Property Management Agreement

What is a property management agreement?

A property management agreement is a legally binding services contract that formalizes the relationship between a property owner and a professional property manager. The main purpose of this document is to help property owners to deal with tenants, as well as manage and maintain their real estate in a professional way.

Introduction

A solid property management agreement sample includes:

• detailed description of the parties involved (full names, addresses, and contact information);
• description of property (location, size);
• detailed list of the manager’s responsibilities;
• limitation of liability clause;
• payment terms;
• insurance terms; and
• rules for termination of a contract.

The parties involved in a property management agreement are a property owner and a property manager. A property owner could be an individual or business who has a full title over real estate that needs to be managed. This template would be suitable for various types of real estate, including office space, apartments, houses, etc.

A property manager is an independent contractor or business that has the necessary skills and expertise to manage the property. In some states a property manager does not need to have a special separate license for the provision of property management services. At the same time, some other states may require holding a separate property management license (e.g., Nevada or South Carolina).

Types and purpose of property management

A good property management agreement template could be helpful in various life circumstances:

• If you are a foreign investor who wishes to purchase real estate within the U.S., it is wise to consider having a property manager handle the property on your behalf.
• If you have a few properties under the lease, it might be challenging to deal with tenants on a regular basis. This is when a property manager could be helpful.
• If you simply do not have enough time to liaise with tenants or maintain the property.

Currently, there are two most common types of contract templates—they are residential and commercial property management agreements. There is no big difference between those two types of property management contracts, except for the payment model. For commercial property management agreements, it is common to have a mixed model of fees, like a monthly fee and a fixed percentage from a regular rental payment.

How to draft a simple property management agreement?

Creating even a simple property management agreement from scratch is a challenging task. It requires lots of attention to details and inclusion of a number of important provisions. Below, we made a short list of all the clauses a good example of a property management agreement should have:

Scope of Services

The thing number one is to include all the services the property manager shall provide. They may be the following:

• collection of rental payments on behalf of a property owner;
• handling the eviction process of tenants who do not pay on time;
• handling minor repair and maintenance of property;
• liaising with tenants on a regular basis;
• ensuring compliance of landlord-tenant relations according to the applicable federal and state laws;
• handling emergencies with the property;
• controlling payment of all utility bills, etc.

Description of the Property

Before entering the contract, the property manager should be aware of all important characteristics of the property, including the tenant’s details. Therefore, a property management agreement lays out:

• full name and contact information of the tenants;
• size and type of the property (e.g., condo, apartment, house);
• detailed location of the property, number of floors, areas, or rooms.

Liability of a Property Manager

Even though a property manager manages the property, he or she does not become liable for damage caused to that property. Thus, a good example of property management agreement should list a number of legal disclaimers that exclude a manager’s liability. Those disclaimers normally include the following:

• Damage to the Property. The property manager cannot be liable for the damage caused to the property by tenants. Therefore, most property owners tend to have insurance coverage in case of damage.
• Unpaid rent. The property manager is only responsible for collecting rental payments. However, he or she cannot be liable for tenants not paying rental payments on time or constantly delaying them.
• Force Majeure Events. The property manager cannot be responsible for any damage caused to the property due to force majeure events, like earthquakes, floods, war, civil unrest, etc.

Payment Terms

Another important pillar every property management agreement sample should have is clear payment terms. This section should answer how much, when, and how a property manager should be paid. Therefore, the text of a document usually sets out:

• selected payment model (e.g., fixed monthly or quarterly fees, percentage of monthly rent, fixed fee, etc.);
• acceptable payment method (e.g., cash, credit or debit card, PayPal);
• order for reimbursement of other expenses (e.g., working overtime due to emergency, advertising of the property to tenants);
• annual mandatory increase of management fees (e.g., up to 2% increase yearly); and
• late fee (when an owner fails to pay for provided services on time).

Termination

Every property management agreement template should establish the exact duration for which services should be provided:

• indefinite period of time;
• until a specific date; or
• for a defined period of time.

Despite the agreed duration for the provision of services, every party should have a right to end it earlier with or without cause. Thus, the text of a document usually includes a notice period within which a contract can be terminated. Besides that, in a limited number of circumstances either party should have the right to end the contract immediately. This is the case when the property owner fails to pay managing fees or when the manager cannot find tenants to occupy the property.

Finally, a solid property management agreement can optionally include an automatic prolongation clause. This is when the contract does not end at the end of the terms, but it is prolonged automatically for the same period of time.

How to customize a legal template at FasterDraft?

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1. Click the “Create Document” button.
2. Answer simple questions in the form.
3. Select a template’s format—property management agreement PDF or Word.
4. Make a payment.
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