Calendar icon May 14, 2024

Your Guide to Property Management Agreements (with Free Template)

With a renewed focus on rental income as an investment trend, the popularity of property management is on the rise. Busy professionals and out-of-town real estate investors increasingly rely on property managers to handle the day-to-day operations of their rental properties.

When they come to you for the first time, one approach to establishing clear differentiation with respect to your competitors is through the clarity and comprehensiveness of your property management agreement. 

In today’s guide we’ll cover the essentials of a property management agreement that provides a foundation for transparency throughout this critical relationship, as well as peace of mind for the investors relying on you to manage their investment.

 

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A Step-by-Step Guide to Building Your Agreement

Crafting a solid property management agreement doesn't have to be daunting. Here's a breakdown of the key components:

Parties Involved

  • Property owner: Clearly identify the legal name and contact information of the property owner(s).
  • Property manager: Do the same for the property management company or individual.

Property Details

  • Address: Include the full address of the property being managed.
  • Legal description (optional): For added clarity, consider including the legal description, particularly for complex property ownership structures.
  • Property type: Specify whether it's a single-family home, multi-unit building, or commercial property.
  • Unique features/limitations: Mention any unique features (e.g., pool, historic designation) or limitations (e.g., zoning restrictions, HOA rules).

Term and Termination

  • Effective date: Define the start date of the agreement.
  • Termination clauses: Outline the grounds for termination by either party (e.g., breach of contract, property sale).
  • Notice period: Specify the required notice period for each party if they wish to terminate the agreement (e.g., 30 days, 60 days).
  • Termination mechanisms: Explain how the date of termination should be communicated (written notice, specific format [e.g., certified mail]), along with any applicable indemnification measures.

Manager Responsibilities

  • Resident screening: Detail the process for resident screening, including applications, background checks, and credit checks.
  • Rent payments and security deposit collection: Outline procedures for security deposit collection, rent collection, late fees, and eviction processes.
  • Maintenance oversight: Specify the property manager duties and roles in overseeing maintenance requests, repairs, and independent contractor/vendor selection (approval thresholds, cost limitations).
  • Financial reporting: Define the frequency and format of financial reports provided by the property manager (monthly statements, annual reports).
  • Communication protocols: Establish communication protocols regarding occupant inquiries, maintenance emergencies, and routine updates.
  • Availability: Consider outlining the property manager's availability for emergencies (24/7 hotline, designated contact person).

Owner Responsibilities

  • Repairs: Specify the owner's responsibility for major repairs beyond normal wear and tear.
  • Providing access: Outline the owner's role in providing access to the property for maintenance or showings when residents are not present.
  • Major decisions: Define how major decisions regarding the property (e.g., renovations, capital improvements) will be made (joint agreement, owner approval).
  • Property inspections: Address expectations regarding the frequency and purpose of property inspections conducted by the owner.
  • Insurance coverage: Clarify the owner's responsibility to maintain appropriate liability insurance policy coverage for the property.

Fees and Compensation

  • Management fee: Detail the structure of the property management fee (percentage of rent collected, flat fee).
  • Additional fees (optional): Address any additional disbursements for specific services, such as resident placement or lease renewals.

Dispute Resolution

  • Process: Explain the process for resolving disagreements between the owner and the property manager (mediation, arbitration, legal action).
  • Governing laws: Specify the governing laws that apply to the agreement in case of disputes.

Free Property Management Agreement Template (Basic)

This contract template is for informational purposes only and should not be considered a substitute for legal advice. Please consult with an attorney to tailor the agreement to your specific needs and to ensure that the provisions of this agreement comply with local and state laws.

 

Property Management Agreement

This Property Management Agreement ("Agreement") is made and entered into as of [DATE] by and between:

[Property Owner Name] residing at [Property Owner Address] ("Owner"), and

[Property Management Company Name] located at [Property Management Company Address] ("Manager").

