Property Management Agreement Template

In plain language: Identifies the owner and manager as legal entities, describes the managed property by address and parcel number, and formally appoints the manager as the owner's authorized agent.

Common mistake: Using an individual's name instead of the registered legal entity for the manager. If the manager operates as an LLC, the LLC — not the individual — must be the contracting party to limit personal liability and maintain license compliance.

In plain language: Defines what the manager is authorized to do independently — advertising vacancies, executing leases, collecting rent, ordering repairs — and what requires prior owner approval.

Common mistake: Omitting a repair authorization limit. Without a defined dollar threshold, the manager may commit the owner to large expenditures without notice, or conversely stall urgent repairs waiting for approvals that delay damage mitigation.

In plain language: States the start date, initial contract length, and whether the agreement auto-renews or requires affirmative renewal — and how either party can prevent auto-renewal.

Common mistake: No auto-renewal provision at all, leaving the agreement with an uncertain status after the initial term. Both parties operate without a governing document, which creates liability gaps until a new agreement is signed.

In plain language: States the ongoing management fee as a percentage of gross rents collected, the leasing commission for new tenants, and any additional fees for lease renewals, eviction coordination, or project oversight.

Common mistake: Defining the fee as a percentage of scheduled rent rather than collected rent. If tenants pay late or partially, the manager collects a fee on income the owner never received — creating a misaligned incentive to tolerate chronic late payment.

In plain language: Establishes the owner's obligation to fund a maintenance reserve, the manager's authority to draw on it for routine repairs, and the process for requesting owner approval for expenditures above the repair limit.

Common mistake: No emergency exception to the approval requirement. Without one, a burst pipe or heating failure in a jurisdiction with habitability laws forces the manager to delay urgent repairs while seeking approval — exposing the owner to tenant claims and code violations.

In plain language: Authorizes the manager to screen tenants using defined criteria, execute leases not exceeding a specified term, and handle security deposits in compliance with local law.

Common mistake: Failing to attach tenant screening criteria as a schedule. Without documented criteria applied consistently, the owner faces fair housing liability for decisions that appear discriminatory even when made in good faith.

In plain language: Specifies the types and minimum coverage amounts of insurance each party must carry — property and liability for the owner, errors and omissions and general liability for the manager.

Common mistake: No requirement for the manager to carry errors and omissions insurance. If the manager makes a leasing or maintenance error that causes the owner a loss, an uninsured manager may have no means to satisfy a judgment — leaving the owner with an uncollectible claim.

In plain language: Requires the manager to maintain separate trust accounts for owner funds, provide monthly income and expense statements, and remit net proceeds to the owner by a defined date each month.

Common mistake: No requirement to keep owner funds in a separate trust account. Commingling owner funds with the manager's operating account is a fiduciary breach, violates most state licensing laws, and leaves the owner exposed if the manager faces insolvency or creditor claims.

In plain language: Allocates risk between the parties — typically the manager is indemnified by the owner for good-faith acts within the scope of authority, while the manager indemnifies the owner for gross negligence or willful misconduct.

Common mistake: Indemnifying the manager for all acts, including grossly negligent ones. A blanket indemnification clause can prevent the owner from recovering losses caused by the manager's own serious failures — making it effectively unenforceable in many jurisdictions.

In plain language: States the notice period required to terminate without cause, the conditions permitting immediate termination for cause, and the manager's obligations to transfer records, keys, and funds upon termination.

Common mistake: No transition protocol on termination. Without a documented handover obligation, departing managers have delayed returning security deposits and records — exposing the owner to tenant claims and regulatory penalties for deposit non-return.

A property management agreement is a legally binding contract between a property owner and a property manager that governs the management of residential or commercial rental property. It defines the manager's authority, compensation, duties, and obligations — covering tenant screening, rent collection, maintenance, accounting, and termination conditions. Without one, both parties operate without clear legal boundaries, creating significant liability exposure for each.

A complete agreement covers the parties and property description, scope of authority with a repair authorization limit, management fees and leasing commissions, maintenance and reserve fund terms, tenant screening and leasing authority, insurance requirements, accounting and trust account obligations, liability and indemnification allocation, and termination notice periods with a handover protocol. Missing any of these creates operational gaps that commonly lead to disputes.

Residential property managers typically charge 8–12% of monthly gross rents collected, plus a leasing commission of one month's rent for each new tenancy placed. Additional fees for lease renewals ($100–$300), eviction coordination ($200–$500), and project management (5–10% of project cost) are common. Commercial management fees vary more widely — typically 3–6% of collected rents — reflecting the higher rents and longer lease terms involved.

No federal or uniform law mandates a written property management agreement, but most state real estate licensing laws require licensed property managers to have a written agreement with property owners before performing management services. Without a written agreement, the manager may be operating outside their license terms. In Canada and the UK, written agency agreements are similarly required by regulatory bodies governing real estate professionals.

Typically yes, with notice — most agreements allow termination without cause on 30–90 days' written notice, sometimes with an early termination fee equal to a specified number of months' management fees. Termination for cause — such as commingling of funds, abandonment, or material breach — generally allows immediate termination without penalty. Review the specific termination clause carefully before signing, as some agreements include automatic renewal provisions that make early exit costly.

A property management agreement governs the relationship between the property owner and the manager — it defines the manager's authority, duties, and compensation. A lease agreement governs the relationship between the landlord (or manager acting on the landlord's behalf) and the tenant — it sets rent, term, rules, and occupancy conditions. Both documents are necessary for a managed rental property; they operate independently and serve entirely different legal functions.

Legally, the owner owns the landlord-tenant relationship because the manager acts as the owner's authorized agent. The owner bears ultimate liability for lease compliance, habitability obligations, and fair housing requirements — even when the manager makes the day-to-day decisions. This is why the indemnification and scope-of-authority clauses are critical: they allocate risk between the owner and manager for decisions made within or outside the agreed authority.

For standard residential management of one to four units, a well-structured template is generally sufficient if you review it carefully and adapt it to your state's specific requirements. Engage a real estate attorney when managing commercial property, high-value residential portfolios, HOA or condo associations, or properties in jurisdictions with complex landlord-tenant regulations — California, New York, Ontario, and the UK being notable examples. A one-hour attorney review typically costs $200–$400 and is worthwhile for any agreement covering property worth over $500,000.

The departing manager is typically required to transfer all security deposits held in trust to the owner or the successor manager within a short window — 5 business days is a common contractual requirement. Most jurisdictions have statutory rules governing security deposit handling that apply regardless of what the management agreement says. Failure to transfer deposits promptly can expose the manager to regulatory penalties and the owner to tenant claims for non-compliance with deposit protection laws.