How to create a property management agreement contract

Date Published : Mar-20-2020

Written By : Phillip Livingston

Is your HOA or condo association talking about bringing a property management company on board? That’s exciting news. Property management companies can be extremely valuable. They help property owners and board members who are overwhelmed by the amount of work it takes to run a residential community.

Property management companies look after day-to-day tasks. But they also help improve communication and transparency within a condo or HOA. Put simply, property management companies help to make things better for the people and the property.

Reasons to hire a property management company

A qualified property management company will ensure that residents feel comfortable expressing their concerns, sharing ideas and talking about issues. Good communication leads to a more connected, happier community.

It may be easier for property managers to enforce the association’s bylaws and rules because they don’t have any previous relationships with the residents, and they will be less likely to give preferential treatment to select members.

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Furthermore, an experienced property manager will bring a wealth of litigation experience to the community. If there is ever trouble interpreting rules or bylaws, or legal issues that arise within the community, the property management company can work with the board to interpret and clarify the governing documents, or take appropriate actions to resolve issues in a suitable manner.

Property management companies may bring trusted vendors with them, and share their connections with you. After working with a qualified vendor for years, property managers may have the power to negotiate lower rates with the vendor. Reaching these coveted vendors can be challenging, and associations don’t often have the time or connections required to secure them.

These are all legitimate reasons to build a relationship with a property management company. But before you welcome a new company into your community, you will both need to sign a property management agreement contract.

A contract is a formal agreement. It is legally binding, and clearly states the obligations and expectations of each party. In this case, the contract would detail what is expected from the property management company, and what the owner’s responsibilities are.

Creating a property management agreement contract

A property management agreement contract should be as specific as possible. Vague or general contracts often lead to misunderstandings and can create conflict between associations and management companies. If you are creating your own contract, or signing one provided by the property management company, make sure it contains the following details:

Services and fees

A contract should clearly state what services the property management company will provide, and how much those services cost. Make sure you understand the fee structure. If something isn’t clear, ask questions. Are certain services provided at an additional cost? Are there services that won’t be done under any circumstances? Different management companies have different rules, however, most companies will flat out refuse to oversee extensive remodeling or refinance properties. The board will usually take care of the association’s reserve fund, budgeting and insurance, in addition to introducing new policies and amending current rules and regulations.

Ensure the manager can do everything that you consider an absolute necessity, such as finding tenants and collecting owner fees or rent. Most associations will want to hire a property management company that will:

  • Collect rent and fees
  • Document financial transactions
  • Maintain accurate and current records of repairs, purchase orders, violation payments, late fees, etc.
  • Stay on top of maintenance
  • Schedule and supervise repairs
  • Advertise the property
  • Rent and lease properties
  • Enforce violations
  • Oversee board meetings
  • Prepare the agenda and other meeting materials
  • Communicate with owners and residents
  • Help resolve owner disputes
  • Recover delinquent fees

Some property owners or boards will select a management company based on cost alone. We would advise against this. Property managers who charge a lower initial fee may cost more in the long run because they provide fewer standard services. Look for a company that will provide the services you need at a reasonable price.


Property management agreements will include a liability clause designed to protect the property manager from claims, charges, debts, demands and lawsuits (including reasonable attorney’s fees related to management of the described property) and any liability for injury that occurred on or about the property that is suffered by an employee, tenant, or guest.

Looking after a multi-residential property is a significant responsibility. As such, the manager does need protection. However, this clause is not intended to give the property manager permission to be negligent. Clients can include a “reasonable care” clause in the contract. The clause obliges the manager to make careful decisions. For example, if the manager hires a trustworthy contractor who causes damage to the property, the manager is not responsible for that damage. However, if the manager randomly selects a contractor who has a reputation for doing bad work, then they may be held accountable for that decision and costs if there is an accident.

Terms of agreement

The contract should clearly state when the agreement comes into effect, and when it ends. Many property management agreement contracts renew automatically unless stated otherwise. You will have to determine if autorenewal makes sense for your property.

Obligations upon termination

The contract also needs to have a termination policy that states why and when the company has the right to terminate the contract, and when the owner can terminate the contract. Is payment required if a contract is terminated before the renewal date? How much notice is required?

There should also be a list of duties that must take place upon termination, and the timeframe in which these duties must be completed. For example, all copies of tenants’ leases must be turned over to the owner within 14 days of contract termination.

Make sure to add these details so that both parties know exactly what to do if the partnership ends on less than ideal terms.

Ask a lawyer for help before signing anything

Both the owner and property management company must sign and date the contract for it to be considered legal and valid. But before that happens, each party should ask a lawyer to review the contract and look for any gaps or clauses that may put one party at a disadvantage.

Finding a property management company that works for you

There are a lot of good property management companies to choose from, so keep the following in mind when you are trying to select a company that will work for you. The company should be transparent and maintain an open-door policy with the board and homeowners as well. It should create an environment where homeowners can ask questions and voice their concerns without feeling fearful.

Make sure the company has the right tools, including property management tools. Companies that have these tools are generally more productive and efficient.

They should also know what to do if there is ever an emergency. They should be ready to take control of difficult or unexpected events, and have the ability to execute an emergency plan if necessary.


It can be quite a challenge to operate a condo or HOA. It’s a balancing act between keeping homeowners happy while securing the long-term future of the community. This big task is more than most board members can handle on their own. Property management companies can help everyone in the community, while improving the property’s value.

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