Introduction to Rental Management Contracts

Author: Tara Peterson

October 12 , 2007

 

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Enclosures:     

Sample Optional Rental Management Program Agreement FAQ
Sample Optional Rental Management Program Agreement

 

The following sample Rental Management Program Agreement FAQ and sample Rental Management Agreement contain common elements that you’ll often find among rental and property management contracts for condo hotel properties.  And, although it is true that in no way will this contract be identical to another contract that you may receive, you will notice certain, if not many, commonalities.

 

 

Disclaimer: Please be fully aware that the below sample contracts are simply just that – a sample of what you may come across.  Other contracts that you may come across could be more or less expansive.  In many cases, other actual contracts will be quite different with regards to verbiage, legalities, and responsibilities.  All names, dates, and locations have been changed in the following documents.

 

SAMPLE OPTIONAL RENTAL MANAGEMENT PROGRAM AGREEMENT

FREQUENTLY ASKED QUESTIONS

 

Delphi Hotel San Francisco

July 2007

 

Summary

Premier Management’s optional rental management program at Delphi Hotel San Francisco allows participating Owners, when they are not occupying their suites, to have their suites rented as part of the Premier Management’s inventory. The program is non-mandatory, not a condition of ownership, and available to all Delphi Hotel San Francisco suite Owners. The following is a summary of the terms that will apply if you choose to participate in the program. It is not a complete statement of those terms and is not a substitute for a complete review of the Rental Management Agreement (RMA).  In addition, the terms are subject to change from time to time.  The terms that govern any particular Owner’s participation will be those set out in the actual RMA signed by that Owner.  Accordingly, if you decide to participate in Premier Management’s optional rental management program, you should review the entire RMA carefully before signing it. If you have any questions, please call Premier Management’s rental management team at (415) 764-1234.

 

Disclaimer

You are not required to participate in Premier Management’s optional rental management program. The decision to participate is entirely up to you. For those Owners that elect to participate, there are no assurances that a participating suite will be rented or that it will be rented at any particular rate.

 

 

1. Who is Premier Management?

Premier Management is the manager of Delphi Hotel San Francisco, and also a qualified and approved rental management company for Delphi Hotel San Francisco. As such, we will operate an optional rental program for the Hotel.

 

Established in 1972, we have managed and operated over 150 hotels in the demanding markets of San Francisco, New York City,  Los Angeles, Chicago, and Las Vegas.

 

2. What is the initial length of the Rental Management Agreement (RMA), and will it automatically renew?

The initial length of the RMA is three years, and it will automatically renew for successive five year terms. If the terms of the RMA were to change in any way, you may choose not to renew the RMA if you so desire.

 

3. Will Premier Management be my exclusive rental agent?

Yes and our primary objectives will be revenue maximization and your satisfaction.

 

4. How much of the rental revenue will I receive?

You will receive 50% of the Net Room Rental Revenue generated by renting your suite. Net Room Rental Revenue is calculated by subtracting a 10% Marketing Fee from the Gross Room Rental Revenue generated by renting your suite. An additional 3% Group Sales Fee will be subtracted from the Gross Room Rental Revenue generated by renting your suite to groups that book no less than 10 suites. For an illustrative example, please see the revenue breakdown provided at the end of this FAQ.

 

The 10% Marketing Fee covers our costs and fees of administering the rental program, including licensing, franchise, credit card and reservation fees, overhead and marketing costs, and travel agent commissions.

 

The 3% Group Sales Fee covers our additional costs of maintaining a Group Sales Team, travel expenses and promotional costs, as well as meeting planner commissions.

 

5. Will I receive revenue from other Hotel services and facilities?

No. You will receive a portion of the room rental revenue from your suite only. You will not receive revenue from the rental of other suites within the Hotel, or revenue the Hotel may realize from a guest staying in your suite.

 

6. When will I receive a rental revenue statement?

Monthly. You will receive your statements 30 days after the end of each month. In the case where a suite is owned by more than one Owner, or the Owner is an entity, the monthly rental revenue statement will be sent to the suite’s Designated Person, as noted

in the RMA. If a credit is due, we will split it up among the Owners, cut separate checks for each Owner, and send them all to the Designated Person. If a debit is owed, we will split it up among the Owners, prepare an invoice for each Owner, and send them all to the Designated Person.

 

7. What are the expected occupancy and room rental rates?

We cannot answer this question, except to say that in order to deliver the most revenue our goal will be to have each suite occupied the most number of nights each year at the highest possible rate. We cannot, and have not, in any way predict(ed) occupancies or room rental rates, and no such guaranties are made.

 

8. Will you comp my suite?

Yes. To adequately promote the Hotel and generate demand, we will have the ability to rent your suite on a complimentary basis no more than 5 days per calendar year. Our goal will be to allocate any and all complimentary stays among all the suites in our rental management program, within each suite category, as equitably as possible.

 

9. How will the reservations be allocated?

Our property management system, Opera, will distribute reservations within each suite category (e.g. studios, one bedroom suites, rock star suites) on a rotational basis, taking into consideration your use, complimentary occupancy, and maintenance down-time, among other variables.

 

Please note that your personal use will reduce the availability of your suite and could negatively effect potential revenues. This will be especially true on weekends and holidays, and during the summer months when rates may be higher. Please also note that complimentary use and maintenance downtime within our control will not adversely effect your suite’s rotation. Downtime that we cannot control, such as your delinquent account, will adversely effect your suite’s rotation.

