Key Elements of a U.S. Property Management Agreement

Answer

When a landlord hires a professional manager to oversee a rental property, they sign a property management agreement. This contract lays out each party’s responsibilities, fees and terms, so both sides understand what services the manager will provide and how the owner will pay for them.

Most agreements start by identifying the property (address, type and units) and the parties (owner and management company). From there, key sections usually include:

• Scope of Services: Specifies tasks such as marketing vacant units, screening tenants, collecting rent, handling maintenance calls and preparing financial statements.
• Management Fees: Defines how the manager is compensated. Common models include a percentage of collected rent (typically 8–12% per month) or fixed monthly fees. Some contracts add leasing fees (e.g., 50–75% of first month’s rent) or charge for maintenance coordination.
• Term and Termination: States the contract length (often 6–12 months) and notice period for cancellation (commonly 30 days). It may also include early termination penalties.
• Owner Responsibilities: Outlines owner obligations, such as maintaining insurance, approving repair budgets above a set amount, and funding maintenance reserves.
• Liability and Insurance: Clarifies who bears risk for property damage or legal claims. Managers usually must maintain general liability coverage and errors & omissions insurance.
• Reporting and Accounting: Details how often the manager provides income and expense statements, security deposit reconciliations and year‑end tax documents.

Before signing, owners should verify that the agreement complies with state landlord‑tenant laws, local licensing rules and any homeowner association (HOA) requirements. Since rules vary by jurisdiction, it’s advisable to consult a licensed attorney or experienced real estate agent to review contract terms.

A clear property management agreement protects both landlord and manager, helps prevent misunderstandings and sets expectations for a smooth working relationship. Always read the fine print, ask questions about unclear clauses and compare multiple proposals before choosing the best partner for your rental investment.