How to Create a Property Management Agreement

A Property Management Agreement is a contract between a property owner and a property management company. It outlines the terms and conditions under which the management company will manage the property. This agreement is essential for both parties to ensure a clear understanding of their responsibilities and expectations. Here is a comprehensive guide to creating a Property Management Agreement, detailing all the key clauses you should include.

1. Parties Involved

This clause identifies the parties entering into the agreement: the property owner and the property management company. It should include the full legal names and addresses of both parties. The management company is typically referred to as the “Manager” and the property owner as the “Owner.” Clear identification helps in case of any disputes or legal issues.

2. Property Description

A detailed description of the property being managed is crucial. This includes the address, type of property (residential, commercial, etc.), and any specific features or amenities. The description should be precise to avoid any ambiguity. If the property consists of multiple units, each unit should be described separately.

3. Term of Agreement

This clause specifies the duration of the agreement, including the start and end dates. It should also outline the terms for renewal and the process for termination by either party. The term can be a fixed period or ongoing, depending on the needs of the parties involved. Clear terms prevent misunderstandings about the duration of the management responsibilities.

4. Scope of Services

This section details the services the Manager will provide. Common services include rent collection, property maintenance, tenant screening, and handling tenant complaints. Each service should be described in detail to ensure both parties have a clear understanding of the Manager’s responsibilities. This clause should also specify any services that are excluded from the agreement.

5. Management Fees

The fees the Owner will pay the Manager must be clearly outlined. This can include a percentage of the rental income, a flat fee, or a combination of both. The clause should also specify when and how the fees will be paid. Additionally, it should address any extra charges for additional services not covered in the basic management fee.

6. Owner’s Responsibilities

This clause outlines the responsibilities of the Owner. Common responsibilities include maintaining adequate insurance, providing necessary funds for property repairs, and adhering to local laws and regulations. The Owner should also provide the Manager with any necessary access and information to effectively manage the property. Clearly defining these responsibilities helps prevent conflicts.

7. Maintenance and Repairs

This section specifies who is responsible for maintenance and repairs. It should outline the procedures for routine maintenance and emergency repairs. The agreement should also specify any spending limits for repairs that do not require prior approval from the Owner. This clause ensures the property remains in good condition and prevents disputes over repair costs.

8. Tenant Screening and Leasing

This clause describes the process for tenant screening and leasing. It should detail the criteria for selecting tenants, the leasing process, and the handling of security deposits. The Manager should be responsible for advertising the property, showing it to potential tenants, and conducting background checks. Clear procedures help ensure high-quality tenants and reduce the risk of vacancies.

9. Rent Collection

This section outlines the process for rent collection, including the due date and accepted payment methods. It should also specify the procedures for late payments and any associated fees. The Manager is typically responsible for collecting rent and depositing it into a designated account. Clear terms help ensure timely rent payments and reduce disputes.

10. Financial Reporting

The Manager should provide regular financial reports to the Owner. This clause should specify the frequency and type of reports, such as monthly income and expense statements. The reports should provide a clear overview of the property’s financial performance. Regular reporting ensures transparency and helps the Owner make informed decisions about the property.

11. Insurance Requirements

This section outlines the insurance requirements for both parties. The Owner is typically responsible for maintaining property insurance, while the Manager should have liability insurance. The clause should specify the types and amounts of coverage required. Adequate insurance protects both parties from potential financial losses.

12. Indemnification

Indemnification clauses protect each party from legal liability for the other’s actions. This clause should specify the circumstances under which each party will indemnify the other. It typically covers negligence, misconduct, and breach of contract. Clear indemnification terms help protect both parties from legal disputes and financial losses.

13. Termination Clause

This clause outlines the conditions under which the agreement can be terminated. It should specify the notice period required for termination by either party. The clause should also address the procedures for handling outstanding obligations and transferring responsibilities. Clear termination terms ensure a smooth transition if the management relationship ends.

14. Dispute Resolution

This section outlines the process for resolving disputes between the Owner and the Manager. It can include mediation, arbitration, or litigation. The clause should specify the preferred method of dispute resolution and the procedures to follow. Clear dispute resolution terms help prevent conflicts from escalating and ensure a fair resolution.

15. Governing Law

The governing law clause specifies the jurisdiction under which the agreement will be interpreted. This is typically the state or country where the property is located. The clause should also address any applicable local laws and regulations. Clear governing law terms ensure the agreement is legally enforceable.

Schedule your 15 minute demo

16. Confidentiality

This clause ensures that both parties will keep certain information confidential. It should specify the type of information considered confidential and the duration of confidentiality obligations. The clause should also outline any exceptions to the confidentiality requirement. Clear confidentiality terms protect sensitive information and maintain trust between the parties.

17. Amendments

The amendment clause outlines the procedures for making changes to the agreement. It should specify that any amendments must be in writing and signed by both parties. The clause should also address the process for proposing and approving amendments. Clear amendment terms ensure any changes are mutually agreed upon and legally binding.

18. Severability

This clause ensures that if any part of the agreement is found to be invalid or unenforceable, the rest of the agreement remains in effect. It should specify that the invalid provision will be replaced with a valid one that closely matches the intent of the original. Clear severability terms protect the integrity of the agreement.

19. Entire Agreement

The entire agreement clause states that the written agreement represents the complete understanding between the parties. It should specify that any prior agreements or understandings are superseded by the current agreement. This clause ensures that all terms are clearly documented and legally enforceable.

20. Signatures

The agreement should be signed by both parties to indicate their acceptance of the terms. This clause should specify the required signatures and the date of signing. Clear signature requirements ensure the agreement is legally binding and enforceable.

Did you find this article worthwhile? More engaging blogs about smart contracts on the blockchain, contract management software and electronic signatures can be found in the Legitt Blogs section. You may also contact Legitt to hire the best contract lifecycle management services and solutions along with free contract templates.