The contract you present to your clients as a property manager is crucial. While your company may boast about certain certifications, standards, and reviews on its website or in person, the property management contract is the piece of information that will tell your clients the most about you.
They’ll likely be comparing your contract against other property management agreements to see which one is the best fit for them.
Don’t have time to dive into each contract’s component? Download the RentPost™ Property Management Agreement template.
What is a property manager agreement contract?
A property management agreement is a contract between a property owner and a property management company giving the latter authority to handle the day-to-day operations of a property on behalf of the owner.
Common responsibilities granted in these agreements include collecting rent, managing tenants, making repairs, and marketing vacancies. In return, the property management company receives a monthly percentage of the collected rent as compensation for their services.
These agreements outline the exact duties, fees, and liability coverage expected from both parties.
Why do you need a property management contract?
A property management contract clearly defines the relationship and expectations between you as the property owner and the management company you hire to oversee operations. It designates authority, ensures transparency on fees/payments, and provides legal protections if issues arise.
Having this documented agreement avoids misunderstandings down the road and ensures your rental property is managed properly in your absence.
What comes under a property management agreement contract?
Our property management contract template includes eight key components mined from analyzing dozens of contract templates from property managers. Before you send the agreement, let me give you a quick walkthrough of each component:
- Identification of parties
- Property description and scope of services
- Terms of the relationship
- Fees and compensation
- Budgets and reports
- Liabilities and insurance
- Dispute resolution
- Termination of relationship
1. Identification of Parties
The property management contract should begin with a clear identification of the parties involved. Accurate identification ensures that both parties understand their roles and obligations from the outset.
Begin by stating the full legal names of the parties involved in the contract. For individuals, include their first name, middle name (if applicable), and last name. For legal entities, use the exact and complete name as registered with the appropriate authorities.
Alongside the names, provide the contact information for each party, including addresses, phone numbers, and email addresses. This helps ensure that the parties can easily communicate with each other throughout the contract term.
Example of Proper Party Identification:
This Property Management Contract (“Contract”) is entered into on [date] between:
[Full Legal Name of Property Owner], residing at [Address], with contact number [Phone Number], and email address [Email Address], hereinafter referred to as the “Property Owner.”
[Full Legal Name of Property Management Company], a [Type of Legal Entity] registered in [State/Country], with registration number [Registration Number], having its principal office at [Address], represented by [Name and Title of Representative], with contact number [Phone Number] and email address [Email Address], hereinafter referred to as the “Property Management Company.”
2. Property Description and Scope of Services
A comprehensive property description is vital to avoid any confusion regarding the managed property. The contract section should detail the location, address, size, and other pertinent information about the property. Additionally, it should outline the scope of services the property management company will provide, which may encompass tasks such as rent collection, maintenance, tenant screening, lease agreements, and property marketing.
Your clients will be looking to see what exactly you’ll do and won’t do in your property management contract. List what services you provide and under what conditions they will be provided.
Some property managers also include a section under which they detail what services they feel are outside of their responsibilities.
They will explicitly state the additional fees for these services if they need to be performed or if they are required to perform them.
This part of the contract can also detail a bit of how your relationship with the tenants will function—including abiding by state laws regarding notice to enter the property and conducting inspections and disclosures of hazards on the property. Your clients will want to see that your services are inclusive, fair, and law-abiding.
3. Terms of the Relationship
Your clients will be looking for a clear understanding outlined in the contract about how your relationship with them will function. This includes all aspects of the relationship such as:
- How long will the relationship be? One to two years is common.
- Who is responsible for what? You’ll be responsible for services provided, but will you require your client to pay for insurance, parts needed for maintenance, or additional services?
- What rights does the client have? Rights to privacy, withhold payment, etc.
- How will disputes be handled? The more detailed your contract is, the better. Disputes generally arise from uncertainty or things being unclear.
The clearer you are about how the relationship will function, whether it be everyday interactions or emergency situations, the better picture a client can get about how the relationship will go.
Clients also want to see how your relationship with the tenants will function. Include terms of the relationship and be as specific as you can in the property management contract.
4. Fees and Compensation
The financial aspect is a critical element of any property management contract. The agreement should outline the fees and compensation structure for the property management services. This may include a percentage of the monthly rent, flat fees, leasing fees, maintenance charges, and any additional expenses that the property owner might be responsible for.
Your client is looking for specifics about what you’ll charge, why, and in what instances the rate may change. If you’re vague or unclear about certain fees in the property management contract, you can expect your client to ask questions about how much the fees will be, or they may go with another more detailed company and spare themselves the trouble of asking you.
State what your monthly rate is, in what instances that rate would change, and any fees for additional services are required.
There may be fees for added tasks the client requires of you outside of your normal responsibilities, fees for any changes in the contract or the duration of time, or fees for terminating the contract.
5. Budgets and Reports
The property management contract must include annual operating and capital budgets for each property to plan and track income and expenses. Ideally, budgets should be updated quarterly.