WITNESSETH

WHEREAS, Owner is the legal owner of the property located at [Property Address] (the "Property"); and

WHEREAS, Manager desires to provide property management services for the Property; and

WHEREAS, Owner desires to engage Manager to provide such services for the Property

NOW, THEREFORE, in consideration of the foregoing premises and the mutual covenants contained herein, the parties agree as follows:

1. Services

Manager agrees to perform the following services for the Property (Services may be added or removed based on specific needs. Consult with a lawyer.):

  • Resident screening and resident selection (application processing, background checks)
  • Collection of rent and late fee enforcement
  • Maintenance oversight and coordination (up to $[AMOUNT] per repair)
  • Move-in/move-out inspections
  • Monthly financial reporting related to management of the property

2. Term and Termination

This Agreement shall commence on [DATE] (the "Effective Date") and shall continue for a period of [NUMBER] year(s), unless earlier terminated as provided herein. This termination of this Agreement may be effected by either party upon [NUMBER] days' written notice to the other party.

3. Management Fee

Owner shall pay Manager a monthly management fee equal to [PERCENTAGE]% of the gross monthly rent collected.

4. Legal Proceedings 

In the event of a legal proceeding arising out of this Agreement or the management of the Property, the following provisions shall apply:

  • Authority: The Property Manager is hereby authorized to initiate and prosecute any legal action deemed necessary to collect rent, enforce the terms of tenant leases, or protect the Owner's property interests.
  • Owner Approval: Prior written approval from the Owner shall be required for any legal action exceeding $[Dollar Amount] or involving potential litigation.
  • Costs and Reimbursement: The Property Manager shall keep detailed records of all legal expenses and attorney’s fees incurred. The Owner shall reimburse the Property Manager for all reasonable and documented legal expenditures associated with authorized proceedings.
  • Representation: The Owner shall have the right to be represented by their own counsel in any legal proceeding. However, the Property Manager shall have the right to participate in the proceedings and may retain separate counsel at the Owner's expense if a conflict of interest arises.
  • Communication: The parties agree to cooperate fully and share all relevant information in a timely manner throughout any legal proceedings.

5. Dispute Resolution (Optional - Replace with preferred method if applicable)

Any dispute arising out of or relating to this Agreement shall be settled by [METHOD OF DISPUTE RESOLUTION, e.g., mediation] in accordance with the rules of [NAME OF MEDIATION PROVIDER] (the "Rules"). The decision of the mediator shall be final and binding on the parties.

6. Waivers

The Owner acknowledges and waives any and all claims, demands, or causes of action against the Property Manager arising from the following, unless such claims arise from the Property Manager's gross negligence or intentional misconduct:

  • Acts or omissions of any resident of the Property.
  • Loss or Property damage caused by reasons outside the Property Manager's reasonable control, including natural disasters, acts of war, or civil unrest.
  • Unexpected repairs or maintenance issues beyond the scope of normal wear and tear.

The Owner further agrees to indemnify and hold harmless the Property Manager from any and all claims, liabilities, damages, losses, or expenses (including attorney's fees) arising from the Owner's violation of this Agreement or any applicable laws or regulations.

7. Entire Agreement and Governing Law

This Agreement constitutes the entire agreement between the parties with respect to the subject matter hereof and supersedes all prior or contemporaneous communications, representations, or agreements, whether oral or written. The terms of this Agreement shall be governed by and construed in accordance with the laws of the State of [STATE].

IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above.

[Property Owner Signature]

[Property Owner Name (Printed)]

[Property Management Company Signature]

[Property Management Company Name (Printed)]

Optional addendums 

For specific situations, consider adding supplementary documents like:

  • Bed bug addendum
  • Pool addendum
  • Pet lease addendum

These addendums can address unique requirements and regulations related to these aspects of the property.

Legal Considerations and Customization

Consulting with a lawyer is crucial to ensure your property management agreement is legally sound and reflects your specific circumstances. An attorney can help you with:

  • Specifying maintenance coverage: Clearly define which maintenance issues are the responsibility of the property manager and which fall to the owner.
  • Pet policy details: Outline a comprehensive pet policy including pet restrictions, fees, and deposit requirements.
  • Local legal compliance: Ensure your agreement adheres to all relevant laws and regulations in your area, such as resident rights and fair housing regulations.

