Property Management Contract

A property management contract needs to be adaptable
in order to cater for the specific needs of the owner/landlord and property.

And that's exactly what we've set out to do here.

You can specify which management services are standard and included in the fee and then add in any extra services you need and stipulate how they will be paid for.

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We've made it even easier for you to select the best form for management of your rental properties from our number of free legal documents:

Commission Agreement - You may only want to contract with an agent to find you a suitable tenant (and perhaps assist with the screening and credit reports), after which you will do your own property management, or contract that function to a different agent or manager. Use our free Once-off Commission Agreement as template.

We also take a look at the referral fees or finder fees charged by rental brokers and whether it's payable by Landlord or Tenant.

Property Management Contract - This is a more comprehensive document and details the specific duties of the Manager and various fees payable by Owner for an extended period of time. Scroll further down on this page to get to your free property management agreement.

Power of Attorney - A practical idea is to use a separate document to empower your Agent or Manager to act on your behalf, without making this an inseparable part of your Management Contract.

Our Power of Attorney for Real Estate can be revoked at any time should you wish to do so, without having to terminate the property management contract at the same time. And here too you can edit it to suit.

You can also issue a separate Proxy to attend specific meetings and to vote on your behalf.

Management Guidelines - This overview of the various property management services typically on offer can help you decide which duties you could do yourself or would rather pay for. Incidentally, if you're thinking of becoming a landlord it will also provide insight into the various functions involved in rental properties.

Copyright Notice

Property Management Agreement

This agreement is made and entered into between the parties hereby identified and thereafter referred to as:

The Owner:

The Manager:

For property management services at:

The Property:

Monthly Rental Price:

The Owner hereby appoints the Manager and for value received the Manager agrees to perform the duties as set out herein.

Schedule of Property Management Fees

Procurement and Placement: ______% (____________ Percent) of the total Rental Price calculated over the duration of the Lease period.
Lease Extension Fee: _______% (__________Percent) of the total Rental Price calculated over the duration of the extension including any escalation in Rental Price.
Monthly Management Fee: ______% (____________ Percent) of the gross Monthly Rental Price.
Monthly Service Payment Fee: An Additional ______% (____________ Percent) of the gross Monthly Rental Price. Service payments on behalf of Owner shall be made according to the Schedule of Monthly Payments attached hereto which may be amended from time to time.
Callout Fee to the Property outside normal business hours, weekends and public holidays: $______ per hour.

1. Procurement and Placement of a Suitable Tenant

Manager undertakes to:

1.1 Advertise and show the Property to pre-qualified prospective tenants and to adhere to all applicable housing and consumer laws in the screening, evaluation of creditworthiness, qualification and placement of a Tenant and in the drafting and execution of the Lease Agreement. Any costs thus incurred including co-opting a third party to procure a Tenant shall be paid for by the Manager from fees earned upon successful placement of a Tenant.

1.2 Obtain from Tenant any consent required to store, transmit or use Tenant's personal or confidential information.

1.3 Prepare, negotiate and execute a legally compliant lease agreement with the Tenant for a lease period not exceeding ____________months and not less than ________months and to forward a copy of the signed lease to the Owner within 5 (five) working days of execution. Any variation on the rental price or rental period beyond that specified herein and any subsequent renewal or extension shall be subject to written approval by Owner prior to execution of a lease or extension agreement.

1.4 Manager shall have sole discretion in selection of Tenants.
1.4 Owner reserves right of final approval of Tenants and shall have access to applicants' credit reports, personal and employment information, salary verification and bank statements having been granted access thereto in writing by the rental applicant.

1.5 Manager shall have sole mandate to market the property and procure a suitable tenant for a period of 60 (sixty) days from commencement date of this agreement, failing which this duty may be offered by Owner to any other third party and the Manager shall have no claim to any fees or reimbursement of costs incurred. Owner furthermore reserves the right to source a suitable Tenant through his own efforts in which event no fees for procurement and placement shall be payable to Manager.

