Property Management Contract - Natural disaster fee ?

Just looking over a contract with an new PM and noticed one weird thing:

Natural disaster fee - when the premises is partially or wholly uninhabitable
10% (+GST) of total invoiced cost of repair​

Never come across this before.
What if there is a earthquake and the building collapses, do I need to pay out 10% of the new building?
Shouldn't this be better off as an hourly charge to them instead of a % of the cost of repair?

Any advice would be appreciated?

 

I assume it's similar to doing a renovation - they look after the process of it.
If it were broken windows and roof tiles from a storm, I would understand them needing to manage it (if you're out of state).
An earthquake where you build an entirely new building I would doubt they'd get up charging that.

 

Most disaster events should be covered by a comprehensive insurance policy.
In the event of a loss, the insurance company will probably organise repairs.

This clause could cost you tens of thousands of dollars, with little work needed to done by the PM. Seems to me they are looking to that clause to replace lost rental commission while the property is uninhabitable. Their problem, not yours.

The time to negotiate is BEFORE you sign the agreement. Simply tell the prospective PM the clause is unacceptable and you won't be signing until it is removed.
Marg

 

I wouldn't sign, I would be looking for another PM. They sound like parasites with questionable integrity, trying to profit off some-ones misfortune.

 

If you sign the clause, there is a bushfire and the house is destroyed, insurance rebuilds at a cost of $500K, then legally you will have to pay the PM $50K, even if the PM does absolutely nothing.

Think long and hard before you sign. And don't be palmed if with "it would never happen". A contract is a legal document and enforceable.
Marg

 

The PM seemed good from the first conversation, mentioning all the things a PM should be doing (many of which my last 2 PM's in the area did not do properly or at all), and she came with a glowing recommendation too, so I'm not convinced she is trying to be dodgy, and I think it is similar to managing the cost of a renovation as mikey said, but of course it is still a terrible idea for reasons Marg mentioned.

I will have it removed before signing.
Thank you all for the feedback.

 

I'd respond to that with, "great, so you'll remove the clause then".

 

As an alternative to asking to have it removed, It looks to me like the fee just needs further clarification so it can't be construed in the way we've suggested here?

 

Agreed. Thanks Tom.