Will I need a property management contract or agreement?

Yes; a property management agreement is a contract between the owner of the property and the property manager or management company hired to run the property. A standard requirement in property management, this legally binding document outlines the manager"s responsibilities as well as the tasks that remain with the owner.

In general, a property management agreement will always contain the same basic types of information. The agreement will name all parties involved and state the address and/or legal description of the property. It will outline the responsibilities of the manager or management team and include some or all of the following items: provision for advertising and renting the property; outline for maintenance, repairs and housekeeping; terms of financial tracking and responsibilities like the collection of rent or late fees; policies for responding to tenant issues and concerns; stipulations for 24 hour emergency services; requirements for ordering supplies for the building; and outline any rules and regulations to be enforced which were set forth by the owner in the tenant leases. The contract will also outline the responsibilities of the owner, which largely deal with communication with the manager or management team. All fees and commissions of the manager, and the term for which the contract is valid are also included in the contract. The agreement includes all contact information, the dates in which the agreement is in effect, and is signed and dated by both parties.1

For an owner-friendly template, Realtax.com2 suggests the inclusion of specific timelines for marketing plans, budgets, plans for improvements and the like. By making it a performance-specific document, it is easier to measure the success and positive impact the manager has on the owner"s property. While Realtax.com cites this as an advantage to the owner, it is clearly also a valuable tool for the manager as well. The more specific the document, the easier it will be for both parties to define their boundaries, and be able to carry out their responsibilities.

Basic property management agreements are available to be downloaded for free, but most if not all of these are boilerplate agreements and can be over-generalized or heavily favor either the owner or the manager.3 Some agreements are available online for as little as $9.994 and appear to have the same general language as those for free; what they do guarantee is professional formatting and accuracy. Wherever the template is generated from, it is a good idea to discuss the agreement first with an attorney and then with the property manager or management company to ensure it is fair and agreeable to both parties.

Property management agreements are an essential tool for both the owner of the property and the manager. Not only does it outline the working relationship of the two parties, but also sets the standard of performance for the building for the term of the agreement.