Free Property Management Agreement

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Last Update May 27th, 2024

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What is a Property Management Agreement

A contract concerning Property Management is an arrangement struck between the owner of a property and the company charged with its administration. 

Similar to other legal forms, a Property Management Agreement (PMA) serves to safeguard the interests of both involved parties by specifying roles and tasks. 

Having a Property Management Agreement Form readily available allows owners to take a step back with ease. The hope is that the chosen company will act with their best interests at heart. 

A PMA equips owners with all relevant terms and stipulations tied to the management of a rental unit. This contract delineates the way the said firm will handle the day-to-day functioning of the leased property. 

The main purpose of this legal document is to clarify the services falling under the purview of the property manager, and those that the owner is accountable for. In addition, it discloses any service fees involved. 

The presence of a formally signed contract  goes a long way in reducing misunderstandings or disputes concerning roles and responsibilities.

Types of Property Management Agreements

The kind of Property Management Agreement form required hinges on the nature of the real estate, your predilections as the property owner, and the array of services that the manager is expected to deliver.

Examine the following types of Property Management contracts:

  • Management agreement for special purposes: This agreement category covers structures that don't align with other classifications, such as sports stadiums, educational institutions, and holiday resorts. In this kind of contract, it might highlight the party accountable for any advertising expenses related to the properties.
  • Industrial Property Management: Pertaining to the oversight of real estate allocated for storage or manufacturing operations, this agreement is applicable. Instances of such spaces encompass automobile factories and storage warehouses. One vital element of this contract is insurance. The agreement is also expected to identify the party responsible for any harm inflicted on the fixed structures.
  • Management agreement for commerce: This type of contract pertains to the supervision of commercial properties. Included within this agreement should be the specification of business types permitted by the landlord on the property, and the allocation of responsibility for upkeep and repairs.
  • Residential Property Management: Within the remit of this agreement, it should encompass specifics concerning the collection and disbursement of rent payments. For residential properties, details of the rental rates must be outlined in the residential lease agreement.

When Do You Need a Property Management Agreement?

You require a Property Management Agreement when you, as the owner, decide to delegate the daily operations of your property to a Property Management company or a property manager. 

The necessity for this type of agreement can arise in a multitude of scenarios – when you own multiple properties and find it challenging to manage them all, when you're located at a distance from your rental property, or when you simply do not have the inclination or the expertise to manage real estate.

Having a PMA in place ensures that there is clarity about the roles, responsibilities, and expectations for both parties.

In addition, a Property Management Agreement becomes essential when the property to be managed falls into a specific category, like commercial or industrial, and you need a manager with specialized skills. 

This contract also proves beneficial when the property ownership involves multiple stakeholders, thus needing an unbiased third party for effective management. 

A professional manager can help optimize the usage and returns from your property, and having an agreement can provide the framework for this relationship, thereby minimizing misunderstandings and potential disputes.

Who are the parties to a Property Management Agreement

The parties to a PMA are typically the property owner (or owners) and the property management company or individual property manager.

The property owner, often referred to as the "landlord" or "principal," is the person or entity that legally owns the property. They are hiring the property manager to oversee the day-to-day operations of the property on their behalf.

On the other side of the agreement is the property management company or the individual property manager, sometimes called the "agent." 

This party is tasked with managing the property following the terms of the agreement. Their responsibilities may include marketing the property, collecting rent, maintaining the property, addressing tenant issues, and providing regular reports to the owner.

It's crucial to note that there could be additional parties involved in a Property Management Agreement under specific circumstances. 

For instance, if the property is owned by a group of investors, all members of the group could be parties to the agreement. Similarly, if the Property Management company is a large organization with different departments handling various aspects of Property Management, the agreement could involve multiple parties within the company. 

In some cases, legal entities like trusts or estates could be parties to the agreement if they hold the property. The agreement is tailored to define the rights, obligations, and roles of all parties involved, thus ensuring smooth operation and management of the property.

Property Manager Functions

Property manager functions are determined by the specifics of the Property Management Agreement (PMA). These duties can cover a wide variety of responsibilities tailored to the needs of each individual property owner. 

It's essential for the manager to understand these stipulations and act accordingly.

Rent responsibilities

Rent responsibilities form a significant aspect of property management. This often involves setting rent levels, which requires an understanding of current market rates to ensure competitiveness and profitability. 

Additionally, property managers are charged with collecting rent from tenants, ensuring timely payment and financial stability. 