FAQs: Helping Potential Investors Demystify Your Property Management Agreement

Q: Is a property management agreement legally required?

A: While not always mandatory, a property management agreement is highly advisable. It protects both the owner and the manager by outlining expectations and responsibilities.

 

Q: Can I use your template for any property management situation?

A: The provided template is a basic framework. It's best to consult with a lawyer to customize it for your specific property type, location, and desired services.

 

Q: Do I need a lawyer to draft the agreement?

A: While not mandatory, legal guidance is highly recommended. An attorney can ensure the agreement is legally sound, protects your interests, and complies with local laws.

 

Q: Can I use this template for agreements outside of property management, e.g., for lease agreements or rental agreements?

A: No, this template is specific to property management agreements. For other types of agreements, consult with a lawyer or use appropriate templates designed for those purposes.

 

Q: What should I do after finalizing the agreement?

A: Once both parties have signed the agreement, keep a copy for your records and provide one to the property manager. Familiarize yourself with the terms and communicate openly to ensure a smooth and successful working relationship.

Conclusion

A well-drafted property management agreement is the cornerstone of a successful relationship between owner and property manager.

By using the provided template as a foundation and consulting with a lawyer for customization, you can establish a clear and comprehensive agreement that provides full transparency and fosters a smooth rental property experience.

On top of your agreement, consider rolling out a resident benefits package (RBP). It’s a powerful way for property managers to create a Triple Win – for residents, investors, and themselves.

An RBP like Second Nature’s is designed to be simple to use and easy to implement. All the services included within it are managed externally by Second Nature, meaning there is no day-to-day upkeep required from the manager. You plug it in and Second Nature keeps it running. The value creation an RBP generates – with such little work required from the PM – is an incredibly easy way to grow your business and create great experiences that residents will pay and stay for.

Don't get left behind in the evolving world of resident experience. Learn more about our fully-managed Resident Benefits Package and how we can build ease for you, your investors, and your residents.

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How to Reduce Employee Turnover in Property Management: A Guide to Retaining Your Valuable Team

