Whether it’s 3 pages or 10, a property management contract outlines the backbone of the landlord-manager relationship. It sets expectations, defines legal authority, and ensures each party understands their rights and duties. Here's a breakdown of the key sections every landlord should pay attention to when reviewing a contract.
1. Introductory Paragraphs: Establishing Legal Agency
Most contracts begin by formally naming the parties involved, confirming that the agreement is legally binding, and specifying the property address. Words like “appoint” or “employ” indicate that you’re transferring agency to the property manager — a legal term that makes their actions on your behalf legally binding.
🧾 Agency means the manager acts as your legal representative, and you're responsible for their actions during the course of managing your property.
2. Broker Responsibilities ("Authority and Powers")
This section outlines what services the property manager will provide. Common inclusions:
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Collecting rent
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Handling maintenance
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Screening tenants
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Managing inspections
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Overseeing evictions (if necessary)
Look for a “best effort” or “due diligence” clause, which assures the company will manage your property to the best of their ability.
3. Extra Duties & Fees
Some contracts include services outside standard management as extra duties — usually charged separately. Examples include:
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Property modernization
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Insurance claims (e.g., fire damage)
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Legal process serving
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Assisting with appraisals or sales
📌 Tip: Check if extra services have flat fees or hourly charges, and clarify them early to avoid surprises.
4. Legal Compliance Clauses
Look for comprehensive language that ensures your manager complies with:
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Fair housing laws
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Local/state landlord-tenant regulations
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HOA rules
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Property codes
This is crucial for liability protection — not only for them but for you as the property owner.
5. Advances and Owner Repayment Obligations
This section states whether the manager is allowed to front payments (e.g., urgent repairs) and under what conditions. If they do, owners are typically required to reimburse promptly — sometimes with added interest for late payments.
6. Owner Representations
Here you affirm that you legally own the property and can enter into the agreement. Disclose:
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Ownership disputes
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Mortgage status
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Structural or legal issues affecting the property
7. Owner Responsibilities & Restrictions
You’re not off the hook once you hire a manager. Common owner obligations include:
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Not hiring other managers during the contract
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Following fair housing laws
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Limiting access to the property (respecting tenant privacy)
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Transferring tenant deposits to the manager
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Reimbursing management expenses
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Not negotiating directly with tenants
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Maintaining legal property standards
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Keeping insurance policies up to date
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Informing the manager if key conditions change (e.g., mortgage delinquency)
8. Insurance Requirements
Your contract will likely require:
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Specific coverage types (e.g., liability, hazard)
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Coverage that names the management company as additionally insured
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Permission for the manager to obtain insurance on your behalf (at your expense) if you don’t comply
Final Thoughts:
A solid property management agreement protects both parties and sets the tone for a professional relationship. While not all contracts are created equal, understanding the responsibilities and representations within will ensure you're entering the partnership with full transparency.
In the next article, we’ll dive into termination clauses and how to handle an early exit if things don’t work out.
