Journal of Property Management

INSIDEIREM KNOW YOUR CODE

knOW yOur IreM CODe OF PrOFeSSIOnAL eTHICS Article 6. Contracts

JusT like THe lanGuaGe in a well-wriTTen conTracT THaT iT refers To, THe lanGuaGe in ar Ticle 6 of irem’s code of Professional eTHics is very clear and undersTandable:

Any written contract between a MEMBER and a client shall be in clear and understandable terms, and shall set forth the specific terms agreed upon between the parties, including a general description of the services to be provided by and the responsibilities of the MEMBER.

But what is clear and understandable to one party may not be so clear and understandable to the other party. Disputes over the language in contracts arise all the time, despite the best intentions of the parties when drafting the language. When negotiating contracts, the wise property manager will be aware of how contract language could be misunderstood by others and will endeavor to eliminate vague or unclear language.

Most contract disputes are legal issues, rather than ethics issues. IREM does not intercede in contractual disputes. Violations of Article 6 are rarely cited separately, but are most often cited in combination with violations of other Articles of the IREM Code of Professional Ethics. When there is an issue between an owner and a property manager, the parties will often refer to the property management contract to determine what the contract language states. If the issue is severe enough to result in one party claiming an ethics violation has occurred, and the management contract is not sufficiently clear and understandable, a possible violation of Article 6 may have occurred. In addition, there may be a violation of additional

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Articles in the Code of Professional Ethics.

An actual complaint, brought before the Ethics Hearing Board, involved a property manager who was commingling multiple clients’ funds into a single interest-bearing account and then crediting the interest earned to the management company. The property manager argued that, had the accounts been kept separately, none of them on their own would have been large enough to earn interest, and therefore the management company should be entitled to the interest. The Ethics Hearing Board ruled that a violation of Article 1. Fiduciary Obligation to Clients and Article 3. Accounting and Reporting had occurred, in addition to a violation of Article 6. Contracts.

Basically, the language in a property management contract should spell out, in sufficient detail, the full understanding between the property management company and the owner. That way, the property management company can rest assured that its rights, duties and obligations under the property management contract are fully understood by the owner and that as long as the property management company’s actions are consistent with the contract language, any issue or misunderstanding can be readily resolved by simply referring to the management contract.

Of course, contract disputes are not limited to just property management contracts. The wise property manager will endeavor to make sure that any contract the property manager signs is clear, understandable, and provides a sufficiently detailed description of the property management company’s services and responsibilities.