When drafting an owner agreement, it’s tempting to recycle a previous contract or rely on a boilerplate found online. But it’s worth investing the time and money to craft a unique, customized owner agreement tailored to your business and its specific needs, as well as the needs of the homeowner. Clearly outlining the roles and responsibilities of both the vacation rental manager and homeowner will ultimately save you time, money and stress. Here are some things to keep in mind when drafting your next owner agreement.
Meet with an attorney.
We highly recommend working with an attorney familiar with the vacation rental industry to draft a reliable and effective owner agreement. Crafting your own agreement may seem like it will save you time and money, but in the long run this isn’t the case. Not only is an ambiguous agreement likely to result in a longer negotiation period, but it also leaves you vulnerable to claims from owners that could ultimately cost far more than the consultation.
Make sure your owner agreement clearly reflects the way you do business today.
First and foremost, your agreement should explicitly define the roles and responsibilities of the manager and owners. Track exactly how much you’re charging and where that money goes — for instance, distinguish between fees and nightly rental proceeds. Make your cash flow transparent. Make sure each agreement is up-to-date with how you run your business; this is part of the reason why outdated or boilerplate contracts aren’t ideal. For example, if a property no longer has access to a pool or recreation center but there’s still language in the contract about rec center passes, it’s time for an update.
Keep your options open where you can.
Avoid restricting yourself by defining unnecessary aspects of your business. As your business grows and changes, you might want to adjust your fees or add a new one. Don’t say you’ll perform maintenance and repairs at $35 an hour say you’ll charge “market rate.” Give yourself room to evolve. The key is to clearly state your rights and responsibilities without writing yourself into a corner. Decide on the issue of assignability that is, whether you want to allow yourself or your owners to assign your contracts to other individuals. Permitting assignability is the most flexible option, since it keeps your options open going forward.
Also decide how you want to handle existing reservations if an owner gives notice that they want to terminate their contract. Determine whether you want to set term requirements. In other words, are your owners committed to a three-year term when they sign? Or do you offer a one-year term followed by a no-term contract? You might also choose not to include any term requirements. Bear in mind, of course, that you must abide by the same contract as your owners, so if you impose a term requirement on them, it will restrict you, too.
Don’t be tempted to substitute a handshake agreement.
While it’s true that relationships are important in the vacation rental business, handshake agreements alone don’t provide sufficient protection for you or your owners. Backing up a handshake agreement with written terms protects both parties. If you have a handshake agreement with an owner, think about what might happen if that owner passed away and their spouse or children inherited the property. What would happen if they sold their home? If you weren’t able to continue renting the property, your business would be affected.
The key takeaway is this: Your owner agreement is a reflection of the way your business works, and it should define the rights and responsibilities of manager and owners without placing undue restrictions that could hamper the growth and flexibility of your business.
If you’re interested in more homeowner agreement information from Vacasa, we hope to see you at our session at the VRMA Annual Conference in Arizona this October!