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Set parameters with a simple property management agreement.
Discover what property owners should include in their property management contract, and learn how to find the right property manager.
What is a property management agreement?
A property management agreement is a contract offered to an individual on behalf of the owner, which outlines the property’s management, whether commercial or residential. Depending on the type of property, this agreement may cover details for leasing units, the collection of rent from current inhabitants, and how to address current renters’ needs. It should align with your state’s housing laws, and it can also outline marketing efforts to prospective tenants.
If you don’t have the time or experience to manage the property yourself or the funds for management services, a property management agreement is a great starting point as it clearly outlines the duties and standards a property manager will be held to while also protecting the property owner from potential legal action.
You’ll need a real estate or property management license to become a property manager in most states. Unfortunately, the requirements vary from property to property and state to state, so there is no way to confirm or verify registration nationwide. This means you will need to research proper licensing in your state before accepting or offering a property management contract.
The value of a property management agreement.
A property management agreement is useful whether you’re a property owner or homeowner hiring someone to take care of your property or you’re being offered a property management role. It identifies the guidelines of a property manager’s position, but it also clearly states the operational costs, leaving no confusion about how resources are allocated in the management of the property. Additionally, this agreement should outline management fees, or what property managers charge for their services. Some managers might charge extra for different tasks that fall outside their traditional duties, and a property management contract addresses this upfront.
As a legally binding document, it’s crucial that the terms and provisions of this agreement are customized to fit your needs. If you're a property owner with a specific set of tasks in mind for the space, a property management agreement clarifies what those tasks will be and if they’ll be performed at the owner’s expense. It ensures written consent for property managers to act on behalf of the owner, preventing legal action against the individual. But be sure to consult an attorney before you finalize and sign the agreement to ensure no problems arise.
What to include in your property management agreement.
Every property management agreement is different, but here’s a list of information to include when you draft your own:
- Include an introduction with identifying information, like contact info for all parties and the date the agreement is signed.
- Outline the services a property manager agrees to perform with prior approval, such as collect rent, advertise to new tenants, and handle evictions.
- Identify the management fees, and determine whether those are payable as a percentage, a flat fee, or on a case-by-case basis.
- List the property owner’s restrictions and responsibilities, including the setup and maintenance of a reserve fund for daily operations and emergencies and an outline of the insurance coverage.
- Spell out the stance the property takes on fair housing under the applicable laws of the state.
- Include a clause about liability insurance, protecting the property manager except in cases of extreme negligence. The property manager is not responsible for the negligence of independent contractors that they hire.
- Identify the duration of the contract. For most management services, a year-long contract is standard.
- Add a cancellation clause clearly stating when and why the property manager and property owner each has the right to terminate the contract.
There are multiple elements within the termination clause: notice to terminate, an early termination fee, a reason to terminate, and obligations upon termination. Each of these goes far in specifying how the termination of this agreement will unfold, including determining how many days’ notice the property manager must give before terminating their contract and in which cases their fee for early termination is required.
Additional details for more complex arrangements.
If the property management agreement you are involved in becomes convoluted, obtain legal counsel from a lawyer about how to fit your needs. But when you draft an agreement, you can go further into detail and outline the following specifics to add clarity:
- Appointment of the title property manager by property owner
- Obligations of property managers under the terms of this agreement, including such actions as returning tenant security deposits upon their departure and leasing occupancy
- Specifying what items shall be reimbursed at the owner’s expense
- Additional fees for other activities, such as signing a new lease or reaching a preset goal
- Indemnification for any personal injury the property manager suffers due to their management and any lawsuits that arise from this
- Warranties or promises made by both property owners and property managers
- An implied waiver, or an explanation that if either party breaks an obligation under the terms of this agreement, they are still obligated to observe rights and responsibilities
- A provision stating that electronic signatures will be considered valid
- Severability, or the protection of the entire agreement as a whole, even if one section is invalidated
Produce property management agreements digitally.
You can streamline your property management agreements with digital signatures. E-sign is changing the way the world does business — by reducing waste and dramatically raising productivity. That’s why companies like JLL Real Estate use Adobe Acrobat Sign, as it allows them to process up to 6,000 agreements per month, all without interrupting workflows.
With Adobe Acrobat Pro, you can:
- Create your own property management agreement template. Learn more
- Complete and fill out your property management agreement digitally. Learn more
- Have your property management agreement signed wherever, whenever. Learn more
- Manage and track your property management agreement online. Learn more
E-signed, sealed, and delivered.
With Acrobat Pro, it’s intuitive and straightforward to get your property management agreement signed. Of course, when either signing or preparing a document like this, reach out for legal advice before ensuring that all provisions of this agreement meet your expectations.
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