The property management industry faces a significant challenge: high employee turnover. In the US, the national average employee turnover rate measured in 2023 across all sectors was 17.3%. With highs of nearly 33% in some sectors, and lows of 12% in others, turnover is a pressing issue. Indeed, the National Apartment Association (NAA) reported that multifamily industry turnover rates in the last decade were up to 40%. While numbers for single-family home property management companies are harder to measure, the bottom line is that employee retention is often a casualty of the stresses that come with the high stakes of simultaneously managing people’s homes on one hand, and substantial real estate investments on the other. A revolving door of staff creates a ripple effect of negative consequences: residents face disruptions in service and communication, while companies struggle with lost productivity, increased recruiting and training costs, and a decline in overall morale. This comprehensive guide will equip property management teams with the tools and strategies to build a happy, engaged workforce and keep valuable co-workers on board. Understanding the Reasons for the High Turnover Rate Multiple factors contribute to the high property management turnover rate, particularly during inflationary periods, when low wages and benefits may fail to match the demanding workload. Team members face long hours, stressful interactions with residents, and the constant pressure of handling emergency situations. Many may feel undervalued and underappreciated, with limited opportunities for career advancement. Poor communication within the company, coupled with an unsupportive culture, will further fuel feelings of dissatisfaction and disengagement. Another factor may well be the cultural fallout from the recent pandemic, which catalyzed large changes in labor market behaviors, particularly among the so-called millennial generation. This has driven an upending of traditional wage-earning paradigms, giving rise to an endemic “gig economy” that industry and governments are still grappling with across sectors. Building a culture of retention Shifting the focus to a positive and supportive work environment is key to stemming the tide of staff turnover of property management employees. Here are several strategies to help cultivate a culture of retention and employee satisfaction: Competitive compensation and benefits Analyze local market wages and offer salaries that reflect the responsibilities and demands of the job. Provide comprehensive health insurance plans, paid time off, and other benefits that demonstrate your commitment to employee well-being. Consider offering perks and incentives such as gym memberships or fitness equipment subsidies to further enhance the compensation package. Work-life balance Promote healthy boundaries by offering flexible scheduling options whenever possible. Explore remote work opportunities for certain roles, especially those suited to administrative tasks. When dealing with difficult resident issues, encourage employees to take breaks throughout the day to prevent burnout. Implementing a core-hours policy, where employees are guaranteed to be available during specific times for urgent matters, can help maintain a sense of work-life balance. Investment in training and development Investing in your employees demonstrates your commitment to their growth and success. Offer ongoing training programs encompassing property management software, tenant relations, conflict resolution, fair housing laws, and industry certifications. This not only enhances their skillset and knowledge, but also empowers them to perform their jobs more effectively and confidently. Clear communication and recognition Establish consistent communication channels to keep employees informed and engaged. Hold regular team meetings, conduct performance reviews, and encourage open communication from the bottom up. Address concerns promptly and professionally. Most importantly, recognize and celebrate employee achievements publicly. A simple "thank you" or a public shout-out goes a long way in boosting morale and fostering a sense of appreciation. Building a team environment Foster a sense of teamwork through team-building activities, mentorship programs, and encouraging collaboration. Promote a supportive environment where colleagues can rely on one another for help and share best practices. This creates a sense of community and belonging which helps reduce feelings of isolation and discouragement. Strategies to Reduce Stress and Burnout High levels of stress can lead to employee burnout and ultimately, turnover. Here are some practical solutions to address this concern: Workload management Analyze workload distribution within your teams and identify opportunities for better balance. Consider cross-training employees to share the burden and alleviate pressure points. Utilize temporary staffing solutions to handle peak periods or unexpected vacancies. Technology and automation Embrace technology to streamline tasks and free up employee time for more strategic endeavors. Implement property management software to automate tasks such as rent collection, maintenance requests, and lease renewals. Consider online portals for residents to submit service requests and access property information, which reduces the burden on leasing and maintenance staff. Stress management resources Offer access to Employee Assistance Programs (EAPs) to provide confidential counseling and support for employees dealing with personal or work-related stress. Consider offering on-site mindfulness training or wellness programs to help employees develop healthy coping mechanisms for managing stress. Retention through Growth and Opportunity Providing a clear career path is critical for retaining top talent. Here's how you can promote employee growth and development: Create clear career paths Map out advancement opportunities within the company and establish clear performance benchmarks for promotion. This gives employees something to work towards and motivates them to invest in their long-term success with the company. Mentorship programs Establish mentorship programs that connect experienced employees with newcomers. Mentors can provide guidance, answer questions, and offer support during the onboarding process and beyond. This fosters a sense of community and helps new hires feel more integrated into the team. Cross-training Invest in cross-training opportunities to broaden employee skillsets and increase job satisfaction. This allows employees to gain exposure to different areas of property management, keeps their work interesting, and prepares them for potential future opportunities within the company. Empowering Your Team: Fostering Ownership and Engagement Empowering your employees fosters a sense of ownership and engagement, leading to a more motivated and productive workforce. Delegate tasks and decision-making Delegate tasks that match employee skill sets and provide them with some level of decision-making authority. This demonstrates trust in their abilities and encourages them to take ownership of their work. Encourage feedback and suggestions Create an environment where employees feel comfortable sharing their ideas and suggestions for improvement. Hold regular brainstorming sessions and actively solicit feedback on company policies, procedures, and resident services. Recognize and value employee ideas Acknowledge and value employee ideas, and whenever possible, implement suggestions that can enhance efficiency or improve resident satisfaction. This demonstrates that their input matters and fosters a sense of ownership within the company. Conclusion Reducing employee turnover in property management requires a multi-pronged approach that prioritizes employee well-being, professional development, and a sense of belonging. By implementing the strategies outlined here, property management companies can cultivate a happy, engaged workforce that delivers exceptional service to residents and contributes to the company's long-term success. Remember, a strong team is the foundation for a thriving property management business. Invest in your employees, and they will invest in your company's success. Learn more about property management company best practices, marketing, and more in our Second Nature Community,

