Property Management Agreement

Overview

A property management agreement is the contract between a property owner and a property manager (an individual or company) authorizing the manager to handle day-to-day operations of a rental property — marketing vacancies, screening tenants, collecting rent, coordinating maintenance and repairs, and often enforcing lease terms — in exchange for a management fee. Property management activity is regulated at the STATE level, and the licensing requirement varies significantly: many states require anyone who manages rental property for a fee on behalf of others to hold a real estate broker's license (or work under a licensed broker), while a smaller number of states have a separate, lighter-touch property manager license or no license requirement at all for certain activities. Confirm the licensing requirement in {{governing_state}} before engaging a manager or acting as one. Scope of authority: the agreement should clearly define what the manager is and is not authorized to do without prior owner approval — commonly, day-to-day operational decisions (routine repairs under a set dollar threshold, tenant communications, rent collection) are delegated to the manager, while larger decisions (major repairs above a threshold, lease renewals on materially different terms, eviction filings) require owner sign-off. A clear spending authorization limit avoids disputes over unauthorized expenses. Fees: property management fees are commercially negotiated, not fixed by law, and commonly combine a percentage of collected rent (often in the 8-12% range in many markets, though this varies widely) with additional fees for specific services (leasing/placement fees, renewal fees, maintenance markup). All fee components should be stated explicitly rather than left to informal practice. Trust accounting: many states impose specific trust or escrow account requirements on how a property manager must hold and account for tenant security deposits and collected rent before disbursing to the owner, including separate-account rules and reconciliation/reporting obligations. These rules are state-specific (and sometimes tied to the manager's real estate license conditions) and are not covered exhaustively here — the manager should confirm compliance with {{governing_state}} trust accounting requirements independently. Fair housing and tenant screening: any tenant screening, marketing or leasing activity conducted by the manager on the owner's behalf is subject to the federal Fair Housing Act and to {{governing_state}}'s (and often the local municipality's) own fair housing and tenant-screening laws, which in some jurisdictions restrict the use of criminal history, source-of-income discrimination, or impose specific screening-fee caps. When to use: for an owner who does not want to handle day-to-day landlord responsibilities directly and wants to delegate them to a professional manager under a defined scope and fee structure. Common pitfalls: no defined spending authorization limit (leading to disputes over unauthorized repairs); no clear trust accounting/reporting cadence; and not confirming the manager's licensing status where required. This template must be reviewed against {{governing_state}} property management licensing and trust accounting law before use.

Information to customize

• Owner's name

• Property manager's name (and license number, if applicable)

• Governing state (property location and applicable licensing law)

• Property address

• Scope of management services

• Spending authorization limit before owner approval is required

• Management fee (percentage of collected rent and/or flat fee)

• Additional fees (leasing, renewal, maintenance markup)

• Trust/escrow account and reporting arrangements

• Agreement start date

• Agreement end date or renewal terms

• Notice period to terminate this agreement

• Date of this agreement

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Frequently asked questions

Does a property manager need a real estate license?

It depends on the state. Many states require anyone managing rental property for a fee on behalf of others to hold a real estate broker's license (or work under one), while some states have a separate property manager license or lighter requirements. Confirm the rule in the governing state before engaging a manager.

How much can a property manager spend without owner approval?

This is set by the parties in the agreement, not by a fixed legal rule. A common approach is a dollar threshold below which the manager can authorize repairs directly, with a carve-out for genuine emergencies, and owner approval required above that threshold.

Are property management fees fixed by law?

No. Fees are commercially negotiated between owner and manager and vary by market and scope of services, commonly combining a percentage of collected rent with fees for specific services like leasing or renewals.

What is trust accounting and why does it matter?

Many states require a property manager to hold tenant security deposits and collected rent in a separate trust or escrow account, with specific reconciliation and reporting obligations, before disbursing funds to the owner. These rules are state-specific and often tied to license conditions.

Who is responsible for fair housing compliance in tenant screening?

Both the owner and the manager can face liability. Any screening, marketing or leasing activity conducted on the owner's behalf must comply with the federal Fair Housing Act and applicable state and local fair housing and tenant-screening law.

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