Question 1

What is a property management agreement?

Accepted Answer

A property management agreement is a legally binding contract between a property owner and a property manager or management company that defines the scope of services the manager will provide, the fees the owner will pay, and the responsibilities of each party. The agreement covers everything from tenant screening and rent collection to maintenance coordination, financial reporting, and lease enforcement. It establishes the legal relationship between the parties, allocates risk through insurance and indemnification provisions, and sets the terms for how long the arrangement will last and how either party can terminate it.

Question 2

How much do property managers typically charge?

Accepted Answer

Property management fees vary based on the type of property, the local market, and the scope of services provided. For residential properties, most managers charge between 8% and 12% of the monthly collected rent. For commercial properties, fees typically range from 4% to 8% of collected rent. In addition to the percentage-based management fee, managers commonly charge a lease-up or placement fee (often 50% to 100% of one month’s rent) each time they find a new tenant, as well as fees for lease renewals (typically $150 to $300), maintenance markups (usually 10% to 20% above the contractor’s invoice), and sometimes advertising or administrative fees. Always negotiate the fee structure before signing the agreement.

Question 3

Do property managers need a real estate license?

Accepted Answer

In most states, yes. Because property management involves activities that constitute the practice of real estate — such as leasing properties, negotiating leases, and collecting rent on behalf of others — the majority of states require property managers to hold a real estate broker’s license or work under a licensed broker. A few states have created separate property management licenses that are distinct from a general real estate broker’s license. Some states exempt certain categories of property managers, such as on-site managers who live at the property they manage or owners who manage their own properties. Always verify the licensing requirements in your state before hiring a property manager or entering into a management agreement.

Question 4

What is a reserve fund and how much should it be?

Accepted Answer

A reserve fund is money that the property owner deposits with the property manager to cover unexpected repairs, maintenance emergencies, and other expenses that arise between rent collection cycles. The reserve fund ensures the manager can act quickly when a plumbing emergency, HVAC failure, or other urgent issue occurs without waiting for the owner to authorize and transfer funds. A typical reserve fund ranges from $500 to $2,500 per property for residential units, depending on the age and condition of the property. The agreement should specify the initial reserve amount, when and how the fund will be replenished, the spending authority threshold (how much the manager can spend without owner approval), and how the reserve will be returned at the end of the management relationship.

Question 5

Can I terminate a property management agreement early?

Accepted Answer

Most property management agreements allow either party to terminate early, but the specific terms vary. Common termination provisions include a 30-to-90-day written notice requirement, an early termination fee (often one to three months of management fees), and conditions under which either party can terminate immediately for cause — such as breach of contract, failure to remit rents, loss of required licensing, or mismanagement. Some agreements also include a cure period (typically 15 to 30 days) that gives the breaching party an opportunity to fix the problem before termination takes effect. Review the termination clause carefully before signing, because an unfavorable termination provision can make it expensive to switch managers if you are dissatisfied.

Question 6

What is the difference between a management fee and a leasing fee?

Accepted Answer

The management fee is the ongoing monthly charge for day-to-day property management services — collecting rent, coordinating maintenance, handling tenant communications, paying property expenses, and providing financial reports. This fee is typically expressed as a percentage of collected rent (8% to 12% for residential properties). The leasing fee, also called a placement fee or lease-up fee, is a separate one-time charge assessed each time the manager fills a vacancy with a new tenant. Leasing fees typically range from 50% to 100% of one month’s rent and cover advertising the vacancy, showing the property, screening applicants, preparing the lease, and conducting move-in inspections. Some managers bundle leasing into the management fee, but most charge it separately.

Question 7

What authority does a property manager have over evictions?

Accepted Answer

The property management agreement should clearly define the manager’s authority regarding evictions. In most arrangements, the manager has the authority to initiate eviction proceedings on behalf of the owner when a tenant violates the lease — such as failing to pay rent, causing property damage, or engaging in illegal activity. However, because evictions involve legal proceedings and potential liability, many agreements require the manager to notify the owner before filing an eviction and to coordinate with an attorney for the legal process. The owner typically remains responsible for attorney’s fees and court costs associated with evictions, though the manager usually handles the day-to-day coordination. Some agreements give the manager full discretion to evict without prior owner approval, while others require written authorization for each eviction action.