Calendar icon May 14, 2024

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How to Build the Perfect Property Management Tech Stack

Building a property management tech stack takes an understanding of your needs, your options, how your team will use tech, and a commitment to continuous improvement. Technology, as most people know, is a double-edged sword. When used correctly, it can optimize business processes and create more efficient systems within your business. When used incorrectly, it can tear a hole in the space-time continuum, and you don’t want that. Industries all over the world have been going through their own tech revolutions over the last 40 years, and property management’s really began in the 80s with Yardi's "Basic Property Management" software. Online listings really took off in the early 2000s, and. Now, PropTech is everywhere, and the use of tech in property management has never had more potential or been more complicated. So how do you build a tech stack that works for you and your employees? Meet Rhianna Campbell and Kelli Segretto, two property management consultants that combine to boast more than 35 years of property management experience. Both have been through more than their share of tech rollouts. They’ve seen what works and what doesn’t, and they’re here to share with you what a good process for building a tech stack actually looks like. Start from the problem Technology will help you button up inefficiencies, but tech itself can create inefficiencies if it’s implemented for its own sake, which is one of the most common mistakes PMs make when at the top of the tech funnel. “Start with your issues list,” says Kelli Segretto, Founder of K Segretto Consulting and 20-year veteran of property management. “A lot of times what I see is a property manager will go to a convention and they’ll meet with a lot of different vendors, and they’ll come home with five new things they want to implement tomorrow.” There’s something of a FOMO effect with tech as it’s viewed as innately progressive, but tech is only progressive on a case by case basis. It will only help you so long as it solves a problem for you. You have to spend the time to identify what problems exist in your business before you start searching for solutions, lest you find yourself putting the cart before the horse. “You really have to dive into your issues list,” continues Segretto. “Realize what your biggest need is first and choose technology that matches that need. Talk to your fellow PMs, join these mastermind groups, attend Triple Win LIVE events, network on Facebook, and talk to other people to find out what’s working for them.’ Segretto really stresses the importance of doing your homework, because there is a tremendous amount of money and effort that goes into a technology implementation, and the worst thing you can do is go through all of that for little to no benefit. The biggest mistake PMs make when trying to build a useful tech stack is just collecting as many programs as possible and trying to jump directly into a fully functional stack instead of identifying solutions and rolling them out strategically. “We really need to be strategic about how we onboard because how many of you want to onboard new technology today and then decide in a year that it’s the wrong one and change? None of you think that’s a good idea. It costs a lot of money. It takes a lot of effort,” says Segretto Segretto’s issue list template is something she works through with her clients. If you're interested in a professional consulting session to help create an issue/action plan for your PMC, you can schedule a call with K Segretto Consulting here. How do you compile an issue list? “I talk to every single employee and find out what their biggest challenges are,” says Rhianna Campbell, a property management consultant and former CEO with over 15 years of experience in the industry. “I love to hear directly from the people who are working face to face with residents and clients and find out what some of their challenges are in the way that they do things on a day to day basis. And then from there, you can really pull out some of the commonalities that everyone seems to be having.” Campbell goes on to clarify that your issues list that you compile from these conversations gives you a clear cut list of questions you can ask software vendors when investigating solutions. “You can say ‘these are a list of my challenges. Can you walk me through how this software can help me solve these problems?’ And that’s a more direct approach versus being sold all the features that you may not even use.” When vetting specific technologies, Segretto suggests asking for a sandbox instead of just a demo. “Ask for a sandbox to where you can actually play with it, manipulate it, break it, find where those weaknesses are in that software before you commit to it.” Segretto also recommends seeking referrals to users who have used the software successfully and who have tried the software and either passed on it or gotten rid of it. Being able to understand those different perspectives will help you see a more complete picture of who the software is for, where it excels, and where it may come up short. Implementation Once you’ve identified which proptech vendors you want to work with, it’s time to enter the implementation phase. This is where most people’s fears reside. “I’ve seen hundreds of businesses