When you appoint a rental property manager or a property management company to run your vacation rental business on your behalf, you will need to enter into a vacation rental property management agreement between landlord and agent to ensure that everything runs smoothly.
This is not a nice to have but is absolutely essential as it protects you if the manager does not fulfill their obligations and vice versa. It is in the interest of both parties to sign this agreement.
The contract should spell out exactly what is expected of each party to avoid any misunderstandings in the future. The more detailed you can be, the better.
This article will help you understand what such a short-term rental management agreement should look like. To make it even easier, we include a vacation rental property management contract template for you to download as a guide when creating your own.
Don’t see the form to download our vacation rental property management agreement? Click here.
There are many variables in this situation, but at least a template will help you focus on the type of information you need to think of including in this contract and then you can take it from there.
Of course, as this is a legally binding document, our sample vacation rental property management agreement is not intended as a substitute for legal advice, which we always recommend before entering into any legal agreement. It is simply meant to give you an idea of what your contract should contain.
If you plan to use our free sample vacation rental property management agreement, be sure to alter it as per your individual needs and to reflect the local legislation and regulations in your area.
What is a vacation rental property management agreement?
A vacation rental property management contract is a formal, written document signed by the property owner and property manager to regulate the relationship between them. It defines the duties of each party, how long the contract will last and what happens if either party does not comply with the terms and conditions of the contract.
For this reason, it is crucial to protect both the owner and the manager in case anything goes wrong and there are any disputes or discrepancies.
Who should sign the short-term rental management agreement?
In the first instance, the agreement usually sets out the parties entering into the agreement. In this case, the owner of the property and the property manager or management firm. It should also include the full and permanent address of both parties, either at the start or at the end of the short-term rental property management agreement.
Why do you need a short-term rental management agreement?
The purpose of the contract should be clearly stated, in other words, the fact that the owner is giving the property manager the exclusive right to rent the property on behalf of the owner, with all the rights and obligations associated with such an agreement.
It is important to emphasize the exclusivity of the contract to ensure there are no former agreements or subsequent contracts entered into between the owner and any other parties at a later date, which could alter the agreement or lead to confusion about duties involved in the rental management process.
This document serves to protect everyone involved as it regulates in detail what each party can expect from the other and should spell out consequences in case these expectations are not honored.
How long will a vacation rental property management agreement last?
The contract should also stipulate the duration of the contract and under which circumstances parties could terminate and what the notice period for termination of the contract would be.
Ensure that the notice period is not too cumbersome to allow you as the landlord to end the agreement if you are not entirely satisfied with the property manager’s results.
The usual notice period for this type of agreement is between 30 and 90 days on either side.
Other typical inclusions in the so-called termination clause would be, for example, giving the owner the right to cancel the contract if the property manager fails to find guests within a specified amount of time.
It also usually stipulates a period within which any amounts owed by either party to the other should be paid when the contract is terminated early.
What should a vacation rental management agreement contain?
Before you put pen to paper, take a look at the most important elements typically included in this type of contract. Contracts do vary considerably, but most of them will include the following basic components.
The address of the vacation rental property
The full address of the property owned by the vacation rental owner has to be stated at the start of the vacation property management contract, including the U.S. state in which it is located.
The property manager’s responsibilities
This part of the vacation rental property management contract should stipulate what services the property manager is expected to provide. This includes which exact services are included in the property management fees, any services available at an additional cost and also which services are excluded from the contract.
Here it is important to note that some property managers may charge a lower fee initially, but could charge more for additional duties, such as paying the bills or dealing with the eviction of difficult guests. These costs add up and could increase the overall cost of the contractual fee considerably. The more specific the contract spells out the duties of the manager, and both parties for that matter, the better.
In the case of additional fees, the vacation rental management contract should also stipulate what these services may be and whether they will be performed at a flat rate or as a percentage fee or whether each case will be judged on merit.
So, for example, many rental property management companies will exclude extensive refurbishment costs. The cost of collecting rental revenue, cleaning fees and booking fees should not typically be excluded by vacation rental managers.
The property owner’s responsibilities
This section of the vacation rental management contract describes which duties the property manager can expect the owner to perform, such as providing sufficient funds in a reserve fund to enable the property manager to cover costs related to maintenance or emergency repairs, for example.
Another key responsibility of the owner is to ensure that the property is sufficiently insured and the insurance agreement should also cover the property manager or company.
From the property manager’s perspective, it is also important to ensure that the owner does not have the right to find tenants for the property or to use the property themselves or allow friends or family to use the property during the duration of the contract. If there are exclusions to this, for example, if the owner wants to use the property during a certain time of the year, this should be explicitly set out in the agreement.
This is to ensure that the property manager could not be expected to manage tenants not recruited through the agreed guidelines and process or lose the ability to earn the vacation rental property management fee during this period.
The owner also is usually precluded from entering the property unless he or she notifies the guest via the property manager beforehand.
Limitation of the property manager’s liability
The contract should feature a clause that protects the property manager from responsibility for damage caused by guests or contractors hired by the manager to perform specific duties, provided that the manager had taken ‘reasonable care’ when hiring the third party or accepting the guest.
For example, the property manager could reasonably be expected to verify that the guests don’t have a record of negative reviews by other vacation rental managers.
Vacation rental management fee
The contract should, of course, include the vacation rental management company’s charge and how and when the property manager’s charges will be paid by the owner.
Before you sign on the dotted line…
As mentioned above, this article is aimed at giving you a starting point for your vacation rental agreement. Download our free vacation rental property management contract as a Word Document below, complete the blanks, and alter it to represent your circumstances and the features of your vacation rental. Then, consult a legal expert to ensure you haven’t missed out on anything.
In these cases, it’s always better to be safe than sorry and a solid agreement could save you a lot of pain and money in the long run.