Question 8

Who is responsible for maintenance and repair costs?

Accepted Answer

The property owner is ultimately responsible for all maintenance and repair costs associated with the property. The property manager coordinates the work — hiring contractors, supervising repairs, and ensuring work is completed properly — but the costs are paid from the owner’s funds, either from the reserve account or from collected rent. Most agreements establish a spending authority threshold (commonly $300 to $500) below which the manager can authorize repairs without contacting the owner. Repairs exceeding this threshold typically require the owner’s prior approval, except in emergencies that threaten the safety of tenants or the integrity of the property. Be aware that many managers add a markup of 10% to 20% on maintenance and repair invoices to cover their coordination and oversight costs.

Question 9

What financial reports should a property manager provide?

Accepted Answer

A comprehensive property management agreement should require the manager to provide regular financial reports, including: a monthly income and expense statement showing all rent collected, management fees deducted, and expenses paid; a monthly ledger of individual tenant accounts with rent payment status and outstanding balances; a year-end statement summarizing annual income and expenses for tax reporting purposes (often including a 1099 for the owner); copies of all paid invoices and receipts for maintenance and repairs; a security deposit accounting showing deposits held, interest accrued (if required by state law), and deductions applied; and a vacancy report tracking turnover rates and days on market. The agreement should specify how often these reports will be delivered (monthly is standard), in what format (online portal, email, or mail), and the owner’s right to inspect the manager’s books and records at reasonable times.

Question 10

What insurance does a property manager need?

Accepted Answer

A property management agreement should address insurance requirements for both parties. The property manager should carry general liability insurance (typically $1 million to $2 million), professional liability or errors and omissions (E&O) insurance, workers’ compensation insurance for any employees, and a fidelity bond or crime insurance that protects against employee theft. The property owner should maintain property insurance (hazard and casualty coverage), landlord liability insurance, and, in flood-prone areas, flood insurance. Both parties should name the other as an additional insured on their liability policies. The agreement should specify the minimum coverage amounts required, require proof of insurance (certificates of insurance) to be provided annually, and include an indemnification clause that allocates liability between the owner and manager for different categories of claims.

Question 11

Can a property manager sign a lease on behalf of the owner?

Accepted Answer

Yes, if the property management agreement grants the manager that authority. Most management agreements include a clause that designates the manager as the owner’s authorized agent for the purpose of negotiating and executing leases, lease renewals, and lease amendments with tenants. The agreement should specify whether the manager can set rental rates independently or must follow the owner’s pricing guidelines, the maximum lease term the manager can offer without owner approval, whether the manager can offer concessions (such as free rent or reduced deposits), and whether the owner must approve each lease before execution. In states that require a real estate broker’s license for property management, the manager’s authority to sign leases stems from both the management agreement and the manager’s broker status.

Question 12

What happens to security deposits under a management agreement?

Accepted Answer

Security deposits collected from tenants belong to the tenants until lawfully applied or returned, and the management agreement must address how they are handled. The manager typically collects and holds security deposits in a separate trust or escrow account, as required by state law. The agreement should specify which party holds the deposits (manager or owner), how the deposits are accounted for, whether interest must be paid (required in some states), the process for making deductions at move-out, and how deposits are transferred if the management relationship ends. The manager must comply with state-specific security deposit laws regarding maximum amounts, required disclosures, allowable deductions, and return timelines. When the management agreement terminates, the manager must transfer all security deposits to the owner or the new manager along with an accounting of each deposit.

Question 13

How do I choose between a property management company and an individual manager?

Accepted Answer

Property management companies typically offer greater resources, established systems, a team of employees to handle different functions (leasing, maintenance, accounting), backup coverage when staff members are unavailable, and the institutional stability that comes with a larger organization. Individual property managers often provide more personalized attention, direct communication, lower fees, and a more hands-on approach. The best choice depends on the size and complexity of your portfolio, your budget, and your management style preferences. For single rental properties or small portfolios, an individual manager may be sufficient and more cost-effective. For larger portfolios, multi-family buildings, or commercial properties, a management company with dedicated departments for leasing, maintenance, and accounting is usually the better choice. Regardless of which you choose, verify their licensing, check references, review their management agreement carefully, and confirm their insurance coverage.

