishment of such right or remedy with respect to subsequent defaults. Every right and remedy given by this Agreement to the parties to it may be exercised from time to time and as often as may be deemed expedient by those parties.
27. APPLICABLE LAW AND PARTIAL INVALIDITY
The execution, interpretation, and performance of this Agreement shall in all respects be controlled and governed by the laws of the State of [STATE]. If any part of this Agreement shall be declared invalid or unenforceable, Agent shall have the option to terminate this Agreement by notice to Owner.
Any notices, demands, consents, and reports necessary or provided for under this Agreement shall be in writing and shall be addressed as follows, or at such other address as Owner and Agent individually may specify hereafter in writing as shown on the attached Schedule B. Such notice or other communication may be mailed by United States registered or certified mail, return receipt requested, postage prepaid, and may be deposited in a United States Post Office or a depository for the receipt of mail regularly maintained by the post office. Such notices, demands, consents, and reports may also be delivered by hand or by any other receipted method or means permitted by law. For purposes of this Agreement, notices shall be deemed to have been “given” or “delivered” upon personal delivery thereof of forty-eight (48) hours after having been deposited in the United States mails as provided herein.
29. AGREEMENT BINDING UPON SUCCESSORS AND ASSIGNS
This Agreement shall be binding upon the parties hereto and their respective personal representatives, heirs, administrators, executors, successors and assigns.
[signature page to follow]
This Agreement is effective as of the date first above written.
NET PROCEED DISBURSEMENTS
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Frequently Asked Questions and Resources
What is a contract?
Contracts are defined as written or spoken agreements which are enforceable by law. They can cover any topic or industry, whether sales, tenancy, employment, or otherwise (source).
What are the different types of contracts?
There are many different types of contracts, as defined by upcounsell, those for fixed prices, employment, lump sums, time and materials, unilateral or bilateral contracts, simple contracts and more. Each has its own specific terms, and can either be oral or written and some are non-negotiable (like adhesion contracts) while others have room to be adjusted or amended.
What makes a contract different from an estimate, quote, bid, or proposal?
Mainly contracts are set and finite and legally binding, whereas estimates, quotes, bids, and proposals are possibilities which can be accepted, rejected, negotiated, or ignored altogether. The key difference is that often a bid or proposal will contain terms and conditions that can be signed by the requestor and turned into a contract (source).
What should I include in my contract?
Every contract is comprised of no less than two core components: clearly outlined terms and signed agreement between two separate parties. For more information, read our 12 clauses you should include in every contract.
How should I write an effective business contract?
Contract creation can be challenging, in most cases getting legal counsel is advised to ensure it will be legally enforceable should you require that. Essentially you need basic terms which should be abided by, and an agreement on what product or service is to be provided, to whom, by whom, and what will be tendered with specific terms (such as deadlines, or how the delivery will be completed). For more tips, read our beginners guide to contract writing.
What is the difference between a contract and an agreement?
An agreement is any understanding or arrangement reached between two or more parties. A contract is a specific type of agreement that, by its terms and elements, is legally binding and enforceable in a court of law, according to Diffen.com.
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