Who are the parties to a property management agreement? A guide for your building or association

What is a property management agreement?

A property management agreement is a legally binding contract between a property owner or association and a property management company. It outlines how the property will be managed, including operations, financial responsibilities, and property maintenance, and defines the working relationship between both parties.
 

Who are the parties to a property management agreement?

There are two primary parties in a property management agreement: The first is the property owner or association, typically represented by the board, and the second is the property management company. While residents interact with the manager, they are not parties to the agreement.
 

Are individual board members listed in a property management agreement?

In most cases, individual board members are not listed as parties to the property management agreement. Instead, the association itself (such as the HOA or condo association) is named as the legal entity entering into the contract. Board members may sign on behalf of the association, but they are not personally bound as parties.
 

Can the property owner or their company be listed in the agreement?

Yes, the property owner can be listed either as an individual or through a legal entity, such as an LLC or corporation. In many cases, especially with investment or commercial properties, the owner’s company is the named party rather than the individual owner, making it one of the official parties to the property management agreement.
 

Types of property management 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 supporting the property or association. This may include resident communication, vendor coordination, maintenance oversight, board meeting support, finding and screening tenants, rent collection, financial management, and supporting compliance with Pennsylvania HOA laws. Boards and owners who prefer a hands-off approach often opt for this type of agreement.
 

Leasing agreement 

A leasing agreement is more limited in scope, primarily focusing on tenant acquisition and lease administration. Property owners retain more control over day-to-day property management while delegating tenant-related tasks to the property manager.
 

Maintenance and repair agreement 

This agreement specifically covers property maintenance and repairs. Property managers are responsible for keeping the property in good condition, and they coordinate and oversee any necessary maintenance work.
 

Consulting agreement 

In a consulting agreement, property managers provide advice and guidance to boards and owners, 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.
 

Portfolio agreement

A portfolio management agreement typically supports multiple communities through a shared manager. The right fit often depends on the size, budget, and needs of the client.
 

Elements of an effective agreement

While the specific terms and clauses in agreements can vary, there are several key components that should be included to provide clarity and protect the interests of both parties:

• Identifying the parties of the property management agreement: Start by clearly identifying the parties involved, such as the property owner(s), the association, and the property manager or management company. Include their legal names and addresses.
   
• Property description: Provide a detailed description of the property or association being managed. Include the address, type (e.g., single-family home, apartment complex, condo, HOA), and any unique features or amenities.
   
• Term of agreement: Specify the duration of the agreement. Most property management agreements are for one year, but shorter or longer terms are possible. Outline any renewal options or termination clauses.
   
• Scope of services: Clearly define the property manager's responsibilities and services. For associations, this section may cover board meeting support, resident communication, assessment collection, vendor coordination, resale packages, common area maintenance, project oversight, rule enforcement, and emergency preparedness. For individual owners or rental properties, it may include tenant screening, rent collection, maintenance, and other agreed-upon services.
   
• Fees and compensation: Detail how the property manager will be compensated. Common fee structures include a percentage of the monthly assessments or rent, a flat fee, or a combination of both. Include information on when and how fees will be paid.
   
• Termination procedures: Outline the procedures and conditions under which either party can terminate the agreement. This may include notice periods, reasons for termination, and any penalties for early termination.
   
• Insurance and liability: Specify insurance requirements for both parties. Property managers typically carry liability insurance, but owners and associations may also need to maintain property, general liability, directors and officers, fidelity, or other coverage based on the property type and governing requirements. Clarify how liability for damages or losses will be handled and which responsibilities belong to the management company versus the owner or association.
   
• Maintenance and repairs: Detail how maintenance and repairs will be managed, including the process for reporting issues, obtaining quotes, and authorizing repairs. Set a spending limit that requires board/owner approval for larger repairs.
   
• HOA fee collection and deposits: Explain how fees will be collected from residents and when they will be remitted to the property owner. Address security deposits and how disputes or deductions will be handled.
   
• Resident screening: Describe the tenant screening process and criteria. Specify the property manager's role in drafting and executing leases, including fee increases and resident renewals.
   
• Accounting and reporting: Detail how financial records will be maintained and provided to the property owner. Regular financial reports should include income, expenses, and any outstanding issues.
   
• Conflict resolution: Establish a process for resolving disputes or complaints between the property owner and property manager. This may include mediation or arbitration clauses to avoid costly litigation.
   
• Additional provisions: Include any additional terms or provisions specific to your agreement. These could cover topics like property inspections, marketing strategies, or specific obligations unique to your property.
   
• Signatures: Both parties should sign and date the agreement, indicating their understanding and acceptance of the terms. Notarization may be required in some jurisdictions.

Frequently asked questions

What does a property management agreement normally include?

Normally, a property management agreement will include the terms and conditions of your business relationship with a company or manager. It formally puts into writing things like how long the contract will last, how much you should pay the company every month, what services you are entitled to, etc.
 

What is the standard term for a property management agreement?

The common standard term for a management contract is typically between one and five years, but this can vary depending on the specific needs and goals of the parties involved.
 

What is the most important aspect of property management?

Effective community communication. One of the most important aspects of property management is maintaining good relationships with residents and owners.
 

What occurs when a property manager signs an agreement with a board/owner?

A property manager becomes an authorized representative when the board/owner and manager execute a legally binding document, a legal contract that details a manager's responsibilities and the board/owner's expectations.

Pro tip: check out our resource library for more information, tips, and resources on effective community management here!
 

About FirstService Residential

FirstService Residential supports Pennsylvania communities with local expertise and dedicated service. Our teams assist with communication, maintenance coordination, financial management, documentation, and 24/7 customer care, all designed to simplify life for board members, owners, and residents alike. To learn how FirstService Residential can support your association, contact our team today.

This information is provided for general informational purposes only and is not intended to constitute, and should not be relied upon as, legal, regulatory, financial, or operational advice, or as a representation or guarantee of any specific services, capabilities, or outcomes. Property management needs, regulatory requirements, market conditions, and available services vary by jurisdiction, property type, and community. FirstService Residential provides services through locally based affiliates and associates, and services and results may vary by community, region, contractual terms, and applicable law.