Why you need to have up to date leasing and managing agreements with your landlords and what happens if you fail to keep on top of this task. 

As a property manager, it can be easy when you have long term property investor clients to let the legal documentation requirements slip. After all, if you have known this person for a long time and had a good working relationship, you should be able to trust them, right? 

Sadly, as some agents have learned the hard way, this is not the case. 

As a property manager, you need to keep your Property Management Authorities up to date. Doing so formalises your agreement and will keep you out of court but not out of pocket. 

What are Property Management Agency Authorities?

Also known as ‘The Authority’, your Property Management Agency Authority is the agreement  you sign with your landlords. When they sign it, landlords confirm you as the agent have the rights to find tenants and manage the property. 

Usually, the Authority will include conditions such as you notifying the owner about damage to the property, unpaid rent or breach of contract by tenants. It will outline the regularity of property inspections, the management fees and any extra expenses like fire alarm or gas heater inspections. The authority is the agreement between the Agency and Landlord to manage the property and collect a commission. In addition to the Authority the agent will specify the service levels that they will perform (i.e. do repairs, pay rates etc). The service agreement is not specified in the Authority.

This service level agreement will also cover items like who is responsible for paying rates and strata fees and arrangements such as the managing body paying them out of the landlord’s rental income. 

Almost every aspect of the property’s management will be covered, including the cost of re-letting the property. 

The importance of Property Management Agency Authorities

As well as having Authorities with each landlord from the outset of your working relationship, you must ensure these documents are kept up to date. Failure to do so can result in the following: 

• Invalid or out of date it doesn't expire- it could be out of date with legislative changes relevant Acts  authorities, which leaves your agency vulnerable to legal implications and financial penalties (including fines and refunds of commissions)

• Any raise in commission the agent introduces must reflect in the authority, therefore if this isn’t done, the existing authority could be invalid.

As an example, if you raised your management fees but did not update the Authority, your landlord can find another property manager then sue you for the extra the commission charged even after a significant amount of time has passed. 

The long term result of badly kept Authorities is a devalued rent roll. When you decide to sell your rent roll, having out of date documents will put potential buyers off.  

How to ensure your Authorities are valid

To maintain the value of your rent roll, take a look through your Authorities and check the following: 

• All information and clauses to ensure they are correct

• The correct legal entity, e.g. Pty Ltd, not the ‘Trading as’ business name. The Agent must ensure the Authority is in the legal entity of its business and not the franchise name or a trading name. The correct ACN is to be noted (not the ABN)

• How up to date the document is in terms of legislative changes

• Fees are up to date in accordance with what you are currently charging

• All documents are signed and dated by the relevant landlord.

To avoid the risk of a landlord claiming back pay or refusing to acknowledge the terms of an Authority because it is out of date, train your staff about the importance of this area. 

Also ensure backup copies are stored electronically. Using a software platform like iAgree, which was created specifically for Australian property managers, or DocuSign can help in this regard. It allows for mobile friendly contracts, e-signatures, text message notifications and custom branding so your contracts always look professional. This service eliminates the need for physical signatures but still allows you to collect legally binding contracts. Read more about ‘sign-on-glass’ technology here.

One more tip is to remember to attach a signed notice of assignment to the Authority when selling or buying a rent roll. Without this attachment, it could be deemed the Authority has not been legally assigned because you can’t establish the trail of authorities from Agency to Agency, thereby jeopardising the claim to charge commission. 

As you can see, to protect the value of your rent roll, attention to detail is key. This includes legal documents and paperwork as much as customer service.

BDH Solutions are rent-roll agents with over 30 years experience in connecting the right vendor with the right purchaser. To stay up to date with our latest listings, register here.