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What is a Property Management Agreement?
A property management agreement is a legally binding contract between a landlord and a property management company. Typically, the landlord has a property or multiple properties they want professionally managed. The agreement is intended to govern the relationship between the landlord and property management company, outlining obligations, fees, and other important terms to make sure the relationship is a success.
A property management agreement is in written form, so it is important to have the agreement signed by all parties. Management companies who agree to manage properties expect to receive compensation for their services as long as they deliver on the obligations outlined in the contract.
What to Include in a Property Management Agreement
A property management agreement lays out the responsibilities assigned to each party and details all relevant aspects. Below is a description of sections that are strongly advised to always include in a property management agreement:
- Service Fees. It is crucial to clearly state in the agreement what fees will be paid to the property management company for performing services. Services tend to consist of finding a tenant for the property owner, collecting and disbursing rent payment, addressing maintenance concerns, enforcing evictions, and being the point of contract for the tenants.
Property Owner Responsibilities.
You as a landlord will have responsibilities just like the management company will have theirs. The tasks that you have to keep up with need to be written out so there is no confusion as to which party is obligated to take care of something specific. You may be tasked with:
- keeping funds available for the management company to withdraw from if maintenance repairs or other charges are due.
- having insurance on the properties being managed and making sure the coverage is sufficient.
- signing a residential lease agreement or commercial lease agreement despite the management company finding the tenants because you still hold the title of ownership.
- Equal Housing Opportunity. The Fair Housing Act regulates fairness and equality in the housing market in order to prevent and address discrimination. Since this Act is composed of many federal and state laws it is highly suggested that it be included in a property management agreement.
- Liabilities. To prevent the management company from having liability issues you may be restricted from doing certain things that are being cared for by them such as finding tenants and entering properties. There is usually an entire section that discusses what a property management company will not be held accountable for. For example, the management company will not take the blame for something such as poor work being done by a third party hired by the landlord.
- Term. The length of time that a property management company agrees to manage properties for a property owner must be specified in the contract so that once again disputes can be avoided. The management company is expected to fulfill their end of the bargain until the agreed upon time has concluded.
- Termination. There are many reasons why you or the management company may wish to terminate your contract early. The various reasons that would justify an early ending to the agreement need to be stated clearly on the contract. If there will be a fee for an early termination then that needs to be included in the property management agreement.
View this article to get more information on what to include in a property management agreement.
Purpose of a Property Management Agreement
The purpose of a property management agreement is to create a legal document that is enforceable by the law that outlines the rights and obligations of the landlord and property management company. The agreement makes it clear what is expected from each party and what remedies may be sought if one fails to do what they promised.
In real estate, things inevitably break and all tenants are different. Creating a property management agreement will create an objective framework for managing the relationship and the property.
Image via Pexels by David
When a Property Management Agreement is Needed
Aside from a property management agreement solely being needed to cover the responsibilities of each party, it serves as the base of a potentially long-term business relationship. Reasons that you may need a property management agreement range from simple to complex and some are explained below:
- Laws & Regulations - Most states require that residential real estate and commercial real estate is managed by an individual or company with a real estate agent license or property management license. The only six states excluded from this requirement are Kansas, Maryland, Maine, Massachusetts, and Vermont.
- Education - Certifications are available for property managers to provide them with knowledge in the field although they do not have the same authority as an actual license. A certified property manager is said to hold the highest ethical standards for managing properties so it seems likely this type of management will prove to be beneficial opposed to others with less education specific to the industry.
- Clarity - Some management companies may assume things are done a certain way but you may have a different view or preference for services that should be provided. A property management agreement is likely to guarantee expectations are met on both ends and will ensure that you and the management company are on the same page. The agreement will also be available for reference if you or the management company cannot remember something.
- Protection - A property management agreement protects the interests of an owner as well as the management company from being held at fault for something that was not their responsibility. You may find it worthwhile to invest in an agreement because the management company is going to be handling sensitive data and will have access to some of your finances. Having direct permissions spelled out will prevent mishandling and abuse.
