A Property Management Agreement serves as a crucial contract that solidifies the relationship between a property owner and the designated property manager or management company. Beyond delineating responsibilities, a well-crafted agreement is instrumental in managing legal liabilities for both parties involved.

Table of Contents

• Defining a Property Management Agreement
• Inclusions in a Property Management Agreement
• Property Management Agreement Example
• When Do You Need a Property Management Agreement?
• Types of Property Management Agreements
• Benefits of Using a Property Management Company
• How to Write a Property Management Agreement?
• Frequently Asked Questions
• How can I ensure compliance with local regulations in a Property Management Agreement?
• Do property managers need a license?
• How can I choose between hiring an individual property manager or a property management company?
• Property Management Agreement Sample

Defining a Property Management Agreement

A Property Management Agreement encompasses a range of services, including tenant leasing, rent collection, property tax filing, adherence to landlord-tenant laws, and overall property maintenance. Whether you're a property owner with a single unit or a complex of properties, having a clear agreement is indispensable for establishing the terms of engagement with your chosen property manager.

Inclusions in a Property Management Agreement

To create a robust Property Management Agreement, specific elements must be addressed. These include:

Services Covered:
Clearly outline the services the property management company will provide, such as tenant screening, lease agreement management, property maintenance, and more. The agreement should serve as a comprehensive guide to the extent of services.

Fees Structure:
Detail the fees associated with the management services, specifying whether it's a flat monthly fee or a percentage of the rental income. Additionally, account for any extra fees related to additional, non-standard responsibilities.

Responsibilities & Limitations:
Clearly define the duties of both the property owner and the management company. This section may cover property owner responsibilities, fund allocation, and limitations on the property owner's involvement in day-to-day activities.

Contract Length and Termination Clause:
Establish the duration of the contract, typically one year, and include a termination clause. This clause protects both parties in case the relationship becomes untenable, specifying notice periods and potential fees.

Liability & Compliance:
Clearly stipulate liabilities in case of injuries or claims against the property and outline compliance with local regulations. Address issues like equal opportunity housing and specific laws governing property management.

Funding/Advances:
If applicable, detail the property owner's responsibility for funding daily operations and emergencies. Specify any arrangements for advances made by the property management company.

Property Management Agreement Example

The example property management agreement below details an agreement between the owner, ‘Dallas S Phillips’, and the agent, ‘Donald M Sammons.’

Dallas S Phillips appoints Donald M Sammons to provide building management services to his property.

When Do You Need a Property Management Agreement?

Consider a Property Management Agreement if:

• You own multiple rental properties that are challenging to manage individually.
• You live far from your rental properties and find it difficult to address issues promptly.
• Time constraints or lack of interest hinder your ability to manage properties efficiently.
• You own affordable housing properties subject to specific compliance rules.
• It makes financial sense to hire a property management company while still generating revenue from your investments.

Types of Property Management Agreements

Different types of property management agreements cater to varying real estate types:

Residential Property Management Agreement: Tailored for managing residential properties, addressing rent, liability, and remittances.

Commercial Property Management Agreement: Designed for commercial properties, specifying responsibilities for repairs, maintenance, and insurance.

Industrial Property Management Agreement: Geared towards managing properties used for manufacturing and storage, emphasizing insurance and responsibility for damages.

Special-Purpose Property Management Agreement: Covers unique structures like resorts, sports arenas, and schools, with provisions for specific responsibilities, including advertising costs.

Benefits of Using a Property Management Company

A well-drafted Property Management Agreement provides:

• Clarity on property manager duties and responsibilities.
• Terms for terminating the agreement and the method of termination.
• Addressing liability issues, including personal injury on the premises.
• A structured partnership framework between the property owner and the management company.

Hiring a Property Manager:
Whether an individual or a company, a property manager should hold the necessary license, typically a real estate broker license or a property management license.

Hiring a Property Management Company:
For property owners with multiple properties or high-value assets, hiring a property management company can be more efficient. It's crucial to research their practices, including insurance policies and their approach to advertising and lease negotiations.

How to Write a Property Management Agreement?

Before you fill out your property management agreement, write your state at the top of the form.

Step 1 – Write Effective Date

1. Date of Agreement. Provide the effective date of the property management agreement.

Step 2 – Fill in Owner and Agent Details

2. Owner. Write the property owner’s full name

3. Agent. Write the agent or property manager’s full name. This is the person responsible for renting and maintaining the property.

Step 3 – Enter the Property Address

4. Street Address. Fill in the street (physical) address of the property being managed. Include any unit or apartment number, if applicable.

Step 4 – Identify the Term

5. Term Length. Provide the term or length of the agreement. Write the start and end dates for when the agent will be responsible for the property.

Step 5 – Confirm Agent Responsibilities

6. Monthly Accounting. Specify the day of the month (i.e., the 1st day of the current month). The agent needs to send a monthly accounting to the owner.

7. Approval for Improvements or Repairs. State whether or not the agent needs the owner’s approval for improvements, maintenance, repairs, or decoration costs. If yes, specify the minimum amount of money that requires the owner’s approval.

Step 6 – Fill In Compensation Details

8. Percentage of Full Month of Rent. State whether or not the owner will pay the agent a percentage of the first full month of rent for acquiring a tenant as part of the agent’s compensation. If yes, specify the percentage.

9. Percentage of Collected Rents and Fees. State whether or not the owner will pay the agent a percentage of the collected rents and fees as part of the agent’s compensation. If yes, specify the percentage.

10. Monthly Management Fee. State whether or not the owner will pay the agent a monthly management fee as part of the agent’s compensation. If yes, specify the monthly amount.

11. Other Payments. State whether or not the owner will pay the agent for any other reasons as part of the agent’s compensation. If yes, specify the purpose and the amount (on a monthly basis).

Step 7 – Explain When Parties May Terminate the Agreement

12. Number of Days to Terminate. Specify the days in which the agent must rent the property (calculated from the date the owner and agent sign the agreement) before the owner may declare the agreement void.

Step 8 – Identify the Governing Law

13. State Law. Choose the state’s laws that will govern the construction of the property management agreement. 

14. Dispute Resolution. Provide the county and state where the parties will resolve any disputes.

In conclusion, a well-constructed Property Management Agreement is the cornerstone of a successful and legally sound partnership between property owners and managers. As the real estate landscape evolves, having a comprehensive agreement becomes increasingly critical for the smooth and profitable management of properties. Use the provided insights to tailor your agreement to the unique needs of your property and business.

Frequently Asked Questions

How can I ensure compliance with local regulations in a Property Management Agreement?

The agreement should include a section addressing legal compliance, mentioning specific local codes and laws, and ensuring adherence to equal opportunity housing regulations.

Do property managers need a license?

Yes, property managers, whether individuals or companies, often require a real estate broker license or a specific property management license, depending on state regulations.

How can I choose between hiring an individual property manager or a property management company?

The decision depends on factors like the number and location of properties, the level of involvement you desire, and your budget. Research the practices and policies of potential managers or companies before making a choice.

Property Management Agreement Sample

Below you can find what a Property Management Agreement typically looks like: