Property Management Agreement
A Property Management Agreement (PMA) is a legal contract between a property owner and a property manager (agent) that outlines the responsibilities, expectations, and compensation related to the management of a rental property. This agreement serves to protect the interests of both parties and ensures the efficient management of the property and its tenants.
Commonly Used For
Property Management Agreements are utilized for various types of properties, including:
- Residential: Single-family homes, condos, duplexes
- Multi-Family: Apartment buildings
- Mixed-Use: Properties that combine commercial and residential spaces
- Commercial: Retail, industrial, and office buildings
Key Components of a Property Management Agreement
1. Appointment of Property Manager
The agreement must include the name of the property manager, whether an individual or a company, and any individuals who will have access to the property.
2. Term
The length of the agreement should be specified, including the start and end dates. The most common term is one year, with options for renewal.
3. Right to Terminate
The agreement should outline the procedures for termination, including the notice period, which is typically 30 days.
4. Manager’s Duties
The agreement should detail the responsibilities of the property manager, which may include:
- Advertising leases
- Screening tenant applications
- Managing lease agreements
- Conducting property inspections
- Handling tenant disputes
- Organizing repairs and maintenance
5. Compensation
The compensation structure for the property manager must be clearly outlined, including:
- Management fees (often a percentage of collected rent, typically 8-12%)
- Additional fees for specific services (e.g., maintenance, leasing)
6. Owner’s Obligations
The agreement should specify the responsibilities of the property owner, such as providing necessary resources for property management.
7. Repairs and Maintenance
The property manager may be authorized to perform repairs and maintenance, with a specified dollar threshold for expenses that require prior approval from the owner.
8. Evictions
The agreement should grant the property manager the authority to initiate eviction proceedings when necessary.
9. Governing Law
The agreement should specify the jurisdiction whose laws will govern the contract.
10. Entire Agreement Clause
This clause affirms that the contract encompasses the full agreement between the parties, superseding all prior discussions or agreements.
Termination of a Property Management Agreement
1. Review the Agreement
The owner should review the termination clause in the agreement, which typically specifies the notice period and any associated fees.
2. Written Notice
A written notice of termination should be prepared, specifying the intent to terminate, the date, and any relevant details.
3. Delivery of the Notice
The notice should be delivered according to the methods specified in the agreement, such as certified mail or hand delivery.
4. Final Settlement
Any remaining financial obligations, including outstanding fees, should be settled as per the agreement.
5. Transition Process
The property manager should inform tenants of the management change, and the owner should coordinate the transfer of records and keys.
Licensing Requirements
In most states, property managers are required to hold a real estate agent’s license or a property manager license, except in six states (Idaho, Kansas, Maine, Maryland, Massachusetts, and Vermont). This requirement is due to the leasing aspect of property management.
FAQs
A Property Management Agreement is a legal contract between a property owner and a property manager that outlines the responsibilities, compensation, and terms of management for a rental property. It is important because it establishes clear expectations, protects the interests of both parties, and ensures efficient management of the property and its tenants.
Typical responsibilities of a property manager include advertising rental properties, screening tenant applications, managing lease agreements, conducting property inspections, handling tenant disputes, and organizing maintenance and repairs. They also collect rent and ensure compliance with local laws and regulations.
To terminate a Property Management Agreement, review the contract for the termination clause, which usually specifies the required notice period. Prepare a written notice of termination and deliver it according to the agreement’s stipulations. Ensure to settle any outstanding financial obligations and coordinate the transition with the property manager.
A Property Management Agreement should include the appointment of the property manager, the term of the agreement, termination rights, manager compensation, responsibilities for leasing and evictions, repairs and maintenance, and provisions for distributions to the landlord. It should also specify the governing law and any additional clauses relevant to the management of the property.
Common fees for hiring a property manager typically range from 8% to 12% of the gross rental income. Additional fees may apply for specific services such as leasing, maintenance, and evictions. It’s important to negotiate these fees and understand the payment structure before signing the agreement.
Yes, in most states, property managers are required to have a real estate agent’s license or a specific property manager license, except in a few states like Idaho, Kansas, Maine, Maryland, Massachusetts, and Vermont. Licensing ensures that property managers are knowledgeable about leasing laws and regulations.
To find a reliable property manager, start by contacting active real estate agents in your area, as they often provide property management services. Schedule meetings with prospective managers to discuss their services, experience, and fees. Checking online reviews and asking for references can also help in evaluating their reliability.
After signing a Property Management Agreement, the property manager typically notifies current tenants about the management change. They will then begin to execute their responsibilities, which include managing tenant relations, property maintenance, and financial reporting to the property owner.