A guide to your commercial property management agreement

What is a commercial property management agreement's purpose?

A commercial property management agreement is a legally binding contract between a property owner (or ownership group) and a property management company. It defines how a commercial space such as an office building, retail center, industrial facility, or mixed-use property will be managed. It also outlines how decisions are made, who is accountable for what, and how costs are allocated.

In DC's competitive and highly regulated commercial real estate market, clarity is key. This agreement is not just about assigning duties — it’s about creating a structured framework for how a property may be operated day-to-day and over time.

Here are a few ways this agreement can support that framework:

• Defines roles and responsibilities: It removes ambiguity by detailing what the manager will and won’t be responsible for, from budgeting and tenant relations to repair coordination and vendor management.
   
• Outlines legal and financial protections: It includes provisions that aim to protect both parties in the event of a dispute, helping to minimize legal risk and misunderstandings.
   
• Clarifies expectations: Timelines for deliverables, reporting structures, and service standards are typically spelled out, creating accountability on both sides.
   
• Supports efficient operations: With clearly defined parameters, property managers can act quickly and confidently within their authority, saving time and limiting delays.

What is included in a commercial property management agreement?

The contents of a commercial property management agreement are typically tailored to the specifics of the property and the expectations of the owner, but most include the following sections:
 

Property management scope

This section outlines exactly what the manager is responsible for. Common inclusions are rent collection, handling tenant inquiries, overseeing repairs and maintenance, managing vendor contracts, and tracking building performance. It also usually touches on the manager’s role in budgeting, lease compliance, and financial reporting.
 

Financial responsibilities

Fees and cost-sharing arrangements are a core part of any management agreement. This portion clarifies how the management company is compensated, whether through a flat monthly fee, a percentage of collected rents, or another structure. It may also include provisions about reimbursable expenses, vendor payments, and how operational costs like insurance, utilities, and taxes are managed.
 

Authority and decision-making

This section defines the limits of the manager’s authority. For example, some owners may allow their management company to approve vendor contracts up to a certain amount without board review. Others may require explicit approval for every capital expenditure. The agreement should reflect these preferences and decision-making thresholds.
 

Legal protections and indemnity

To protect both parties, some commercial property management agreements contain mutual indemnification clauses. This may include language where either party agrees to assume responsibility for certain legal fees or liabilities, depending on the situation — especially if the manager is acting on the owner's behalf.
 

Term and termination

Agreements generally run for a defined period, often with automatic renewal clauses. Termination language outlines how either party can exit the agreement, under what conditions, and how much notice is required.
 

Insurance and liability

This portion describes what types of insurance must be maintained by the owner and the manager. It often includes general liability, property, errors and omissions, and workers’ compensation coverage. It should also address procedures for filing claims and managing loss events.
 

How property type influences agreement terms

A downtown office tower in DC will have very different operational needs than a suburban strip mall or a flex industrial facility. These differences can affect staffing, compliance, tenant mix, hours of operation, and capital planning, all of which shape how the management agreement is drafted.

For instance, retail centers may require more frequent cleaning, parking lot maintenance, or coordination with anchor tenants for promotional events. Industrial buildings might focus more on infrastructure maintenance and loading dock schedules. Office buildings often include concierge services, visitor management protocols, and detailed reporting requirements for energy use or occupancy.

A well-written agreement can account for these nuances so that expectations align with the actual demands of the property.
 

Tips for a strong commercial property management agreement

A thoughtfully crafted management agreement can prevent confusion and create a smoother working relationship between owner and manager. While no two properties are alike, there are a few universal practices that can help strengthen your agreement and improve long-term outcomes:

• Start with a sample, but customize it: Templates can be a helpful starting point, but commercial properties are complex, and so are the expectations that come with them. Tailor each clause to reflect the realities of your asset, tenant mix, and ownership goals.
   
• Work with an experienced attorney: A real estate attorney who understands DC’s regulatory environment should help draft or review the agreement to determine that it protects both parties and complies with local laws. Legal review can also help clarify liability, indemnity, and termination clauses that are often overlooked.
   
• Be specific about maintenance and repairs: One of the most common areas of misunderstanding is how maintenance is handled. Spell out which party is responsible for routine tasks, what qualifies as a capital improvement, and how emergency repairs are authorized and paid for.
   
• Account for DC-specific compliance requirements: Some commercial buildings in DC are required to comply with energy benchmarking rules through the Department of Energy & Environment (DOEE), which requires regular energy usage reporting. A manager’s duties related to this type of compliance (along with fire inspections, accessibility standards, and sustainability reporting) may need to be included in the agreement. Some mixed-use buildings with residential units may also need to comply with DC’s Rental Housing Act. In those cases, the manager’s role in compliance reporting, tenant notification, and rent adjustment protocols should be clearly addressed where applicable.
   
• Review the agreement regularly: As the building evolves, so should the agreement. Plan periodic reviews to confirm that roles, responsibilities, and expectations are still aligned with current operations and ownership strategy.

Common questions from commercial property owners

As a property management company, we hear a few key questions from owners who are reviewing or negotiating their first commercial management agreement:
 

Can I change managers mid-agreement if things aren’t working out?

Possibly, depending on the agreement’s terms. Most agreements require written notice, often 30 to 90 days in advance. Some also include termination fees. Knowing the specifics in advance can help avoid friction later.
 

Who pays for large capital repairs?

Major repairs or upgrades are typically the owner’s responsibility unless otherwise agreed. The manager may coordinate bids and supervise the work, but the owner usually funds it.
 

How are tenants involved?

While the manager acts as the day-to-day point of contact, some owners like to be looped into tenant negotiations or notified about issues like lease violations. The agreement should define how and when this communication happens.
 

Do I need to use vendors chosen by the manager?

Not in all cases. Many agreements allow for owner approval of vendors or a preferred vendor list. However, some managers offer discounts or loyalty incentives with their vetted partners, which can be cost-effective.

Whether you’re managing a mixed-use high-rise in downtown DC or repositioning a warehouse for new tenants, the foundation starts with a clear, collaborative agreement. And with the right partner, managing the details becomes a lot less complicated.

Interested in learning more about how a management agreement could benefit your DC property? Contact a member of our team today.