Do property management companies have to have a written and signed agreement to be binding in Tennessee?
I kid, I kid!
Ok, maybe not. But property management agreements are complex enough, with enough money at stake, and with enough services that need to be included or excluded, that you absolutely should put the agreement in writing, whether the law requires it or not!
In the event of a dispute, you will both have something to refer to clear things up. The presence of a contract therefore will prevent a lot of disputes from going to the courts.
Competently-written contracts don’t create problems. They prevent them!
Real estate licensing bodies know this, of course. In some states, like North Carolina, it is actually illegal for a real estate license holder to enter into a property management arrangement without a written contract.
Now, moving on, you seem to be asking whether a verbal agreement is binding in Tennessee. The general rule is that verbal contracts are binding – but good luck proving them in the event of a dispute. Verbal agreements have been giving attorneys’ headaches – and lining their pockets – since the beginning of time.
There are exceptions to the general rule: Any service that is not to be performed within the space of one year from the making of the agreement or contract cannot be governed by an oral contract. These agreements must be in writing.
Since your contract isn’t in writing, you probably don’t have a contractual termination date you can point to that would establish the property management service contract to be less than one year. If there’s no end date, however, some judges may even rule that the terms of the contract are so vague that a meaningful contract doesn’t even exist in the first place.
In the event of a dispute with an oral contract, the courts will put more weight on the testimony of the parties and witnesses, as well as on the usual and customary practices within a given industry.
Hope that helps. But surely you can see how easily the absence of a written contract in the world of property management can lead to some major problems for both parties down the road.
Writing about personal finance and investments since 1999, Jason Van Steenwyk started as a reporter with Mutual Funds Magazine and served as editor of Investors’ Digest. He now publishes feature articles in many publications including Annuity Selling Guide, Bankrate.com, and more.