When hiring a professional Airbnb manager to take care of your investment property and guests, it’s important to have a clear understanding and confirmation of the responsibilities and the rights of both sides of the contractual relationship, namely you - as the property owner - and the property manager.
To this end, you need to sign a clear, detailed, and legally binding short term rental property management agreement that defines the working relationship in a way that avoids various hiccups down the road.
What a Short Term Rental Property Management Contract Is
A short term rental property management agreement, also known as a vacation rental management agreement or an Airbnb property management agreement, refers to a written and signed contract between the property owner and the property manager that specifies the rights and responsibilities of the two parties.
This is a legally binding document, and the inability of any party to stick to its terms and conditions can lead to legal actions and legal consequences.
From a host’s perspective, signing a short term rental property management contract is a must in order to protect their property and business, to limit their liability, to earn passive income, and to maximize revenue and profit from their Airbnb business.
These contracts follow a pretty standard template in the vacation rental management industry, but there might be some variations in the exact language based on several factors.
Some of the factors that affect a short term rental property management agreement are:
- Management type: Half service vs full service Airbnb management requires different terms.
- Location: Some markets demand additional stipulations and arrangements related to tax collection and remittance and other legal issues.
- Company: Each Airbnb management company has its own agreement form matching its business. In some cases, slight changes might be implemented to make the template more suitable for the specific owner and their property.
This article will also cover factors around vacation rental property management agreements like:
- Why a vacation rental management contract is important: We will outline and explain the main reasons that make having a clear, written, and signed contract a must when hiring a professional property manager.
- Duration of a short term rental management contract: We will specify the typical duration of agreements, situations in which they can be terminated earlier, and any exceptions to these rules.
- What a short term rental contract contains: We will list and describe the main issues covered by every Airbnb management contract, including the rights and responsibilities of the two parties that sign it.
The contract needs to be signed by both the rental owner (or their representative) and the Airbnb manager to enter into force. Moreover, it is different from a vacation rental agreement which is signed by the property owner and guests and which regulates the short term use of the property by guests and their relationship with the manager.
Disclaimer: The information in this article is for information purposes only and is not meant to replace legal advice and counsel. A lawyer should be consulted before entering into any legal agreement with another party.
Why a Vacation Rental Management Contract Is Important
Before learning about the technical details of an Airbnb property management contract, you should understand why at all it is needed to bother with such an agreement. After all, nobody likes unnecessary legal work and documentation.
An official written agreement is absolutely required when hiring a third-party property manager.
- Well defined scope of services: A contract lists the exact services that the property manager will provide for the successful operations of the Airbnb business. Once the scope of services is defined, owners can hold managers accountable for any missing services or any services performed subpar.
- Clearly outlined owner duties: Homeowners know which services they need to conduct and can plan for them accordingly. This minimizes the risk of poorly maintained properties that can compromise the performance of the business.
- Financial agreements: A well-drafted short term rental property management agreement handles all financial issues involved in the management of the property. It specifies the monthly management fee, additional fees, cost allocation, authorized expenditures, mechanisms related to the determination and collection of guest fees, and the transfer of owner income.
- Legal protection: The contract provides legal protection to the owner and the property manager both in terms of the operations of the short term rental business and in relation with one another.
- Legal, regulatory, and tax compliance: A good agreement ensures that the Airbnb business complies with all local short term rental regulations including the issuance of licenses and permits and the collection of taxes.
- Contract termination: Airbnb hosts know exactly when the contract will end and whether it will be automatically renewed.
- Conflict resolution: An agreement determines how any disputes between the owner and the manager will be tackled and resolved.
Now that we’ve established why it’s important to sign a short term rental management contract, it’s time to look at the other aspects of the agreement.
Duration of a Short Term Rental Property Management Agreement
A standard vacation rental management agreement lasts for one month or one year, with the annual option being more widely spread. Short term rental management companies usually require a certain minimum commitment on behalf of the owner in order to onboard the rental properly, to set up all necessary mechanisms, to adjust accordingly after some operations, and to start seeing optimized results.
Some choose to lock owners in for an entire year to guarantee their business for at least that long, but this practice is generally frowned upon in the industry. Moreover, the contract should clarify whether it’s automatically renewed after the end of the initial period or whether some actions need to be taken to continue it.
