Components of the Third-Party Management Package

M. Anne Ballard Comments
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Length of Term

Many in the industry have annual management agreements which self-renew. Others require a longer term. Since this is like a marriage, make sure you review this part of the agreement. Short-term contracts are available, as are specialty contracts, and a higher monthly fee is typical in these situations.

Examples could include start-up contracts, where the management company completes all steps to get the store open—hiring and training managers, creating marketing and promotional plans, and putting budgets in place. Due diligence contracts to assist a prospective client in purchasing an existing facility are also short term, as are feasibility studies. Prices for these services range from $5,000 to $10,000 apiece.

Frequency of Onsite Supervision

Management companies typically make monthly visits to the store to audit, train managers, inspect the site and review income and expenses for the preceding month. Some companies also offer weekly supervision, while others make quarterly onsite inspections.

If you require more on-site supervision, be prepared to pay for this service. Most companies do daily audits of income deposited and require managers to make daily deposits for safety and administrative reasons. You may also find companies that provide online manager training where managers and home office staff are face to face using existing store hardware such as webcams and speakers. This means less travel time and the ability to be in touch instantly.

Termination

What is the length and term for giving notice, and what, if any, are the early termination penalties? In most cases, a 60-day notice to terminate should be issued from either party. Some property-management companies require the client to have paid at least 12 months of fees, regardless of notice length. Some contracts state that termination can only occur with cause. Read and understand all these important terms. You should also consult with your attorney for more clarification of contract details.

As in a divorce, there are occasional situations where it is mutually agreed to terminate, and fees may be waived in such cases. An example would be in a lease-up situation where the store has negative cash requirements. In this situation you are required to reimburse the management company within a specific time period. Failure to do so can result in immediate termination. Remember, management companies are not in the business of financing owner’s stores and operations.

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