2. Property and Tenant Management

Manager assumes no responsibility for any duties or services unless specified hereunder or agreed to in writing by both parties at a future date.

Manager shall:

2.1 Conduct an inspection of the Property with Tenant prior to occupation and issue copies of checklist to Tenant and Owner.

2.2 Maintain an interest bearing trust account separate to Manager's personal account for holding all deposits or monies paid by Tenant which may be subject to a refund during or at the end of the tenancy. Interest earned shall accrue to the Tenant's benefit and any refund to the Tenant shall be subject to a written release by Owner.

2.3 Issue receipts to Tenant for all amounts collected and retain proof of any refunds.

2.4 Make all effort to collect amounts due from Tenant timeously and after offset of Manager's fees, authorised monthly payments to third parties and incidental expenses incurred on behalf of Owner, pay the balance into Owner's nominated bank account. Payments of balance due to Owner shall be done within 3 (three) business days of Tenant's monies cleared through Manager's bank account and no later than the 15th of each month during the tenancy.

2.5 Issue letters of demand to Tenant for late payment or non-payment and take all necessary legal actions to recover overdue or unpaid amounts. Manager may engage the services of a collection agency at Owner's cost.

2.6 Do a full inspection of the Property and moveable inventory every 3 (three) months to ensure Tenant is complying with the lease and forthwith submit a report of findings and recommendations to Owner.

2.7 Promptly attend to Tenant's queries or emergencies and effect required repairs, maintenance and painting without delay to preserve the Property in good condition.

2.8 Take reasonable care to hire the services of competent and reputable contractors. Coordinate with Tenant and thereafter supervise work and access of repair or maintenance personnel to the Property.

2.9 Recoup amounts from Tenant if any such work is necessitated due to the negligence or wilful conduct of the Tenant and thus beyond normal wear and tear.

2.10 Submit to Owner a statement of account and copies of invoices for expenses incurred on a monthly basis. Present an invoice for amounts not fully covered by rental income and therefore due by Owner, which shall become payable in full within 7 working days.

2.11 Conduct a mandatory exit inspection 7 (seven) days prior to Tenant vacating the Property and compile a report regarding required cleaning, repairs and maintenance and submit same to both Tenant and Owner. Report to identify any issues beyond normal wear and tear in order to give Tenant an opportunity to remedy.

2.12 Conduct a final inspection with Tenant in comparison with initial pre-occupation checklist. Oversee final move-out and return of all keys and remote controls by Tenant.

3. Repairs and Maintenance

3.1 Manager is authorized to effect repairs and maintenance limited to an amount of $__________. Any work exceeding this amount requires submission of quotes from 3 (three) reputable companies and approval in writing from Owner prior to proceeding with such work.

3.2 In the event of an emergency or if postponing the work may result in further damage to the Property or pose a danger to life and owner cannot be reached, then Manager may in his sole discretion authorize work in excess of the limit stated in 3.1 above.

4. Default by Tenant or Early Termination of Lease by Tenant

4.1 Should Tenant be in breach of the lease agreement which results in early termination of the lease, then Manager shall refund Owner a pro-rata amount of any Procurement and Placement fee paid by Owner.

4.2 Manager shall earn a reduced monthly management fee of _____% (_________Percent) during vacancy periods if due to Tenant absconding or Tenant's premature termination of the Lease period for whatsoever reason.

Clauses 4.1 and 4.2 above are only applicable to a Tenant procured by Manager.

5. Sale of Property

Manager shall be entitled to a sales commission of _____% (____________Percent) of the gross sales price only if the Property is sold during a Tenant's occupancy and for a further 3 (three) months after termination of the tenancy, provided the Tenant was procured by the Manager.

6. Limitation of Liability

6.1 Manager makes no guarantees as to the occupancy level of the Property and shall not be held liable for any unpaid amounts by Tenant unless by gross negligence for failure to recover monies due by Tenant.

6.2 Manager and all personnel contracted by Manager shall not be held liable under this agreement for damage to the Property or the property of the Tenant or injury to any persons except in cases of wilful conduct or gross negligence by the manager or contracted personnel.