Lastly, they also have the role of adjusting rent in accordance with local and state laws, a task that requires a thorough grasp of legal guidelines.

Tenant management

Tenant management includes finding and screening potential tenants, a process that ensures the selection of reliable and respectful occupants for the property. 

Once tenants are in place, the property manager is also responsible for addressing any complaints, ensuring a satisfactory living environment. 

The manager also oversees tenant move-outs and, in more challenging situations, may be required to manage eviction processes, adhering to local and state laws.

Maintenance and repairs

Maintenance and repairs are key to property management. This involves the physical upkeep of the property, which includes conducting regular maintenance checks to ensure the property remains in good condition. 

These checks help to prevent extensive damage and keep the property safe and habitable. In addition to routine care, property managers are also responsible for handling emergency repairs, acting swiftly to resolve urgent issues that may arise.

Understanding and complying with laws

Understanding and complying with laws is a critical aspect of property management. 

Property managers must keep abreast of the latest local, state, and federal legislation that governs the renting and upkeep of rental properties. This legal knowledge ensures they operate within the bounds of the law, protecting both the property owner and the tenants. 

Compliance with such regulations not only prevents legal disputes but also promotes trust and professionalism in the property management industry.

Additionally, this understanding of law extends to areas like tenant rights, safety standards, and eviction procedures, ensuring fair and lawful management practices across the board.

Record keeping

Managers are entrusted with maintaining exhaustive records for the property, which include a detailed account of income and expenses. 

This allows them to keep track of financial health and operational costs. They also need to register inspections, signed leases, maintenance requests, and any complaints or repairs, ensuring all interactions and events are well-documented. 

Records of rent collection, insurance costs, and any incidents provide a transparent and chronological account of property management activities, fostering trust with property owners and tenants.

Budget management

Budget management is a crucial role often shouldered by property managers. They are commonly responsible for managing the budget for a building, which involves careful planning, monitoring of income and expenses, and strategic decision-making. 

An integral part of this role is the maintenance of all necessary financial records, vital for accountability and strategic planning. 

In some cases, property managers also take on the responsibility of paying property taxes. This added role not only ensures timely payment but also entails understanding and adhering to the relevant tax laws and regulations.

Property inspection

Property inspection forms an essential duty in property management. Regular inspections are carried out to assess the current conditions of the property, ensuring it remains in a good state of repair. 

These checks also serve to confirm tenant compliance with lease terms, safeguarding the property's value and condition.

 Addressing potential issues proactively is another critical aspect of these inspections, helping to prevent minor problems from escalating into major ones. 

Overall, thorough and regular property inspections contribute to the longevity of the property, tenant satisfaction, and maintaining a strong landlord-tenant relationship.

Marketing and vacancy filling

This process involves creating ads, listing the property on appropriate platforms, and showing the property to potential tenants.

Property managers are in charge of advertising the property to fill vacancies. They are tasked with advertising the property effectively, which involves creating appealing and accurate ads that highlight the property's best features. 

Listing the property on suitable platforms, both online and offline, is another part of this job, maximizing the property's exposure to potential tenants. Property managers also show the property to interested parties, providing a comprehensive tour and answering any queries. 

This strategic and efficient process of marketing and vacancy filling helps ensure continuous occupancy, contributing to the profitability of the rental property.

Establishing and managing relationships

This function involves the negotiation of contracts with vendors and the resolution of conflicts, if any. 

The property manager must be able to foster positive relationships with a diverse group of stakeholders, including tenants, vendors, and other relevant parties. This involves creating a good rapport, often through effective communication and customer service. 

Additionally, the manager negotiates contracts with vendors, ensuring the property receives quality services at fair prices. In situations where conflicts arise, the manager also plays a critical role in resolution, helping to maintain harmony and continuity in property operations.

Reporting

Regular updates to the property owner are an integral part of this process, keeping the owner informed about all critical aspects of the property. 

This includes updates on the property's financial performance, providing a clear picture of its profitability and any areas for improvement. 

Besides financial updates, the property manager also reports on the physical condition of the property, highlighting any maintenance needs or structural issues. 

By effectively communicating these insights, the manager helps the owner make informed decisions and maintain the property's value and desirability.

What to Include in a Property Management Agreement

A PMA should be comprehensive, covering all necessary components to ensure smooth Property Management. 

