A guide to your California property management agreement

What is a property management agreement in California?

A California property management agreement is a contract between a board of directors or property owner and a management company that outlines how the property will be cared for, what services will be provided, and how responsibilities will be shared. It typically covers day-to-day support, compensation, reporting, and expectations so both sides have clarity from the start.

This article is not intended to and does not constitute legal advice or create an attorney-client relationship. Board members should consult their association’s attorney to discuss the legal implications of their decisions or actions prior to proceeding.
 

What does a property management agreement typically include?

No two properties are exactly alike, but many California property management agreements follow a similar structure. Here are some of the most common elements:

• Scope of services: This section outlines the responsibilities of the property manager, such as maintenance, vendor coordination, board meeting preparation, responding to resident issues, and keeping financial records in order.
   
• Compensation: Agreements typically explain how the manager will be paid. Some charge a flat monthly fee, while others use a percentage of collected rent or assessments, and some use a combination. There may also be fees tied to specific tasks like managing a large capital improvement project.
   
• Duration and renewals: Covers how long the agreement lasts, whether it’s for a set period or month-to-month, and how it can be renewed.
   
• Termination provisions: Most California property management agreements include language explaining how either side can end the contract. This might involve notice periods or specific reasons like non-performance or a change in leadership.
   
• Finances: A thoughtful agreement outlines how financial management responsibilities are handled, like collecting assessments, issuing payments, and delivering monthly reports. In California, it should also clarify how resident funds are kept in separate trust accounts, as required by law.
   
• Insurance requirements: Agreements may outline the types of insurance the association, owner, and manager must carry, like general liability or errors and omissions coverage.
   
• Legal compliance: Because property management in California is closely regulated, the agreement may reference the need to follow fair housing laws, habitability standards, and any relevant licensing requirements.

A well-written California property management agreement should make the working relationship clearer. It should give the manager enough authority to handle day-to-day operations, while keeping major decisions firmly in the board’s or owner’s hands.
 

What is the purpose of a management agreement?

A California property management agreement is more than just a formality — it’s the foundation of a clear working relationship between a board or owner and a property manager. Here’s what a well-written agreement can help accomplish:

1. Helps prevent misunderstandings: Putting key terms in writing can help you avoid confusion later, especially when it comes to financial management, shared responsibilities, or decision-making authority.
    
2. Protects both sides: If questions or concerns arise, the agreement can serve as a neutral reference point. It can also include provisions that limit liability or clarify how certain situations should be handled.
    
3. Supports legal compliance: In a highly regulated state like California, the agreement helps both parties stay aligned with laws around licensing, trust funds, and fair housing practices.
    
4. Creates accountability: With built-in reporting expectations and service benchmarks, the agreement can help support consistent performance over time.

Without a clear California property management agreement, even well-intentioned partnerships can run into avoidable issues.
 

California property management agreement laws

California laws shape how property management agreements are written and carried out. From licensing to recordkeeping to trust account use, understanding these requirements can help boards and property owners ask the right questions and build stronger partnerships.
 

Licensing

In California, anyone who collects rent, markets units, or negotiates leases for pay generally needs a real estate broker’s license from the California Department of Real Estate (DRE), or must be a licensed salesperson working under a broker’s supervision. However, managers who work exclusively with common interest developments like HOAs or condominium associations typically aren’t subject to those requirements, as long as they’re not handling leasing or rental transactions. Day-to-day support like budgeting, enforcing rules, or coordinating maintenance may not require DRE licensure.
 

Trust accounts

When a property manager collects assessments, rent, or deposits on behalf of an owner, those funds must be kept in a separate trust account, not mixed with general business funds. Your California property management agreement should clearly explain how money will be handled, when payments will be made, and what kind of records will be provided.
 

Recordkeeping and transparency

A strong property management agreement should also define how records will be stored, how often reports will be provided to the board, and what the manager’s responsibilities are when it comes to transparency and compliance.

For community associations, the Davis-Stirling Act outlines what records must be kept and shared with members, such as financial reports, meeting minutes, and vendor contracts.

For property managers operating under a real estate license, California Business and Professions Code §10148 requires that certain transaction records be retained for at least three years. It’s helpful to confirm how those records will be organized and made available when needed.
 

Fair housing compliance

Property managers must comply with federal and California fair housing laws, including the federal Fair Housing Act, the Fair Employment and Housing Act and the Unruh Civil Rights Act. The management agreement may include language confirming that the manager will follow these laws in areas like resident communications, tenant screening, rule enforcement, and evictions.
 

How to choose a property manager in California

Hiring the right property management company before entering into an agreement is essential.

Consider:

• Licensing and experience: Confirm that the company is properly licensed and has experience managing properties of your type and size.
   
• Scope of services: Ask to review a sample agreement to understand what services are offered and how disputes are handled.
   
• Reputation: Research reviews, request references, and ask how the company measures service quality.

At FirstService Residential, we help California boards and property owners navigate management agreements with clarity and confidence. Our local expertise, trusted processes, and responsive support make a meaningful difference. Contact us today to learn how we can support your property or community.