Property Management Contract

[Chad Swinford]

For the first time in 13 years, I am entering into a property management contract as I begin to hand over the management of some properties.  I am looking forward to not dealing with the day to day, but I want to make sure the contract is good for me.

Here are the points that I am unsure of. 

The company's contract is stating that I pay them $50 to serve an eviction notice, $350 for court costs for filing and tracking the eviction, and then they get the first AND LAST $175 of a judgment.

They want half of any late fees.

The costs of eviction are the most concerning.  I am paying this company to screen and select the best tenants for the properties.  For them to charge me for their poor choice seems like double dipping.

Thanks so much for your wisdom here.

[Todd Burton]

Originally posted by @Chad Swinford:

For the first time in 13 years, I am entering into a property management contract as I begin to hand over the management of some properties.  I am looking forward to not dealing with the day to day, but I want to make sure the contract is good for me.

Here are the points that I am unsure of. 

The company's contract is stating that I pay them $50 to serve an eviction notice, $350 for court costs for filing and tracking the eviction, and then they get the first AND LAST $175 of a judgment.

They want half of any late fees.

The costs of eviction are the most concerning.  I am paying this company to screen and select the best tenants for the properties.  For them to charge me for their poor choice seems like double dipping.

Thanks so much for your wisdom here.

Hello Chad-

Regarding evictions, if they have established screening criteria & requirements for placing a tenant and those are clearly defined in the management agreement and you accept them then if the person they placed is evicted it is not really a poor choice but just an unfortunate reality of investment real estate. If the screening criteria & requirements are not defined and they are placing tenants at their own discretion then they should share in the burden of the eviction expenses. Personally, I would not allow any tenant to be placed if there is no established and agreed screening criteria & requirements.

I don't know how they run their operation and their cost structure but I would ask a couple questions; 1) Why are they entitled to any part of the judgment? 2) Do they use an attorney to file and does the attorney attend the damages hearing? (if you own the properties in a corporation you cannot get a judgment for over $1,500 unless you use an attorney). Note; in Marion county (Indianapolis), the cost just to file is $109.