launch technology across the nation and helped them implement. Ones that tend to fail are the ones that are not prepared,” says Segretto. “What I mean by not prepared is they don’t have their team’s buy-in. They don’t even know what they really want the technology for. They just feel like they want it and they want it right now. They’re not willing to dedicate a resource or a person that’s going to own it. Without that ownership, tech stacks fail.” The biggest parts of a successful implementation are team prep, ownership, and monitoring. Team Prep Getting buy-in from your team is critical for any implementation. The people that are using the tech need to believe in and understand the tech. Nothing guarantees failure more than just throwing a new service at someone. Explaining and training are the two big words here (it’s neat that they rhyme). Make sure your team knows why you’re doing this and how to use it. “You’re prepping your team, you’re talking about it, and you’re giving those ‘why statements’ so that everyone is on board before you launch. All of that needs to happen in your pre-implementation,” says Segretto Define Ownership Segretto believes it’s critical to identify who in the company will own the technology rollout. A tech rollout is just like any other undertaking in your business in the sense that it needs a central point of leadership to understand and manage all the processes of it. “You then have to pick a designated person who's going to be the owner of that technology. Then as you implement, they're going to be the expert, and they need to have time during that pre phase to become an expert, to get the training, to know the tool so that when questions happen in your office, your team members have a point of contact in office who's going to be able to either give them the answer or find them the answer.” Monitoring “It’s never set it and forget it,” says Segetto regarding the upkeep of a tech stack. “That would be cool, but that’s not reality. You need to be constantly monitoring its performance. I think that sometimes we tend to expect things will just keep working and we don’t really do the work we need to to monitor performance.” Campbell believes it’s helpful to monitor performance of tech that same way you would monitor performance of an employee. You need to conduct regular reviews of your tech’s performance much the same way you would of your team’s performance. Things change, companies grow, priorities shift. The same tech implemented the same way won’t necessarily be efficient forever. Tech audits are necessary to identify places where you can further optimize on a regular basis. After all, constant improvement should exist in any good business. “Being able to evaluate whether or not that technology is working is really important. I've seen a number of times where people buy into the tech and then don't use it. So really having points in time where you check to see if you're really utilizing that software that you paid a lot of money for, and not just spending money on it every month. And that can happen too. So just making sure that you are creating some opportunities to evaluate the performance of your technology to make sure that it's keeping up with the demands and the changes of your organization is so key.” Continuous Improvement The point of continuous monitoring is to promote continuous improvement. Tech evolves. It updates. Platforms overtake other platforms as the landscape changes. It pays to be aware, otherwise you can end up with less of a tech stack and more a tech pile, featuring redundant technologies, unused features, and wasted money and time. Getting the most out of your tech helps prevent these issues and keep your business efficient. Segretto, in her 20 years of property management, has seen companies go searching for tech solutions to problems they’ve already solved but were just unaware of. “Once you've identified how you're using it, then we start going on a treasure hunt to start looking for the hidden gems of what are the potentially overlooked features within my current tech stack.” Squeezing every drop out of your tech is a worthwhile endeavor. For every functionality you need that you can ID in your current stack, that’s one less rollout, one less training, one less process development you need to engage in. It’s a heck of a lot easier and cheaper than getting a whole new system. “How many of you would have time to stop and rebuild all of your processes every six months? Nobody? Yeah, it's impossible. And so instead of adding a new tool into that organization, what we did was we went back in and we maximized the utilization of that existing tool, which is a lot less expensive and a lot less cumbersome on the team than shifting entirely.” Tech is a good thing. Don’t let the length of this article about implementation scare you into thinking it’s more complex than it is. As long as you’re willing to manage your tech stack and make sure your team knows how to use it, you’re going to be in good shape. You wouldn’t bring on a new employee for no reason, so don’t add tech for no reason. Tech is a tool and its power is determined by the person who wields it. If you’re purposeful and thorough, you can vastly improve the efficiency of your business with the ever-growing field of PropTech companies in existence.

Calendar icon May 9, 2024

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