However, other Airbnb property managers choose to have open-end agreements in order to give vacation rental investors more freedom and more flexibility and to allow them to stay only if they are satisfied with the quality of provided services and the performance of their property.
In addition, most short term rental property management contracts require owners to give a 30-day written notice in case they want to cancel services. This includes planning to list the property for sale. Some companies might require a 90-day notice before termination.
Under the termination clause, property owners are usually required to honor any reservations that have already been made for the time after the notice period in case the property manager cannot find them a suitable and acceptable alternative accommodation.
When choosing between a few service providers, hosts should go for the one that aims to keep them with high-quality services rather than rigid contract duration terms.
What a Vacation Rental Management Agreement Contains
There exist certain differences in the content and the terms of short term rental management agreements to account for service, market, and company factors. There are, however, certain constants that persist.
All short term rental property management contracts contain the following elements:
Address of the Property
First, the agreement starts with listing the address of the short term rental property under question. The address should be provided in full to eliminate any possible doubt or confusion. The address is also used to determine the Airbnb laws and regulations that apply to the property and the taxes that need to be paid as zoning plays a crucial role in this regard.
Property owners should be aware that when auditing the manager’s records for the payment of applicable taxes, relevant tax agencies obtain the address of the property. This information might be used to impose further taxes related to short term rental activities outside the owner’s family, if needed.
Property Manager’s Duties and Responsibilities
Every such agreement has a section, usually titled “Manager’s Services”, that details the short term rental property management services that the manager commits to performing in order to ensure the running of the Airbnb business.
This section should include the standard services that are covered by the monthly fee as well as the additional services that hosts might opt in for at extra costs. Some contracts also explicitly mention the services that are excluded (that need to be handled by the owner or other third-party service providers) to be 100% clear.
The typical responsibilities of full-service vacation rental managers include:
- Marketing and advertising the property
- Pricing the rental in a way that optimizes occupancy and revenue
- Collecting booking revenue and additional guest fees
- Setting up, collecting, and managing security deposits
- Screening guests
- Managing reservations and booking calendars
- Coordinating check-ins and check-outs
- Cleaning the property after stays
- Providing fresh linen before new guest arrivals
- Restocking guest supplies in line with hospitality industry standards
- Providing additional concierge services (not always)
- Maintaining a separate accounting record of all invoices, receipts, reservations, and expenditures
- Conducting property inspections after stays and recording any situations covered by the security deposit
- Handling repairs under the security deposit
- Performing regular property inspections to identify needed fixes (not always)
- Coordinating maintenance activities (not always)
- Serving as the contact point between the owner and guests
- Making payments to the owner after each month
The exact list of the property manager’s duties might vary depending on the company and the agreement between the property owner and manager. What matters is that all responsibilities of the property manager are clearly listed and explained.
Property Owner’s Duties and Responsibilities
Equally important, a vacation rental property management contract outlines the responsibilities of the owner. While hiring a professional property manager takes a huge load off the shoulders of investors, it doesn’t erase all their duties as owners of the property. Owners need to be fully clear on their duties in order to deliver them as expected.
The standard host responsibilities cover:
- Supplying furniture and appliances in addition to cookware and dinnerware needed for the comfortable stay of short term guests and the competitiveness of the property compared to other Airbnb listings in the area (unless the property manager offers interior design and furnishing services)
- Getting and renewing short term rental licenses and permits required for the legal operations of the rental (unless handled by the property manager)
- Providing a set of all keys necessary for entering and exiting the property
- Maintaining the property, furniture, appliances, and amenities in a way that guarantees safe stays and full functionality of the property (unless handled by the property manager)
- Paying utility bills on time
- Paying property and other required taxes on time
- Providing enough funds in a reserve account for emergency repairs
Before signing a contract, the owner needs to read their duties carefully and make sure that they can cover everything without a problem.
Property Manager’s Rights
While the duties of both parties are a major part of the contents of an Airbnb management agreement, they are not all. Rights are also important to provide legal protection.
