Monday August 04, 2025
What is a property management agreement?
A North Carolina property management agreement is a legally binding contract between a property management company and the association it serves. It outlines the scope of services, fees, and responsibilities for managing the property. For associations like HOAs and condos, the property management agreement is a critical tool because it defines exactly what the management company will handle on behalf of the board, from financial reporting to vendor coordination. The property management agreement protects both parties by clearly stating terms for compensation, dispute resolution, and termination. Without a written agreement, boards may face confusion about who is responsible for key tasks such as rule enforcement or maintenance planning.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.
Types of contracts
Property management agreements can take various forms, depending on the scope of services, the property type, and the duration of the contract. Here are some common types:Full-service management agreement
In a full-service management agreement, the property manager assumes comprehensive responsibility for the property. This may include everything from handling maintenance to supporting compliance with laws like the NC Planned Community Act. Boards that prefer a hands-off approach often opt for this type of agreement.Maintenance and repair agreement
This agreement specifically covers property maintenance and repairs. Property managers are responsible for maintaining the property, and they coordinate and oversee any necessary maintenance work.Consulting agreement
In a consulting agreement, property managers provide advice and guidance to the board, but they don't take an active role in management. This type of agreement is suitable for those who want to manage their properties independently but seek professional guidance.Commercial agreement
Commercial properties, such as office buildings or retail spaces, often require specialized management. A commercial property management agreement outlines the unique responsibilities and expectations in managing these types of properties.Key components of a property management agreement
A well-written property management agreement should include specific details to protect both the board and the management company. Important components include:- Parties involved: Clearly identifies the association and the property management company entering into the agreement.
- Property description: Specifies the exact property or properties covered by the agreement.
- Scope of services: Outlines the management company’s responsibilities, such as budgeting, financial management, maintenance oversight, staff supervision, compliance tracking, and owner communication.
- Fees and payment structure: Explains how management fees are calculated, whether as a flat rate, percentage of assessments, or separate charges for specific services.
- Term of the agreement: States the length of the contract, renewal terms, and any automatic extensions.
- Termination provisions: Details how either party can end the agreement, including required notice periods and acceptable reasons for early termination.
- Insurance and liability: Lists any required insurance coverage and includes indemnity clauses to protect both parties.
- Dispute resolution: Explains how disagreements will be handled, such as mediation, arbitration, or legal action.
- Reporting requirements: Sets expectations for financial statements, variance reports, and reserve fund updates, including how often these reports will be provided to the board.
Agreements for different property types
A property management agreement can look slightly different depending on the property type. For HOAs, the agreement often focuses on common area maintenance, landscaping contracts, covenant enforcement, and collecting assessments. Condominiums typically require more extensive building system oversight, capital planning support, and vendor supervision for shared mechanical systems like elevators or boilers.Lifestyle communities and high-rises may have additional requirements, such as staff training, concierge management, or amenity programming. Regardless of property type, the property management agreement should be tailored to reflect the unique operational and financial needs of the community.
Frequently asked questions about property management agreements
How do you process a property management agreement?
To process a property management agreement, the board typically reviews the proposed contract, compares it to other bids, and negotiates terms if needed. Once the board approves the agreement in a properly noticed meeting, both parties sign the contract, and the management company begins transitioning operations. Many companies provide a detailed onboarding plan to transfer records, meet with vendors, and set up financial reporting systems.What is the standard term for a property management agreement?
Most property management agreements run for one to three years, but the length can vary depending on the size and complexity of the property. Some agreements include automatic renewal clauses, so boards should review notice deadlines carefully before the term expires.What is the most important aspect of property management?
The most important aspect of property management is consistent, professional service that aligns with the goals of the board. For associations, this means accurate financial reporting, timely maintenance, and reliable support for the board’s decisions.What happens when a property manager signs an agreement with a board?
Once a property management agreement is signed, the manager becomes an authorized representative of the association. This means they are responsible for carrying out the duties outlined in the agreement, such as handling finances, coordinating vendors, and assisting with compliance, while the board retains ultimate decision-making authority.Pro tip: check out our resource library for more information, tips, and resources on effective community management here!
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Property management agreements are vital documents that establish the framework for a successful property management partnership. They protect the interests of both boards and property managers by defining roles, responsibilities, and expectations. When creating or entering into such an agreement, thoroughness, clarity, and open communication are essential to support a mutually beneficial relationship.Before finalizing an agreement, it's advisable to consult with professionals who specialize in real estate to verify that your contract complies with local laws and regulations. By doing so, you can embark on a property management partnership with confidence, knowing that both parties are on the same page and well-prepared for the responsibilities ahead.