Comprehensive Property Management Agreements

Secure your investment with well-defined property management agreements that ensure clarity and protect your interests

Key Considerations in Property Management Agreements for Landlords

Property management is a licensed profession in most states. In Washington, only licensed Real Estate Brokers and Managing Brokers can manage rentals for others. While owners can manage their own properties, this article focuses on third-party management by Brokers and key terms those owners should know to look for in their property management agreements.

Property Management Agreements Defined

A property management agreement is a contract between a landlord and a property management company that outlines the responsibilities, terms, and conditions for managing the landlord’s rental. A good property management agreement helps avoid misunderstandings while aligning the expectations and objectives of both parties.

Fee Structures

Fee arrangements can vary significantly by provider. Landlords should consider both the cost and the value of services offered under each structure:

Approval Thresholds for Large Expenses

Set a dollar amount above which the manager must obtain owner approval before incurring repair or improvement expenses.

Bid Process Requirements for Large Expenses

Consider requiring multiple bids for larger projects to ensure transparency and competitive pricing.

Responsibility for Overseeing Work

Clarify whether the manager supervises repairs, handles warranty claims, or simply coordinates with vendors.

Capital Reserve Requirements

Set up a reserve fund for major repairs or replacements, accessible to the property manager with the owner's approval.

Surcharges Based on Repair Value

Some managers charge a percentage of the repair cost as a fee. If so, landlords should evaluate whether the manager’s vendor discounts justify the surcharge.

Ultimately, landlords should evaluate total cost and scope of services, not just the headline fee percentage.

Leasing Incentives

Property managers often use leasing incentives to attract quality tenants and lease units quickly. Different incentives can be used for residents and leasing agents.

Reduced Rent for the First Month

Drive faster occupancy, especially in competitive markets.

Waived Application Fees

Expand applicant pools with minimal cost.

Utilities or Amenities Included

Enhance perceived value of the rental.

While these promotions can help fill units, they may lead to tenant expectations of continued discounts. Consider long-term effects on lease renewal and retention rates.

Tour Bonuses

Encourage more showings.

Signing Bonuses

Reward successful lease executions or renewals.

Performance-Based Rewards

Some sophisticated structures may look at “loss to lease” and “gain to lease” numbers, or other profit measures, and pay a commission based on those.

Incentives should balance speed with quality to avoid hasty placements that increase turnover or tenant issues.

While filling vacancies is critical, retaining reliable tenants often delivers better returns. Lease renewals reduce turnover costs and vacancy risk. For instance, accepting a modest rent increase from a current tenant may yield better results than holding out for a higher rent with a new tenant after turnover expenses.

Staggering lease expirations throughout the year also prevents clustering vacancies, which can strain resources and negotiating power.

Scope of Services

The scope of services provided by property managers can vary widely. Typical services include:

Tenant Screening

Conducting background checks, credit checks, and reference checks to ensure quality tenants.

Rent Collection

Managing the collection of rent payments and handling any issues related to late or missed payments.

Maintenance and Repairs

Managing routine maintenance and emergency repairs.

Complaint Processing

Handling tenant complaints and resolving issues promptly.

Managing Packages and Deliveries

Manage and organize tenant package deliveries, ensuring secure storage and timely notifications of arrivals.

Parking Enforcement

Monitor parking regulations, maintain records, issue fines, and coordinate towing for unauthorized vehicles.

Emergency Response

Develop and implement emergency response plans, offer 24/7 support, and coordinate with local emergency services.

Reasonable Accommodation Request Processing

Managing requests for reasonable accommodation in compliance with fair housing laws.

Leasing and Renewals

Handling lease agreements, renewals, and tenant turnovers.

Contract Management

Managing contracts with vendors, service providers, and other third parties.

Financial Reporting

Provide regular financial reports outlining income, expenses, and overall property performance

Annual Unit Inspections

Conduct annual inspections to ensure property maintenance and identify potential issues early

Notices and Evictions

Prepare and serve notices for lease violations and manage the eviction process in compliance with local laws.

Record Keeping

Maintain accurate records of all transactions, communications, and property management activities.

Limitations on Damages

Property management agreements often limit damages, restricting the compensation a property owner can claim if the manager fails in their duties. Common clauses include:

Liability Caps

Limits the amount the property manager is liable for, often to the amount of fees paid.

Exclusion of Certain Damages

Excludes liability for specific types of damage, such as consequential damage and lost profits.

Indemnification

Indemnification means protecting someone from financial loss or harm. Clauses that require the property owner to indemnify the property manager for certain actions or claims.

Court Costs

Provisions that outline how court costs and legal fees will be handled in the event of a dispute.

Liability for Legal Compliance

Property managers must comply with various legal requirements, including:

Fair Housing Laws

Ensuring non-discriminatory practices in tenant selection and management.

Landlord-Tenant Laws

Adhering to state and local regulations regarding leases, deposits, repairs, and evictions.

Health and Safety Codes

Maintaining properties to meet health and safety standards.

Employment Laws

Hiring, training, overseeing, and compensating employees and contractors necessary to keep rental operations running.

Agreement and Notice Terms

The terms of the property management agreement, such as duration and termination notice requirements, are critical. Key aspects include:

Agreement Terms

The length of the contract and renewal options.

Notice Periods

The required notice period for terminating the agreement

Early Termination & Related Fees

Conditions for early termination and any associated fees, including penalties and when they apply.

Assignability

Whether and on what terms a landlord may assign the agreement if property ownership changes.

Disclaimer

This article is provided for informational, educational, and marketing purposes only and does not constitute legal advice. The content is current as of its publication or last review and may not reflect the latest legal developments. Do not rely solely on this information—consult a qualified attorney regarding your specific situation.

Manage Your Property Management Agreement

Well-drafted property management agreements can reduce risk, protect income, and simplify operations. At Cascade Counsel, we help property owners understand their contracts, negotiate better terms, and resolve disputes. Whether you’re reviewing an existing agreement or preparing to hire a manager, we’re here to help.

Contact Cascade Counsel today to ensure your agreement is working for you—not against you.

Property Management Agreements ​