The property manager or property management company must also prepare monthly reports for property owners showing financial performance vs. budget, occupancy %, rents, maintenance issues, capital plans, etc.
Property management software like RentPost™ generates reports on demand for both landlords and owners and help track and report on key performance indicators.
6. Liabilities and Insurance
To safeguard both parties, this contract section should also include liability and insurance matters. The property management company should have appropriate insurance coverage, including professional liability insurance and general liability insurance, to protect against potential legal claims and damages. It should also outline any indemnification clauses to hold each party accountable for their actions.
Addressing liability and insurance matters in a property management contract is essential to safeguard the interests of both the property owner and the property management company. These components not only protect against potential risks and legal liabilities but also foster a sense of security, trust, and professionalism in the property management relationship.
By defining responsibilities and ensuring proper insurance coverage, the contract establishes a strong foundation for a successful and mutually beneficial partnership between the property owner and the property management company.
7. Dispute Resolution
A dispute resolution clause in the property management contract is essential to provide a framework for resolving conflicts or disagreements that may arise during the contract period. Mediation or arbitration procedures can be outlined, saving both parties time and money by avoiding costly legal battles.
Including a dispute resolution clause in a property management contract is a vital element that promotes effective communication, transparency, and problem-solving between the property owner and the management company. Dispute resolution clauses outline the agreed-upon procedures for resolving conflicts, helping both parties understand how disagreements will be handled.
By establishing these processes from the outset, the contract ensures that both parties are on the same page regarding dispute resolution methods. This helps maintain a positive and constructive business relationship while minimizing potential disruptions to property management operations.
8. Termination of Relationship
Your potential client wants to know your conditions for terminating the contract and if they can terminate the relationship if they wish. Include this information in your contract to give your client peace of mind when hiring you.
Some property managers include terms under which the client may terminate the relationship, but more commonly, their contracts let the client know that they can terminate the relationship without reason as long as they give 30 days’ notice.
Some property managers require fees along with this. For instance, the client may be required to pay the monthly fee for the rest of the duration of the contract if they choose to terminate early.
Whatever you decide to put on the agreement is up to you—just be clear about the termination conditions in your property management contract.
How RentPost™ helps property managers in managing rental properties
The RentPost™ property management software provides an all-in-one solution to simplify and automate the many complex administrative tasks involved in managing rental properties.
From collecting online rent payments to advertising vacancies and screening tenants to maintenance coordination and accounting, our platform centralizes and optimizes rental property operations to save managers time and money while improving tenant services.
With powerful reporting and predictive insights, property managers using our software gain visibility across portfolios to make more informed decisions.
Collect Rent Payments
- Online tenant portals allow tenants to easily pay rent digitally, avoiding late payments. Automate payment reminders and late fees.
- The software centralizes accounting by syncing bank accounts, generating financial reports, tracking income and expenses, and supporting tax preparations.
- Tenants can request maintenance via the portal. The software tracks maintenance tasks, assigns work orders to contractors, and ensures completion.
- Integrated background check services screen tenant applicants, checking credit, income, and criminal history, to reduce rental risks.
- From listing vacancies online to digital lease signing, the software guides managers through the entire lease lifecycle.
- Complete move-in/move-out inspections using pre-defined checklists on a mobile device, documenting conditions with photos.
By centralizing rental property management, managers save time through automation, track detailed financial and operational data, demonstrate compliance, and provide an improved tenant experience.
Check out the RentPost™ software full features list.
Property management agreement template example
FAQs related to property management agreement
How long should be a property management contract?
The standard property management contract term ranges from 12 to 24 months. Annual contracts allow property owners to regularly review and provide feedback on the manager’s performance.
Auto-renewal options can be included if both parties are satisfied, while 30-60 days termination notice clauses give flexibility if issues arise.
Lengthier 3 to 5-year contracts may favor larger PM firms but limit owner control. Ultimately the contract term should allow enough time for the manager to add value through tenant retention and operational improvements.
What is the difference between a lease and an agreement contract?
A lease governs the relationship between owner and tenant, while the property management agreement outlines the relationship between the owner and manager of the property.
What are the dangers of not having a proper property agreement contract?
Without a detailed contract, expectations around management responsibilities, fees, and ownership rights may be unclear, leading to confusion and conflict later on.
The lack of outlined financial and reporting procedures increases risks around mishandling funds, non-payment, or misaligned incentives, while the absence of termination provisions, liability clauses, and enforcement measures leaves no options if a manager underperforms or causes financial damage.
With no defined communication protocols, rental issues may escalate without owner awareness, harming tenant relations and property operations.
Essentially, a loose verbal agreement raises liability, weakens the owner’s position, and exposes the asset to preventable operational and financial risks that a strong written contract could mitigate.
A well-crafted property management contract is the cornerstone of a successful partnership between property owners and management companies. By including key components such as clear identification, scope of services, duration, fees, responsibilities, insurance, and dispute resolution, the contract ensures transparency, accountability, and legal compliance.
When both parties understand their obligations and expectations from the beginning, the property management process is more likely to be efficient, harmonious, and beneficial for all involved.