Detailed Information About Changes in last year's 2007 Management Agreement
The Arrowpoint Realty Property Management Agreement is a document which has evolved over the past 22 years we have been in business. Many of the changes we have incorporated over that time have been a direct result of specific experiences and situations we have encountered.
At the same time, we have strived to keep the document short and in plain English so that it is easy to understand. I cringed when we had to expand from a one-sided legal size page to a two sided letter size! It is interesting to note that we have had a number of attorneys as clients over the past two decades, and very few of them have taken issue with the contract at all, and the few who did each had concerns about different provisions.
The point is that a contract is only a piece of paper. The real substance lies in the character and integrity of the parties to the agreement. We believe strongly that people should be very clear about what they are signing, and in that regard each year we constantly word-smith the contract and prepare an overview of any substantive changes made since the previous year.
The most important changes for 2007 are in paragraph 4, which is the fee schedule for our services. Please keep in mind that Arrowpoint has not raised our monthly management fees since January of 2004, although many of our operating costs have increased substantially over the past 3 years.
Here is an overview of all the changes to the fee schedule:
Line 4-e raises the management fee $5 per month on each property. About half of the additional income this provides will fund salary increases for our staff. The rest will help pay for these increased costs, as well as future technology investments. Line
4-f changes the year end fee from $50 per unit to $75 per owner. This change reflects increases in staff time and processing for each tax package. Multi-Unit owners, however, get a break because the fee is not charged per unit, but instead by owner.Line
4-j is a change that will probably have no impact on the majority of our clients. Arizona law says that upon termination of a management account, we should send the owner copies of leases and other records from the past three years. This was actually meant for the apartment industry where most complexes have on-site management companies. Unlike that segment of the management business, we already provide clients with copies of leases and invoices on a monthly basis. When the law first took effect several years ago, we began photocopying and re-sending all the documents, but clients were complaining – they did not want all this redundant paperwork.
In fact, it has been many years since we did photocopy file documents, except for one divorce case, but that was enough of an experience to remind us of how time consuming it could be. So, just in case someone should request copies of three years of files on their units, the one-time copying fee has been raised from $100 to $200. Of course, anytime you need a copy of a particular document from your file, we are happy to e-mail or fax it to you at no charge.
One other change relates to the expiration date of the contract. Many years ago we decided to change our contract’s expiration date from December 31st to January 31st, because we learned from experience that in December people are overwhelmed with the holidays and the mail is so much slower that oftentimes contract renewals were overlooked or misplaced.
Making this change enabled us to combine the contract renewal with the year-end financial reports and 1099 IRS form into a single mailing, which saved considerable time and costs. In spite of that change, however, each year only about half of our clients sign and return their annual contract renewals by the January 31st expiration date.
This creates enormous problems for us. By law, we are not supposed to provide management services without a contract. If there is an emergency, if we have to go to court over a tenancy issue, or if we need to arrange for utilities, we need to have a current agreement giving us the requisite authorization.
An expired contract also leaves us in another quandary. We don’t want to curtail services to the tenant or disrupt the owner’s cash flow by refusing to accept rent payments, so last year we added a provision that the contract would continue on a month-to-month basis as long as both we and the owner, by our actions, allowed it to do so. The 2007 agreement, in Line 7-c more clearly expresses that idea by providing that if there is a fee increase in the new contract, the month-to-month extension will continue at the new prevailing new rates.
Finally, we have added the Fair Housing and REALTOR®/MLS logos just to emphasize our commitment to non discrimination and the REALTOR® Code of Ethics in our business practices.
As always, your comments and suggestions can be sent to Michael@ArrowpointRealty.com
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