ARTICLE
22 October 2024

The Management Of Short-Let Properties

GA
GVZH Advocates

Contributor

GVZH Advocates is a modern, sophisticated legal practice composed of top-tier professionals and rooted in decades of experience in the Maltese legal landscape. Built on the values of acumen, integrity and clarity, the firm is dedicated to providing the highest levels of customer satisfaction, making sure that legal solutions are soundly structured, rigorously tested, and meticulously implemented.
It is common practice that the letting of a short-let property, as one that has been leased for a short period of time and which is not for permanent residential purposes, is overseen by a property manager on behalf.
Malta Real Estate and Construction

The Scope of a Short-Let Property Management Agreement

It is common practice that the letting of a short-let property, as one that has been leased for a short period of time and which is not for permanent residential purposes, is overseen by a property manager on behalf of the property owner. Such a relationship may be regulated by a short-let property management agreement, which consists of a legally binding contract detailing the rights and responsibilities of each party. In this regard, Companies such as Airbnb or Booking.com for instance, may engage individuals to manage the complete running of the property, wherein the property manager is the person responsible of all tasks and responsibilities to operate a successful property management business.

The Terms and Conditions of the Agreement

Despite having no legislation in Malta that regulates this type of agreement, there are some standard clauses that should be included to regulate the relationship between the two (2) parties.

Details of Property

The agreement should begin by specifying the complete address of the short-let property as this helps avoid any potential confusion or ambiguity of the property/ies in question.

Duties

The rights and obligations of both parties need to be clearly stipulated in the agreement, as this allows the property owners to plan ahead, whilst also significantly reducing the risk of poorly maintained properties that could negatively affect business performance.

Every agreement normally includes a list of the property manager's services, outlining the tasks that the manager agrees to undertake to ensure the smooth operation of the property management business. This section should outline both the standard services included in the monthly fee and any additional services that hosts can choose for an extra charge. Some agreements also clearly specify services that are not included and must be managed by the owner instead to ensure complete transparency.

Financial Arrangements

A well-drafted short-let property management agreement addresses all financial aspects of property management, including but not limited to, the monthly management fee, cost allocation, authorized expenditures, guest fee determination and collection, and the transfer of income to the owner.

Normally, the amount of a management fee is set up as a percentage of monthly revenue. Furthermore, if the manager charges additional fees for extra services, such as cleaning and maintenance, these should also be listed as additional costs in the agreement.

Moreover, the agreement should also explain the payment method for the owner payout, typically by cheque or bank transfer.

Duration of Agreement & Termination Clause

The agreement must specify the duration and the end date of such relationship, including whether it would automatically renew at the end of its initial term or else whether any actions are required to extend it.

It is good practice that short-let property management agreements include a termination clause covering a written notice should the parties wish to termination the relationship and cancel the services being provided. Property owners are generally obliged to fulfil any reservations made for the period following the notice if the property manager is unable to secure suitable and acceptable alternative accommodation.

Liability Clause

A liability clause in such an agreement eliminates the responsibility of the property manager in case of injury suffered by guests or contractors when on the property. This would include medical expenses and legal fees, among others.  The property managers, however, retain liability for damage that occurs due to the negligence or wilful conduct by the property manager himself/herself or his/her employees.

Conditions related to damaged or missing property

Such agreements may also allow property managers to set up and collect security deposits that cover the majority of property damage or loss that happens during stays. 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.

Common Practices by Property Managers and Property Owners

The process often begins with the marketing and promoting of the property through third party contractors. When reservations are made, the property manager is responsible for handling such reservations and maintaining the booking calendar. The manager would then normally collect booking fees and any additional guest charges such as a security deposit. When guests arrive at the property, the manager would then be tasked with coordinating guest check-ins and check-outs. Furthermore, the property manager is lastly in charge of liaising any emergency repairs that would emerge during the guests' stay.

The agreement should adequately define how regularly the property manager must report to the owner, whether monthly or otherwise, and a detailed property performance report would typically be drawn up following the procedure.

On the other hand, the standard rights of the property owner include visiting the property and 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.

Conclusion

The effective management of short-let properties hinges on a well-structured short-let property management agreement that outlines the responsibilities and expectations of both property owners and managers. Given the absence of specific legislation in Malta, it is imperative for all parties involved to clearly delineate their rights and obligations within the agreement. Key elements to such agreement are essential to mitigate risks and ensure transparency. Ultimately, a comprehensive agreement not only safeguards the interests of both parties but also contributes to the overall success of the short-let property business, enabling property owners to maximize their investment while providing good-value service to guests.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

Mondaq uses cookies on this website. By using our website you agree to our use of cookies as set out in our Privacy Policy.

Learn More