The Property Management Contract – Issues and Insights

Posted by: Howard Sobel on April 30th, 2009

The property manager will be taking on significant responsibilities with the owner’s real estate. You will be effectively handing your property over to another.  It is important to look at the contract, at a minimum it must:

  1. Name all parties to the contract
  2. The legal property address
  3. Define the responsibilities of the manager and the owner
  4. Enumerate all  fees and commissions for leasing or real estate sales.
  5. Define the term of the contract
  6. Both parties must sign and date the contract

Agency — What Is It?

Wiki: It may be referred to as the relationship between a principal and an agent whereby the principal, expressly or impliedly, authorizes the agent to work under his control and on his behalf. The agent is, thus, required to negotiate on behalf of the principal or bring him and third parties into contractual relationship. Basically, you are binding the manager to act on your behalf and in your best interest regarding the management of the property.

The Take-away:

  1. Require a current license. Search your state dept. of Real Estate to see if it is current and note any complaints or suspensions or revocations of the real estate license.
  2. Referrals: Check with your local Better Business Bureau and ask for referrals.
  3. Check the coverage. Ask to see the company general business liability insurance. It’s best if the principals have errors and omissions insurance. Be sure the insurance policies are current.

The Length of the Contract: Often it’s one or two years. Property Managers wont take a month to month contract because they need to get the tenants onto the rent roll and into their system. They also need a little time to learn the property. One year should be a reasonable minimum.

The Take-away: Be sure that the contract can be voided, without having to provide reason and without penalty with a written 30 day notice to terminate the arrangement. Be sure that your written termination date matches the hire date or you may have a deduction for early termination. If the hire date was on the first, terminate on the first.

Duties and Responsibilities of Managers

1. Maintenance and Inspections: In a general sense they should perform all the duties necessary to maintain and manage the property. You may specify that certain tasks or procedures remain the owners to do. Many hands-on owners like to do their own maintenance or pay their own mortgage and insurance payments. Management companies will not like this because maintenance is a profit center, but it is your right.

The Take-away: Property management companies often have their own handyman and you should be very clear about how this works. If a light bulb is out and the handyman has to travel back and forth and change the bulbs, there is likely a minimum one hour charge. It could cost you $45.00 to change a light bulb plus the cost of the light bulb.

2. Major Repairs: You should expect that all major repairs be completed with three independent bids and receipts to back up the billing.

The Take-away: Protect yourself. You should establish limits on how much can be spent without your approval. If the bids all seem high, we think you should have the right to bid it out yourself. If you do, you would then be responsible for the outcome and if it was not up to code, the management firm may not want to represent you. So, for those who know what they are doing, this might be a money saving option on big jobs.

3. Inspections: The manager should be there for all city inspections and without any charge. This is a management function.

The Take away: Require in the contract that the management company provide annual inspections and a written report.

4. 24-Hour Emergency Service: This is a basic management resposibility. There must be a 24/7 response team and without charge is built in.

Tenant Screening and Leasing

1. Marketing and advertising the rental: The company should be familiar with the local market and be able to price the unit so that it rents reasonably fast and at the right rent. A poor rental process can cause you time on the market while all the bills still have to be paid. We have seen many companies try to hit home runs to get the highest rent rate only to be over zealous and cost the owner months of income.

The Take-away: Ask the company how much leasing experience they have, how long a property is on the market. How do they come to their pricing strategies and how they intend to advertise. We think that Craigslist and a company website should do the job. Luxury properties may require brochures and classified ads.

2. Tenant Screening: What are the tenant screening criteria. The company should be able to clearly offer you a set of rules. This should never be an off hand “we pick em if we like em” approach. Thats a law suit waiting to happen.

Financials: Management companies should offer online statements, preferably with an accountant willing to answer your questions.

Management Responsibilities:

  1. Track income and expenses to determine profitability.
  2. Rents and other property income shall be deposited into a special bank account or trust as required by law and cannot become mingled with the company funds.
  3. Issue monthly income statements.
  4. Negotiate rental agreements.
  5. Respond to tenant requests and deal with problem tenants.
  6. Respond to maintenance problems in a timely fashion and do annual property inspections to highlight pending maintenance. Deferred maintenance i s always more expensive down the road.
  7. Property management companies should be able to pay all operating expenses and create monthly distributions to owners on demand.

Special thanks to T.L.A. for the photo.



15 Comments on “The Property Management Contract – Issues and Insights”

Ion Home Inspection

Good Stuff! Thanks

Jeffrey Owen
Katy, Houston, Sugar Land TX

Ray Mikus

I found this to be a concise summary of the roles and duties of a property manager. It’s also vitally important that the property owner remains involved in the operation of his or her property. We recently had a case here in Vermont (yes, even in bucolic Vermont) in which a property management company bilked hundreds of landlords out of rents. The tenants paid, but the landlords didn’t get it. It’s still being sorted out by the courts.

I bring this up because sometimes people think that using a property management company enables them to become, quite literally, an “absentee landlord”. Be present.

Tony Sena

Excellent outline of the responsibilities of a property manager. Landlords should read this article so they know what they should expect from their property manager.

Walter Grande

That defines what a property manager responsibilities should be. Screening renters, is a talent and is a major reason to employing a property manager.


There’s reviews of property management services posted online at Thought you might like to know.

Linda Moulhem

This is great information. A reputable property management company should always be able to provide the owners with the monthly statements (P&I or Income / Expense or Rent Rolls etc.) within 5 days after the close of the month. They should also return phone calls within 24 hours, no exceptions! And finally…and this is important, there is NEVER an excuse to be rude. If your property manager is rude to either the tenants/residents or owners or even vendors, it is an indication of ill management. Look for warning signs and if you as the owner are not kept in the loop with your own property, find another manager ASAP. Good luck with all of your Real Estate endeavors, sincerely Linda Moulhem. NYC Property Managers, LLC.

Total Quality Assurance

Yeah… if your property management company can’t provide you with the basics, it’s time to start looking around for a better option.

Ken of Home Property Management

I’ve experienced good and bad management companies. In home property management, the company needs to take care of landlord’s property as if it were their own. One of my best experiences was with a retired military colonel who collected the rent himself every month. Gave him a chance to see the property regularly.

San Diego Property Management

One good rule of thumb is that if it doesn’t sound right ask questions. Check around and find 2nd opinions. If what seems like a basic necessity is not included, you can probably find another company offering the same basic service as part of their full service package.

property for sale in Portugal

This is what I really need. I do believe that all this information is going to help me a lot about my properties. Thank you for sharing it and I will be visiting this blog more often.

appliance repair

One of the more impressive blogs I’ve seen. Thanks so much for keeping the internet classy for a change. Youve got style, class, bravado. I mean it. Please keep it up because without the internet is definitely lacking in intelligence.

tempe property management

Yeah, both property owner and property manager are supposed to follow certain must haves while getting into a deal. Majorly property managers, in the capacity of professionals, are responsible for the deal to go smooth.

earl piercy

What recourse do I have against a property manager who put terrible tenants into my property, did not check on them for two years, and now the property is damaged by them far beyond their ability to pay?

property search agents

Exactly, professional synchronization between property owner and property manager is always required.


What happens when you’re a renter and the management company and owner have a disagreement? They were having a fight in my front yard and no longer have an agreement. I have a year lease with the management company. If I have to move what recourse do I have for moving costs?

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