A property management agreement is a standard document to have anytime property owners want to hire someone else to manage properties for them.
Get Help With a Property Management Agreement
Getting help with a property management agreement is a sensible thing to do given the complexities of managing property and value of real estate. The owner and property management company will be protected by executing an agreement. If you need help with a property management agreement, post a project in ContractsCounsel’s marketplace to receive bids from vetted lawyers. Our lawyers can help you draft a property management company from scratch or review an existing agreement.
Meet some of our Property Management Agreement Lawyers
In his firm, Talented Tenth Law, Antoine focuses on helping people maximize their protection and prosperity in the courtroom and the boardroom. His firm’s services include representing people in lawsuits involving breach of contract, many types of civil lawsuits and helping business owners win government contracts among other things.
Tom is a former chief legal officer of public and private companies. He has extensive experience in mergers & acquisitions, commercial transactions, joint ventures, finance, securities laws and general corporate law across a broad range of industries, including construction, consumer products, e-commerce, energy and healthcare. As an attorney who practiced at two different Top 50 international law firms, he can deliver "Big Law" service at a competitive price. Prior to becoming a lawyer, Tom served as an officer in the U.S. Army and attained the rank of Captain. He served a tour in Iraq where he led a reconnaissance platoon and was awarded the Bronze Star Medal.
Craig E. Yaris is a partner at Parlatore Law Group, with the experience and drive to handle all your Franchise, General Business Practice, and Mediation needs. As a former small business owner and Chief Operating Officer of a franchisor himself, Mr. Yaris is passionate about promoting business growth. He has experience handling daily operations, employee disputes, and negotiations of pertinent contracts for a franchise company with 100 locations in five states, where he organized and conducted semi- annual meetings to educate and inform franchisees of best practices for improved growth. In addition, Mr. Yaris was responsible for the preparation and filing of the UFOC (Uniform Franchise Offering Circular) in several states and is well-versed in business formation. Between his time as Franchisor and Conflict Resolution Specialist, Mr. Yaris was the Co-Founder and Chief Operating Officer of an online company whose goal was to help inform marketers and business owners of the fast-paced and ongoing changes within their specific verticals. This experience helped him hone his research and writing skills and prepared him for the cloud-based aspects of Parlatore Law Group. Mr. Yaris also has extensive experience in public speaking, as he has planned and delivered several keynote addresses and educational seminars for many New York-based organizations, and as a Continuing Education Instructor for Hofstra University. Prior to joining Parlatore Law Group, Mr. Yaris worked as a Patient Advocate, and more recently, a Conflict Resolution Specialist, where he mediated and resolved disputes on behalf of patients with insurance companies. In this role, he negotiated for coverage of previously denied medications and medical procedures as well as successfully mediated disputes between individuals and business partners which would have otherwise resulted in protracted litigation. In addition, he has experience mediating employer and employee disputes as well as helping resolve family conflict. He has also studied and attended many Non-Violent Communication (NVC) workshops and strives to bring these tools and methods to all of his mediations. His variety of experiences speak to his ability to handle small business needs at all stages of business growth and development. Mr. Yaris also has experience with business growth and development, as he has worked with several small business on creating and implementing strategies for steady growth. In addition, to spending time with family, Mr. Yaris volunteers his time helping spread the message of the ACLU and he supports many local charities focused on families and children. He is admitted to practice in New York.
Amy has served as outside general counsel and litigator to established businesses throughout western Washington since 2010. Her passion and focus is providing the best possible representation for clients in the construction, transportation and hospitality industries.
I am bar certified in the lovely state of Missouri. I received my J.D. from The University of Iowa College of Law (2019) and my B.A. in Political Science from BYU-Idaho (2015).
I am a solo practitioner with offices in Denver, Colorado and Austin, Texas with a focus on general business and real estate contracts.
Experienced business and contract lawyer. Our firm specializes in commercial litigation and dispute resolution.