EXHIBIT 10.3
PROPERTY MANAGEMENT AGREEMENT
THIS AGREEMENT is made and entered into as of the 1st day of January,
1997, by and between Apple Residential Income Trust, Inc., a Virginia
corporation (hereinafter referred to as "Owner"), and Apple Residential
Management Group, Inc., a Virginia corporation (hereinafter referred to as
"Manager").
WITNESSETH:
WHEREAS, Owner is the owner of Mill Crossing Apartments (hereinafter
referred to as the "Property"); and
WHEREAS, Owner and Manager desire to enter into this Agreement for the
purposes herein contained.
NOW, THEREFORE, in consideration of the promises herein contained, and
for other valuable consideration, receipt of which is hereby acknowledged, the
parties hereto agree as follows:
1. Designation of Manager as Manager for the Property. Owner hereby
engages Manager as sole and exclusive manager to rent, manage and operate the
Property, upon the conditions and for the term and compensation herein set
forth. All or a portion of the services being performed by Manager may be
contracted or subcontracted to another property management company, provided
that such company agrees to be bound by the terms of this Agreement.
2. Term of Agreement; Renewal. This Agreement shall be valid for an
initial term of two (2) years. In the event Owner sells its interest in the
Property, this Agreement will terminate on the date of such sale. Unless
either party by written notice sent to the other party at least sixty (60) days
before the end of any two-year term hereof elects not to renew this Agreement,
this Agreement shall renew automatically for successive terms of two (2) years
on the same terms as contained herein.
3. Acceptance of Engagement. Manager hereby accepts its engagement as
the manager of the Property and agrees to perform all services necessary for the
care, protection, maintenance and operation of the Property, including the
following:
a. The collection of all rents and other income from the
Property, provided that nothing herein contained shall constitute a guarantee by
Manager of the payment of rent by tenants;
b. The purchase, at the expense of Owner, of all equipment,
tools, appliances, materials, supplies and uniforms necessary for the
maintenance or operation of the Property;
c. The contracting on behalf of Owner for water, gas,
electricity and other services necessary for the operation and maintenance of
the Property;
d. The advertising for the rental of space in the Property, the
cost of which shall be paid or by Owner;
e. The use of all reasonable efforts to keep the Property
rented by procuring tenants for the Property and negotiating and executing on
behalf of Owner all leases for space in the Property;
f. The employment, discharge and payment of all employees or
contractors necessary to be employed in the management and operation of the
Property. Owner agrees that all wages (and federal and state unemployment
insurance and other required charges) of such employees, and all compensation of
such employees and contractors, shall be paid from Owner's funds;
g. The preparation and filing of all returned and other
documents (other than promissory notes, mortgages, deeds of trust or other
documents or instruments which would encumber the Property) required under the
Federal Insurance Contributions Act and the Federal Unemployment Tax Act, or any
similar federal or state legislation. Manager shall also file returns and
reports, and pay from Owner's funds, all sums as may from time to time be
required by the state or locality in which the Property is located;
h. The maintenance of full books of account with correct
entries of all receipts and expenditures, which books of account shall be the
property of Owner and shall at all times be open to the inspection of Owner or
any of its employees or duly authorized agents;
i. The furnishing to Owner of all lenders' annual property
inspection letters regarding repairs necessary to avoid mortgage loan defaults.
The furnishing monthly of a detailed statement of all receipts and disbursements
for that month, such statement to be furnished on or before the 20th day of each
month for the preceding month. Such statement shall show the status of
collections and shall be supported by canceled checks, vouchers, duplicate
invoices and similar documentation covering all items of income and expense,
which shall be kept in Manager's office and shall be available for inspection by
Owner's representatives at all times. Manager shall also furnish a monthly
operating statement showing the income and expense for the month, and year to
date, and for the same month of the preceding year. The cost of performing the
accounting functions outlined in paragraphs h
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and i shall be paid for by Owner pursuant to the terms of this Agreement;
j. The furnishing of annual reports to Owner which shall
contain a composite financial report of the monthly statements provided in
accordance with paragraph i, plus a statement by Manager as to the operations
of the Property during the previous year and recommendations, if any, as to
necessary policy changes or improvements which should be implemented in the
forthcoming year, which recommendations shall be accompanied by an estimated
budget for such items;
k. The furnishing from time to time, at least semi-annually,
of a tentative budget of expenses;
l. The furnishing from time to time, at least annually, of the
following schedules: (1) forecast of rental and occupancy changes; (2) review
of lease negotiations; (3) annual analysis of leases; and (4) schedule of
capital improvements and method of financing such improvements;
m. The furnishing, on a regular basis, of all forms necessary
to operate and lease the Property and manage the personnel including, but not
limited to, form leases, contracts and management policies; and
n. During the initial term of this Agreement, supervising the
transition from former ownership of the Property and implementing new management
systems with respect to operation of the Property.