Provision	Description
Scope of Authority	Defines exactly what the manager is authorized to do — leasing, maintenance, rent collection, evictions, accounting, and any activities outside of standard management
Management Fees	Typical residential fees range from 8% to 12% of collected rent; commercial properties from 4% to 8%. Specify whether the fee is based on collected rent or scheduled rent
Lease-Up / Placement Fees	One-time fee for finding and placing a new tenant, typically 50% to 100% of one month's rent. Covers advertising, showings, screening, and lease preparation
Maintenance Markup	Many managers add 10% to 20% to contractor invoices for coordinating and overseeing repairs. The agreement should disclose this markup and the spending authority threshold
Reserve Fund	A cash reserve (typically $500 to $2,500 per property) held by the manager to cover emergency repairs and expenses without waiting for owner authorization
Insurance Requirements	Minimum coverage amounts for both parties — general liability, professional liability / E&O, workers' comp, fidelity bond for the manager; property and landlord liability for the owner
Liability & Indemnification	Allocates risk between the parties. Typically, each party indemnifies the other for claims arising from their own negligence or breach of the agreement
Term & Termination	Initial term (commonly one to two years), auto-renewal provisions, notice requirements for termination (30 to 90 days), early termination fees, and grounds for immediate termination for cause
Owner Access to Records	Owner's right to inspect the manager's books, records, bank statements, and tenant files at reasonable times with reasonable notice
Financial Reporting	Monthly income/expense statements, tenant ledgers, vacancy reports, year-end tax summaries (including 1099), and copies of all paid invoices
Security Deposit Handling	Which party holds deposits, the trust account used, compliance with state deposit laws, and the transfer process when the management relationship ends
Eviction Authority	Whether the manager can initiate eviction proceedings independently or requires owner approval, who bears the legal costs, and coordination with legal counsel

Responsibility	Owner	Manager
Set rental pricing and terms	Approves	Recommends
Market and advertise vacancies	—	Performs
Screen tenant applications	—	Performs
Execute lease agreements	May approve	Performs
Collect rent and late fees	—	Performs
Fund reserve account	Performs	—
Routine maintenance (< threshold)	Pays	Coordinates
Major repairs (> threshold)	Approves & pays	Gets bids & coordinates
Maintain property insurance	Performs	—
Maintain liability / E&O insurance	—	Performs
Eviction proceedings	Pays legal costs	Initiates & coordinates
Monthly financial reporting	Reviews	Prepares & delivers
Pay property taxes and mortgage	Performs	May assist
Capital improvements	Decides & funds	May manage project

Free Property Management Agreement Forms

What Is a Property Management Agreement?

Legal Protection

Fee Transparency

Clear Expectations

Who Needs a Property Management Agreement?

Rental Property Investors

Out-of-State or Distant Owners

Multi-Property Portfolio Owners

HOAs and Condo Associations

Inherited or Accidental Landlords

Property Management Agreement Form Preview

Property Management Agreement

Section 1: Parties to the Agreement

Section 2: Property Description

Section 3: Management Fees & Compensation

Section 4: Scope of Services

Section 5: Execution

Key Provisions Every Property Management Agreement Should Include

Types of Property Management Services

Full-Service Management

Leasing-Only Management

Maintenance-Only Management

Fee Structures Explained

Percentage of Rent

Flat Fee

Hybrid Model

Common Add-On Fees

Property Manager Licensing Requirements

Consequences of Unlicensed Property Management

What to Verify Before Hiring a Property Manager

Owner vs Manager Responsibilities

When to Hire a Property Manager vs Self-Managing

Hire a Property Manager When...

Self-Manage When...

How to Create a Property Management Agreement

Gather Property and Management Details

Customize the Agreement for Your Situation

Execute and Distribute the Agreement

Sample Property Management Agreement

PROPERTY MANAGEMENT AGREEMENT

Frequently Asked Questions

Official Resources

Create your Property Management Agreement in under 10 minutes.