Turnkey, that vacancy period when a rental property is being renovated or prepped for marketing, creates a potentially perilous situation for property managers. Indeed, depending on the terms of the management agreement, it could be a no-man’s-land, rife with proverbial, booby-trapped landmines that could indiscriminately explode without notice.
Commonly, management agreements technically terminate when the tenant moves out, but if the property owner wishes to continue working with the property manager, there can be an unstated commitment to renew the leasing and management agreement once the property is ready for marketing. And it almost goes without saying that the property manager will assist the property owner with minor repair work. If the work is to be substantial, as might be classified as “turnkey”, the property manager may want to enter into a special compensation agreement for arranging and supervising the process.
But what happens if the owner assumes the manager is doing the turnkey while the manager assumes the owner is handling the process. Nothing will get done, and at some point, fingers will be pointed. And the unsolvable argument will begin (landmine).
Often overlooked by owners is the key role they play in the process, regardless of the written or assumed turnkey agreement. The owner, by necessity, must be the force behind the project. This only makes sense when one considers who has the most to gain or lose. In any case, the managers’ hands are tied, unless they have been given a power of attorney to spend the owner’s money, from a funded account. This is rare, so in most cases, it becomes an act of teamwork with the owner taking lead. But it is essential that the manager clearly explain and define this role early in the process to avoid misunderstandings.
Another potential problem is when the owner is unresponsive to the manager’s requests for input, decisions, or funding. The question becomes: How persistent should the property manager become in pursuing the property owner? At what point does the property manager cross the line between better discretion and pestering? At what point does the property manager’s unintended prying become personal? For example, if the owner has no money, and is embarrassed about it, and if the manager relentlessly pursues the funding, at some point the property owner is going to become exasperated, firing back at the manager (landmine). Conversely, what if the property owner really does need and welcomes the nudging, but the manager backs off in deference to the property owner. The manager may later be accused of not being aggressive enough (landmine). At its best or worst, it’s a balancing act-and one of the more frustrating experiences for both parties to the circumstance.
Property managers must talk about this relationship early in the process. Only then will the property owner understand what’s at stake when he starts receiving desperate emails or phone messages from the property manager, pleading for needed decisions or resources. This is why it is vital that property owner understands who has the lead. It’s the best way to disarm the landmines.