4. Deposits of Rent and Other Income. All sums received from rents,
tenant security deposits or other deposits on space in the Property, deposits
on keys and other income from the Property, shall be deposited from time to
time as collected by Manager to the credit of Owner in such bank or banks as
may from time to time be designated by Owner. Such funds shall be disbursed
only in accordance with the terms of each individual lease and in accordance
with any applicable federal, state or local laws, regulations or ordinances.
5. Insurance. Owner shall place all insurance policies with respect to
the Property and its operation. Manager shall be included as an insured in the
policies covering general liability, public liability and workers' compen-
sation insurance. In the event, Manager is authorized by Owner to place
insurance policies, the companies, the general agents, the amounts of coverage
and the risks insured shall be subject to the approval of Owner.
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6. Indemnification. Owner hereby agrees to indemnify and hold harmless
Manager against and in respect of any loss, cost or expense (including
reasonable investigative expenses and attorneys' fees), judgment, award, amount
paid in settlement, fine, penalty and liability of any kind incurred by or
asserted against Manager by reason or or in connection with the employment of
Manager hereunder, the performance by Manager of the services described herein
or the occurrence or existence of any event or circumstance which results or is
alleged to have resulted in death or injury to any person or destruction of or
damage to any property and any suit, action or proceeding (whether threatened,
initiated or completed) by reason of the foregoing; provided, however, that no
such indemnification of Manager shall be made, and Manager shall indemnify and
hold Owner harmless against, and to the extent of, any loss that a court of
competent jurisdiction shall, by final adjudication, determine to have results
from willful misconduct, gross negligence or fraud by or on the part of Manager.
7. Compensation of Manager for Managing the Property.
Owner shall pay to Manager a "Property Management Fee" for management of the
Property pursuant to this Agreement in an amount equal to five percent (5%)
of the monthly gross revenues from the Property. The Property Management Fee
shall be paid to Manager on or before the 10th day of each month and shall be
based upon the income received by Owner (for such month) which has been
obtained by such date. If additional gross revenues are received by Owner
after the day Manager is paid, the sum due to Manager on account of such
additional income shall be paid to Manager when Manager is paid its fees for
the next succeeding month.
8. Reimbursement for Expenses. Owner shall reimburse Manager for
Manager's expenses, including salaries and related overhead expenses, associated
with bookkeeping, accounting and financial reporting services pertaining to the
Property.
9. Reserves for Capital Items. Owner acknowledges that the budget
prepared by Manager, pursuant to paragraph 3(k), will contain a category labeled
"Reserve for Capital Items." Owner agrees to place rents and other income in
a bank account, or to permit Manager to transfer Owner's funds to such account,
in sufficient amounts to meet the needs reflected in such budget. Such funds
shall be placed in the account on a monthly basis as reflected in the budget.
10. Cash Flow. Owner acknowledges that the budget prepared by Manager,
pursuant to paragraph 3(k), will contain a category labeled "Cash Flow." Owner
agrees, in the event that the budgeted cash flow for the Property is "negative"
in any month
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covered by the budget, to place sufficient funds in a bank account, or to
permit Manager to transfer Owner's funds to such account, to make up the
budgeted operating deficit. These funds must be placed in such account at
least forty-five days before the budgeted deficit is to occur.
11. Power of Attorney. Owner hereby makes, constitutes and appoints
Manager its true and lawful attorney-in-fact, for it and in its name, place and
stead and for its use and benefit to sign, acknowledge and file all documents
and agreements (other than promissory notes, mortgages, deeds of trust or other
documents or instruments which would encumber the Property) necessary to perform
or effect the duties and obligations of Manager under the terms of this
Agreement. The foregoing power of attorney is a special power of attorney
coupled with an interest. It may only be terminated by canceling this Agreement
as provided herein.
12. Relationship of Parties. The parties agree and acknowledge that
Manager is and shall operate as an independent contractor in performing its
duties under this Agreement, and shall not be deemed an employee or agent of
Owner.
13. Entire Agreement. This Agreement represents the entire
understanding between parties hereto with regard to the transactions described
herein and may only be amended by a written instrument signed by the party
against whom enforcement is sought.
14. Governing Law. This Agreement shall be construed in accordance
with and be governed by the laws of the Commonwealth of Virginia.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first written above.
OWNER:
APPLE RESIDENTIAL INCOME TRUST, INC.,
a Virginia corporation
By: /s/ Xxxxx X. Xxxxxx
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Title: President
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MANAGER:
APPLE RESIDENTIAL MANAGEMENT GROUP, INC.
By: /s/ Xxxxx X. Xxxxxx
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Title: President
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