Defining Property Management Agreement
A property management agreement, sometimes referred to as a management contract, is a document that is signed and entered into between a property owner and a property management company (or an individual) that outlines the duties and responsibilities of the management company.
Recognized as a legally-binding contract by the courts, property management contracts not only list out the responsibilities of the property manager, but also what powers and authority the manager has over the property. It also serves to clarify between the parties what will be expected in terms of property maintenance, upkeep , and how it will ultimately be managed. These agreements serve as a means of protecting both parties, ensuring that the management company is held accountable for its contractual obligations and that the property owner has all of their expectations clearly outlined in the legal document.
Property management companies work with owners, making it their job to collect rent, perform maintenance and repairs, and market and advertise the property, all for a set fee. When you enter into a property management arrangement, you are essentially becoming an employer, putting this property manager in-charge of day-to-day operations of your property (or properties).
Essential Features of a Basic Property Management Agreement
A typical simple property management agreement will include the property management firm’s obligations to the homeowner and the homeowner’s obligations to the property management firm. The agreement will include what the management firm will do to oversee and take care of the system and what fees will be charged for the service. It will also set forth the responsibilities of the property owner to the management company and include the rights afforded them to collect certain costs for any late payments or violations of law. Below are some of the most common items included in a simple property management agreement.
Services
The basic services will include administrative, maintenance, and oversight of the property. This section is critical because it states that management will forego certain duties unless they are expressly listed as part of the services provided.
Fees
The simple property management agreement will usually state which portion of the rent goes to the management firm each month as well as any other costs (such as costs associated with eviction) that will be passed on to the property owner.
Obligations
The obligations of the management firm to the owner, as well as the obligations of the owner to the firm, typically include the following:
Termination
Certain things may cause the contract to be terminated, which may include failure by the owner to make timely payments, the closing of their account, or when the property is sold. Once the contract is terminated, it will also be indicated how the company will distribute any money collected.
Communication
A simple property management agreement should include information about the process by which the management company will communicate important information to the property owner. This will often include how they will address permits or complaints by tenants to ensure there are no violations of ordinance or state laws.
Advantages of a Basic Property Management Agreement PDF
A simple property management agreement In PDF format is easily started by filling in some blanks.
One of the primary benefits of using a simple property management agreement in PDF format is convenience. These agreements allow property owners and managers to avoid having to create a new contract each time the terms of management change or a property changes hands. Instead, the agreement can be updated with the property manager’s information and other specific details, and use the new document as a "generic" form that can help as a basis for future contracts.
These agreements can be shared easily with others via email or other electronic communication, allowing property management companies to send out blank contracts for new management opportunities with ease.
Using this format allows property managers to maintain a uniform, professional document record. Having multiple forms for multiple agreements can create confusion among management staff and, worse, a misunderstanding among property managers and owners whom you represent. Using a simple property management agreement in PDF format minimizes this confusion, since you won’t have to review multiple forms before selecting one. You’ll always have access to your simple agreement, and can make minor adjustments as necessary.
Creating a Basic Property Management Agreement
There are certain things you will need to ensure are in any property management agreement you write, regardless of whether it is a simple template or not. For starters, you will need both parties’ names, the property address, the length of the contract and possibly the start and end date, the legal responsibilities, and the payment for service amount . All of these things are covered in a simple property management agreement PDF. All good templates will include some specific language as well. Here are some of them: You can always go beyond the basics and put details on the occupancy and rent collection or what happens if there is property damage or a natural disaster. An addendum with those clauses can be added to the basic agreement.
Common Pitfalls to Avoid
When creating or utilizing a property management agreement, it is crucial to be vigilant to avoid some common mistakes. One of the primary errors is the omission of important terms that clearly define the responsibilities and authorities of both parties. For instance, stating that the manager will collect rental payments without specifying the exact procedures, frequency, and form of payment can lead to disputes later. Similarly, vague terms around when the landlord must be notified of a maintenance issue or repair, or what actions constitute an emergency can cause confusion and conflict.
Another frequent oversight is the lack of precision in defining roles and powers. Phrases like "commonly associated with" or "as necessary" are often used but unhelpful as they leave too much room for interpretation. Rather than saying the manager can advertise a rental unit "as necessary", it’s often better to explicitly state that the unit will be listed on the MLS or other rental sites for thirty days prior to a vacancy and assume a vacancy reserve of X months after a unit is vacated. This level of detail establishes clear expectations and responsibilities.
Last but not least, an effective property management agreement should include mechanisms for dispute resolution. Whether through mediation, arbitration, or other means, omitting these can be detrimental when a disagreement arises. Without established procedures for addressing conflicts or termination of the agreement, the relationship between the landlord and manager can quickly deteriorate, causing unnecessary loss and inconvenience.
Properly structured, a property management agreement can be a powerful tool in any property management effort. However, it is important to have a clear grasp of what you are getting into before signing on the dotted line.
Tools and Templates for Property Management Agreements
Several towns and municipalities have made it easy for building owners and managers to go online to find a sample "Property Management Agreement" document to download in PDF format. You don’t have to spend hours figuring out what type of language to put in your agreement – you can just download the template and fill in the blanks! But who wants to read through all the federal, state, county and municipal laws before putting in an "assignment of authority," "tenant’s rights," "eviction procedures," or "indemnity" clause into the agreement? These are just some of the clauses that can be added if you download a template from a reliable source .
Some reputable sources of pre-written Property Management Agreements can be found on the City of Pontiac (Michigan), the Pinellas Property Management Association (Florida), PHA (New Jersey) and the Apartment Association of Greater Orlando websites, to name a few. Just make sure when you go to download a sample agreement, it should be a recent version to ensure that it contains the up-to-date legal language.