The contract should clarify the rights of the property manager. Usually, the manager is free to:
- Set up daily rates as deemed necessary by them
- Deploy emergency repairs to protect the property and its guests up to a certain amount of money (usually a few hundred dollars)
- Decide which guests can and cannot stay at the property based on objective and legal background checks
- Hire third-party contractors to provide marketing and advertising, housekeeping, and maintenance works
The property manager rights are usually needed to ensure smooth business operations without unnecessary disruptions by owners.
Property Owner’s Rights
The rights of the Airbnb host should also be stipulated in and guaranteed by the short term rental management agreement.
The standard rights of the property owner includes:
- Visiting the property as wanted (in coordination with the property manager and when there are no guests on site)
- Reserving the property for personal use (provided that this does not conflict with any existing reservations and does not exceed a certain number of days per year, usually 60-90 days)
It’s very important to confirm that the contract allows you to do both of these things before deciding to work with a certain manager. After all, this is your own property, and it doesn’t make sense to not be able to check up on it periodically or not be able to use it for your own vacations.
Indemnification of the Property Manager’s Liability
In addition, short term rental management agreements have a separate clause that eliminates the liability of the property manager in case of injury to guests or contractors when located on the property. This includes both medical expenses and legal fees.
Property managers, however, retain liability for damage that occurs because of negligence or willful conduct by the company or its employees.
When hiring a professional manager, short term property owners need to amend their Airbnb insurance to include the property manager. The insurance needs to cover both property damage and personal liability.
Short Term Rental Management Fees and Other Financial Matters
Importantly, every contract features a section that specifies the monthly Airbnb management fee. Usually this amount is set up as a percentage of monthly revenue.
In the US market, most vacation rental managers charge between 25% and 40% of revenue, including cleaning fees. Summer is a top choice for hosts across the US as fees start at an industry-low rate of 20%, excluding cleaning fees, for comprehensive services.
If the manager charges additional fees for extra services, such as cleaning and maintenance, these should be listed in the agreement. After reading the text, owners need to know how much exactly they will be expected to pay and for what services.
Furthermore, the agreement should explain the payment method for the owner payout, typically check or bank transfer. It should also state how long after the end of the month the owner can expect their money.
Conditions Related to Damaged or Missing Property
Accelerated wear and tear is normal with short term rentals due to the high renter turnover and the sometimes reckless behavior of guests. Vacation rental management agreements allow property managers to set up and collect security deposits that cover the majority of property damage or loss that happens during stays.
After a guest stay is completed, the manager needs to inspect the property to identify any damage. Then, they withhold the relevant amount of money from the security deposit to pay for the necessary repair. Such maintenance work is managed and coordinated by the Airbnb manager.
Sometimes managers do not detect all issues on time. In case a problem is realized later on, the property manager is obliged to attempt to track it down to the guest who inflicted it and get the necessary coverage for the damage.
Meanwhile, property owners remain responsible for the coordination and the payment for any damages and losses that remain outside the scope of the security deposit. This usually refers to regular wear and tear and items stored outside the rental unit which might or might not be covered by the short term rental insurance.
When signing an Airbnb management agreement, you should operate with a mindset that’s ready for the worst to happen. When it comes to property damages and personal property losses, it’s better to be over prepared and over protected than to simply hope for the best.
Miscellaneous Conditions
A few other components present in most short term rental management agreements include:
- Duration: A short term rental property management agreement needs to specify the time of duration and what it takes to renew the agreement. Owners should know for how long the management of their property is covered.
- Reporting: The contract should define how regularly the manager has to report to the owner. This is usually done on a monthly basis and includes a detailed property performance report. Meanwhile, it should also be clarified whether the host will receive access to real-time online data that tracks the operations of their rental.
- Termination: A termination clause is a must in any vacation rental contract. Hosts need to know what it takes to cancel the property management work in case their situation changes or they are not satisfied with the provided services. They also need to be aware under what circumstances the property manager can terminate the agreement.
In some cases, Airbnb property management contracts might need a few additional sections to clarify special situations and circumstances. But the above-listed items cover the must-have sections of every agreement that aims to make the lives of both property owners and property managers easier and more organized.
Bottom Line
The purpose of a short term rental property agreement is to make your relationship with the company taking care of your investment property easier and smoother. Your work with them should be based on trust and good will, but trust and goodwill are not enough to govern business relations. Treat your vacation rental property as any other business and protect it with a clearly drafted, detailed, written, and signed contract.