Here's a rundown of key sections typically found in these contracts:

  • Agreement introduction: This part contains the date of the agreement, the parties involved - the property owner and the property manager - along with their official names and addresses.
  • Manager's appointment: The document should state clearly that the owner assigns the property manager the responsibility to manage the specified property in line with the agreement's terms.
  • Agreement Duration: The agreement's effective date and its termination date. Also, there should be a provision for early termination under specific conditions.
  • Manager's duties: All the tasks the property manager is responsible for should be listed here, including collecting rent, paying bills, handling maintenance and repairs, conducting property inspections, marketing, tenant screening, lease management, and dispute handling.
  • Compensation structure: Here, you should detail how the property manager will be paid for their services. This might include a fixed fee, a percentage of the rental income, or a combination of both.
  • Manager's authority: This section grants the manager the right to perform necessary actions to fulfill their responsibilities, such as signing leases, hiring contractors, or making payments.
  • Termination clause: The agreement must include terms under which either party can terminate the agreement, usually with a specified notice period. It should also dictate what happens upon termination, including final accounting procedures.
  • Governing law: This section clarifies which state's laws will govern the agreement and handle any disputes.
  • Entire agreement clause: This clause affirms that the contract encompasses the full agreement between the two parties, superseding all prior discussions, negotiations, and agreements.

It is important for a Property Management Agreement to include provisions that clearly define the roles, responsibilities, and expectations of both the property owner and the property manager. 

These provisions serve as a framework for effective communication, outline the scope of services to be provided, address financial arrangements, and establish procedures for conflict resolution. 

By incorporating them, the PMA becomes a comprehensive and legally binding document that safeguards the interests of all parties involved and promotes a successful and harmonious working relationship.

How to Terminate a Property Management Agreement

Terminating a PMA requires careful consideration and adherence to the terms outlined in the contract.

  1. Review the agreement: The agreement usually includes a termination clause specifying how and when the agreement can be ended. This clause should provide information about the notice period required, any fees associated with termination, and any other conditions that need to be met.
  2. Written notice: Prepare a written notice of termination. This notice should specify the date, your intention to terminate the agreement, the reason for termination (if required), and your contact information. It's also prudent to acknowledge your understanding of any potential penalties or fees due to early termination.
  3. Delivery of the notice: Usually stipulated in the agreement, methods can include certified mail, hand delivery, or email. It's important to ensure that the notice is sent within the agreed-upon timeline.
  4. Final settlement: Settle any remaining financial obligations as per the agreement. This could include outstanding fees or payments to the property manager, the return of any remaining balance from the rental income, or dealing with a termination fee, if applicable.
  5. Transition process: Once the termination process is underway, coordinate with the property manager for the transition. This could involve transferring any remaining funds and handing over tenant records, keys, and any other relevant documents. The property manager should also inform the tenants about the change in management.

Communication should be clear, respectful, and conducted in good faith, as maintaining a positive relationship can help avoid potential legal complications.

Property Management Agreement Sample

In need of a reference point for drafting your own PMA? This section provides a sample Property Management contract for your convenience. 

By examining this Property Management Agreement sample, you can gain valuable insights into the structure, content, and key provisions that should be added to your own form.

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Property Management Agreement Sample

Other Real Estate Documents

In addition to the Property Management Agreement Form, other important real estate documents play a crucial role in rental Property Management and tenant-landlord relationships:

Property Management Contract FAQs

When entering into a Property Management contract, it's natural to have questions and seek clarity. 

This section addresses some frequently asked questions (FAQs) regarding Property Management contracts, providing valuable insights to property owners and helping them make informed decisions.

What Are the Benefits of Management Agreement?

A PMA brings several advantages to property owners, such as the ability to entrust day-to-day operations to professionals, resulting in efficient management, and time savings. 

Other benefits include effective marketing, tenant screening, improved tenant relationships, streamlined collection, proactive property maintenance, financial transparency, and the potential for optimizing overall investment returns.

Can Managers Sign Leases for Property Owners?

Property managers can sign leases on behalf of owners as part of their responsibilities outlined in the Property Management Agreement

This allows them to handle tenant selection, lease negotiation, and agreement execution, offering convenience for property owners who may not be available or prefer not to handle these tasks themselves.

Do Property Managers Need to Be Licensed?

Licensing for property managers depends on state and local rules. Many states require a real estate license, while others may have specific Property Management licenses or certifications. 

Managers need to familiarize themselves with the requirements in their jurisdiction and ensure compliance to operate legally and provide professional services to owners.

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Property Management Agreement Sample

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