 

10. Will you collect a reserve to repair, maintain, refurbish and/or upgrade my suite?

Yes. We’ll set aside 5% of your share of the Net Room Revenue each month into a reserve account. The account will always remain your property and will be used for repairs, maintenance, replacements and upgrades within your suite in order to maintain

it in rentable condition.

 

11. What happens if a Hotel guest damages my suite?

In such an event, or if any items are missing from your suite, we’ll use all reasonable efforts to collect charges for damages or missing property from the Hotel guest. However, should we not be able to collect the charges from the Hotel guest, the cost of

repair or replacement will be your responsibility. Please note that the Association insurance policy, which will cover your suite, will include contents insurance and therefore may be a resource to you in such an event.

 

12. What happens if a Hotel guest checks-out without settling his or her account?

If a Hotel guest were to check-out without settling his or her account, we’ll use all reasonable efforts to collect the charges using the Hotel guest’s credit card on file. However, should we not be able to collect the charges, no revenue will have been collected and therefore neither of us will be paid. Please understand that this type of event is uncommon.

 

13. How will I go about making my own reservations?

Let the Owner Experience Team know when you would like to stay and it will secure those dates for you, provided your suite is not occupied and/or has not been reserved for those same dates. While the Owner Experience Team will not move a guest from a suite that’s already occupied, if necessary and upon your request, it will attempt to move a reservation to accommodate your own, though no guarantees are made.

 

14. How far in advance should I make my reservations?

As far in advance as possible, especially during traditional peak periods (e.g. Christmas, New Year’s Eve and weekends). Given  our mutual goal of revenue maximization, if you have not reserved  your suite, we will be working on your behalf to get it reserved.  As per the current Hotel’s expected Policies and Procedures,  you will be able to reserve your suite as far in advance as one year.

 

15. If I am not able to use a reservation I’ve made, will there be a cancellation policy?

Yes, and please understand that the cancellation policy will change from time to time, largely based on demand. Please ensure that you understand the cancellation policy for each reservation you make.

 

16. Will I be able to use the facilities of the Hotel when I am not staying in my suite?

Yes, but to ensure the highest level of service for every Owner and guest staying in the Hotel, Owners staying in the Hotel will be the Hotel’s first priority. Guests staying in the Hotel will be the Hotel’s next priority. Then Owners not staying in the Hotel. Then the general public.

 

Owners not staying in the Hotel may request facility reservations (e.g. at Fleming’s Steakhouse, Sea Cliff bar, the Spa) via the Owner Experience Team, which will evaluate each request based on the Hotel’s ability to provide each Owner and guest staying in the Hotel a rock star experience.

 

17. Will I pay for housekeeping, or be charged a service fee, when I use my suite?

No. While the Hotel Manager will charge you a daily service fee as per the Unit Maintenance Agreement, we will credit this fee back to you in appreciation of your participation in our optional rental management program.

 

18. May I rent my suite on my own?

No. Premier Management will be your exclusive rental agent and you may not rent your suite on your own; nor may you collect any type of payment from guests that may use your 28 days of use. If you do not abide by this policy, we will have the right to terminate your RMA.

 

19. May I terminate the RMA?

Yes. You’ll have two options for terminating the RMA should you so choose. First, if you sell your suite, you may terminate the RMA by providing us advance notice. Second, if the terms of the RMA change you will have the right to terminate. In either case, you will be responsible for honoring, or causing the new Owner to honor, any and all rental commitments. If you or the new Owner is unable to honor these commitments, you will be liable for any costs incurred in relocating a guest from the suite.

 

20. Revenue Breakdown Example

The following revenue breakdown example is provided for illustration purposes only.

 

Transient Group

	Revenue	Revenue
Gross Rental Revenue	$100.00	$100.00
Less: Marketing Fee	10%     ($10.00)	($10.00)
Less: Group Sales Fee	3%       ($0.00)	($3.00)
Net Room Revenue	$90.00	$87.00
Less: Operator's Fee	50%        $45.00	$43.50
Owner’s Revenue	50%        $45.00	$43.50
Less: Reserve *	5%        ($2.25)	($2.18)
Owner's Distributable Revenue	$42.75	$41.33
* The Reserve is the property of the Owner.

Continue to "Sample Rental Management Agreement" »

COPYRIGHT © 2007 PREMIUM CONDO HOTELS - NO PART OF THIS ARTICLE MAY BE REPRODUCED WITHOUT THE EXPRESS WRITTEN CONSENT OF THE AUTHOR. ALL INCIDENTS OF PLAGIARISM WILL BE PROSECUTED TO THE FULLEST EXTENT OF THE LAW.

THE ABOVE SUMMARY IS NOT INTENDED TO BE A THOROUGH AND EXHAUSTIVE EXPLANATION OF ALL OF THE TERMS AND PROVISIONS OF THE PROJECT DOCUMENTS. WHILE THE PURCHASER CAN USE THIS SUMMARY AS A GENERAL SUMMARY OF THE PROJECT, THE PURCHASER MUST REFER TO THE PROJECT DOCUMENTS TO DETERMINE HIS OR HER ACTUAL RIGHTS AND OBLIGATIONS. IF ANY CONFLICT OR DIFFERENCE EXISTS BETWEEN THIS SUMMARY AND THE PROJECT DOCUMENTS, THE PROJECT DOCUMENTS WILL CONTROL.