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Property Manager Agreement basics

Property Management Agreements help property owners ensure that property managers protect their interests by collecting rent, maintaining properties and managing vacancies. This contract outlines the property manager's as well as the owner's responsibilities.

Use the Property Manager Agreement document if:

  • You own property that you want someone else to manage.
  • You are a property manager contracting with a property owner.

Property Manager Agreements are simple to make and include all provisions required to create a comprehensive working contract between property owners and managers.

Other names for Property Manager Agreement:

Property Manager Contract, Property Management Agreement

What is a Property Management Agreement?

A Property Management Agreement is a contract between a property manager and a property owner. The agreement outlines the expectations of their professional relationship. While a property manager is not an employee of the property owner, but rather an independent contractor or another business, there are still agreements to be considered to make the relationship successful. It covers details such as specific management responsibilities, how payments are made, items the owner is responsible for, and insurance requirements.

Provisions included in Property Manager Contract

Our Property Manager Contracts include all common provisions and the legal language to make a comprehensive real estate business contract. While in many cases the property owners may initiate making the contract, often property managers will make their own contract and present it to the owner. Some key points of considerations include:

Duration of the contract
While ideally, you are looking to create a beneficial long-term agreement, many limit the first agreement to one year. This is viewed as a trial period to see if both parties work well together and it allows time to figure out what improvements may need to be added to the next contract.

Responsibilities of the manager
It will need to be decided what are the manager's responsibilities. Most often this includes collecting rent, managing building maintenance expenses, finding and hiring labor, finding and screening tenants, and signing and renewing contracts.

Manager payments
Often the manager will receive payment as a percent of the collected rent. Ongoing expenses may also be taken out of the collected rent or the property owner may fund a separate account just for additional expenses such as repairs and advertising. The contract also outlines how the owner wants to be paid and when rent money is due.

Termination with notice
If either party wants to terminate the agreement it can be done so with notice. The agreement includes a provision for ending the contract and how many days' notice must be given. Usually, you will also build into the contract the actions that need to be taken before the termination date such as paying the remaining rents, providing expense documentation, submitting last reports and so on.

Termination by default
If either party does not hold up their end of the agreement, the contract can be terminated. Most often you will include in the document how many days a party has to fix issues before termination is considered.

You'll want to outline what kind of insurance each party must have to protect all interests. This may include liability and Errors and Omissions insurance. An indemnification section is also included in this agreement.

Can managers sign leases for property owners?

This agreement does allow property managers to sign Lease Agreements for the property owner. Often property owners are located far from the properties or simply do not have the time to sign every agreement so the property managers act on their behalf. This includes lease renewals and lease terminations. Managers may also have the power to submit legal paperwork for processing evictions.

How much do you pay a property manager?

Property managers are usually paid a percentage of the rent collected. Five to ten percent is common. Since rent varies, the property manager will need to decide what percent is worth the amount of work it will take to perform their duties. Owners should note that if a manager under bids, that may be a sign that they may not have the experience you are looking for.

Do property managers need to be licensed?

Many states require professional property managers to either have a Real Estate Broker License or another type of state certification. A Real Estate Broker License gives the manager the right to advertise property, collect rent, negotiate leases and show property. Some areas also offer training for Property Manager Licenses. In most states, these licenses are not difficult to obtain. If you need more information about local real estate laws, contact a real estate lawyer.

Questions to ask your next property manager

Property managers have a lengthy list of responsibilities and are critical to your success as a property owner. You want someone you can trust with your property, income and reputation. Before you enter a contract with a property manager, you'll want to attempt to find the best candidate.

To learn more about the property manager, you may consider asking:

  • How many units do you already manage? Do you hire others to help you fulfil your duties?
  • Do you also manage your own properties? How many?
  • How much do you usually charge for managing properties?
  • What kind of insurance do you already carry?
  • How long have you been a property manager?
  • How do you manage receipts and financial documents?
  • How do you advertise for new tenants? How many vacancies do you currently have?
  • How quickly are late rents handled? How do you evict renters?
  • Do you expect to receive payment on empty units?
  • How do you collect rent? Do you use an online payment system?
  • How do you normally screen rental applicants? Do you know the current local housing laws?
  • Do you charge a "finder's fee" for obtaining new renters?

When you meet with them, you'll want to try to trust your first impressions. Do they seem unorganized? Are they preoccupied? Do they seem to listen to your concerns? You may also benefit from visiting some of the properties they manage to see if the buildings are well maintained and occupied. Some owners will even call on their vacant properties posing as a potential renter to test customer service skills and responsiveness.

If you need additional real estate agreements, see our Essential Documents for Landlords.

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Sample Property Manager Agreement

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