A Property Management Agreement is a legally binding contract between a property owner (landlord) and a property management company or individual property manager. This agreement outlines the responsibilities, services, and authority granted to the property manager, ensuring the efficient management of the property.

A property management contract is essential for rental properties, commercial buildings, vacation homes, and multi-unit complexes. It provides clarity on rent collection, maintenance, tenant relations, financial reporting, and legal compliance.

This guide covers what a Property Management Agreement is, why it’s important, key components, how to draft one, common challenges, and its benefits. Whether you are a property owner looking to outsource management or a property manager handling multiple units, understanding this agreement is crucial.

Table of Contents

1. What is a Property Management Agreement?
2. Why is a Property Management Agreement Important?
3. Key Components of a Property Management Agreement
4. How to Draft a Property Management Agreement
5. Common Challenges and How to Address Them
6. Who Needs a Property Management Agreement?
7. When Should a Property Management Agreement Be Used?
8. Advantages of a Property Management Agreement
9. FAQs About Property Management Agreements

What is a Property Management Agreement?

A Property Management Agreement is a contract that grants a property manager or management company the authority to oversee the daily operations of a property. It establishes the scope of management services, payment terms, and responsibilities, ensuring a smooth working relationship between the owner and the manager.

This agreement typically includes:

• Tenant screening and leasing responsibilities.
• Rent collection and financial reporting.
• Property maintenance and repairs.
• Legal compliance and eviction processes.
• Fee structure and termination clauses.

A properly structured property management contract ensures that property owners and managers understand their roles, protecting both parties legally and financially.

Why is a Property Management Agreement Important?

1. Defines the Property Manager’s Scope of Work

Ensures clarity on which tasks the manager is responsible for, such as rent collection, maintenance, or leasing services.

2. Establishes Financial Terms and Fees

Clearly outlines management fees, commission rates, and expense reimbursements to avoid disputes.

3. Provides Legal Protection for Both Parties

Sets clear guidelines on responsibilities, liabilities, and dispute resolution to minimize legal risks.

4. Ensures Compliance with Landlord-Tenant Laws

Property managers are required to adhere to federal, state, and local rental laws to protect the owner from lawsuits.

5. Prevents Miscommunication and Disputes

Having a well-documented agreement ensures smooth operations and clear expectations between both parties.

Key Components of a Property Management Agreement

1. Property Details

• Full address and type of property (residential, commercial, vacation rental, multi-family unit).
• Number of rental units or commercial spaces under management.

2. Roles and Responsibilities of the Property Manager

• Marketing and advertising vacant units.
• Screening tenants and lease management.
• Rent collection and deposit handling.
• Property inspections, repairs, and maintenance coordination.
• Handling tenant complaints and eviction procedures.

3. Compensation and Fee Structure

• Flat monthly management fee or percentage-based fee.
• Additional fees for leasing, maintenance, evictions, and legal compliance.
• Reimbursement of operational expenses (advertising, maintenance, legal fees).

4. Lease Management and Tenant Relations

• Authority to sign leases on behalf of the owner (if applicable).
• Tenant screening policies (credit checks, background checks, references).
• Handling lease renewals, modifications, and terminations.

5. Maintenance and Repairs

• Who is responsible for hiring contractors and overseeing repairs?
• Spending limit for repairs without owner approval.
• Emergency maintenance procedures.

6. Rent Collection and Financial Reporting

• Process for collecting rent and handling late payments.
• Financial reporting frequency (monthly, quarterly, annually).
• How security deposits are handled and refunded.

7. Legal Compliance and Evictions

• Ensuring compliance with local rental laws and regulations.
• Authority to file eviction notices and represent the owner in legal matters.

8. Liability and Insurance

• Insurance coverage requirements for both parties.
• Limitations of the manager’s liability in case of disputes or negligence claims.

9. Agreement Duration and Termination Clause

• Contract start and end date.
• Conditions for early termination by either party.
• Notice period for termination (30-90 days recommended).

10. Signatures and Witnesses

• Both the property owner and property manager must sign the agreement.
• Option for notarization for added legal security.

How to Draft a Property Management Agreement

Step 1: Outline Management Responsibilities

• Clearly define what tasks the property manager is expected to perform.

Step 2: Specify Payment Terms

• Set monthly fees, commission percentages, and any extra service charges.

Step 3: Include Lease and Tenant Handling Policies

• Clarify tenant screening, lease signing authority, and eviction procedures.

Step 4: Detail Maintenance and Repair Responsibilities

• Define who will handle repairs, how costs are covered, and spending limits.

Step 5: Set Legal and Compliance Guidelines

• Ensure the agreement complies with state rental laws, fair housing regulations, and liability terms.

Step 6: Review and Sign the Agreement

• Have both parties review, sign, and keep copies for reference.

Common Challenges and How to Address Them

1. Disputes Over Maintenance Costs

Solution: Include clear spending limits and approval processes for repairs.

2. Late Rent Payments and Collection Issues

Solution: Set firm policies for rent collection, late fees, and eviction handling.

3. Termination of Agreement Without Notice

Solution: Require a minimum 30-90 day notice for contract termination.

4. Property Owner Interfering with Management

Solution: Define the manager’s authority to make decisions without constant owner approval.

Who Needs a Property Management Agreement?

• Real estate investors hiring property managers.
• Landlords with multiple rental properties.
• Vacation rental owners using management services.
• Commercial property owners outsourcing tenant management.

When Should a Property Management Agreement Be Used?

• Before hiring a property management company or individual.
• When leasing multiple units and needing professional oversight.
• For commercial properties requiring lease and maintenance management.

Advantages of a Property Management Agreement

• Ensures professional property oversight.
• Minimizes legal risks and financial disputes.
• Provides clear accountability for property managers.
• Simplifies rent collection and lease enforcement.

FAQs About Property Management Agreements

1. Can a property manager sign leases on behalf of the owner?

Yes, if the agreement grants them lease-signing authority.

2. What percentage do property managers charge?

Typically 8-12% of monthly rent, but it varies based on location and services.

3. Can an owner terminate the agreement early?

Yes, but termination policies and notice requirements should be specified.

A Property Management Agreement ensures a structured, legally secure arrangement between landlords and managers. Download our free template today to streamline your property management process!

Property Management Agreement Sample

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