6.3 Owner shall carry and maintain adequate all risks Homeowners Insurance and name Manager as additional insured where possible. Owner shall provide Manager with a copy of the Policy.

7. Duties and Warranties of Owner

7.1 Owner shall not enter the Property without prior approval from the Manager or Tenant.

7.2 It is especially noted that Owner's indulgence to Tenant for late payment of amounts due shall not affect timely payment of Manager's fees, which shall be paid by Owner within five working days of rental due as per the Lease Agreement. The same proviso for timely payment to Manager shall apply if rentals are paid by Tenant directly to Owner, regardless if or when funds are cleared through Owner's Bank.

Owner warrants:

7.3 Being the legal and rightful owner of the Property and undertakes to supply Manager with proof of ownership and all documents and records required by Manager to perform its duties as set out herein.

7.4 That there are no other contractual obligations with regards to the Property which may conflict with any provision or preclude Manager from fulfilling any duties contained in this agreement.

7.5 That the Property is habitable and to the best of Owner's knowledge no hazardous conditions exist which may pose a significant danger to occupants.

8. Contract Period and Termination

8.1 This Property Management Agreement shall commence on _______________ 20____ and end on _______________ 20_____. During this initial contract term either party may terminate the agreement without having to provide reason by giving the other party 60 (sixty) days notice to terminate. Owner shall be liable for a penalty of _____% (_______Percent) of balance of the outstanding portion for any early termination by Owner.

8.2 After the initial contract period this agreement shall automatically continue on a month to month basis subject to a 60 (sixty) days notice from either party to terminate without penalty or having to provide a reason.

8.3 Manager shall contact Owner at least two calendar months before the end date to confirm Owner's intention to continue and inform Owner of any material changes to the services offered or fees charged.

8.4 Owner may terminate the agreement without incurring any penalty or termination fees if the Manager fails to find a suitable tenant within 60 days of commencement date and thereafter by giving Manager one calendar month written notice.

8.5 Either party may terminate without penalty if the other is in material breach of this Property Management Agreement and fails to remedy within 15 (fifteen) working days of being notified of such breach. Any subsequent breach by the same party shall constitute grounds for immediate termination without right to remedy or there being a penalty to the terminating party.

8.6 Upon termination by either party all administration records generated by Manager pertaining to the Property including leases, Tenant information and account statements shall be provided to Owner within 15 (fifteen) working days and any amounts owed by either party to the other must be paid in full within 30 days of contract termination. Either party may apply to a Court for recovery of unpaid or overdue amounts.

8.7 Termination by either party shall not affect previously approved repair or maintenance work in progress or provisions which may of necessity continue to have effect.

9. Communication and Notices

The parties accept delivery by hand or electronic mail as medium for all correspondence which shall be deemed received on the same day if delivered during recipient's business hours, failing which the following business day shall be deemed the day of receipt, regardless whether recipient was present at the address at the time.

10. Declarations and Relaxation of Terms

The parties confirm their authority to enter into this Property Management Agreement and accept and agree to the conditions contained herein and all applicable Annexures attached hereto. To be valid any amendment must be in writing and signed by both parties. If any clause or part of a clause is judged invalid by an appropriate court of law, it shall not affect any of the remaining clauses whatsoever which shall remain in full force and effect. Any relaxation by either party of any of the terms on one occasion shall not prejudice or constitute a waiver of the party's rights subsequently. Neither party may assign, cede or delegate their obligations without prior written consent of the other party.

11. Jurisdiction

The parties consent to the jurisdiction of the magistrate's (other _________________) court for the district of ______________________________.

Owner Signature: ___________________ Date: _____________________

Owner Physical Address:

Owner Email Address:

Manager Signature: _________________ Date: _____________________

Manager Physical Address:

Manager Email Address:

* * *

contract and house

In order to have a mutually beneficial partnership, both Owner and Manager need to have fair consideration in the property management contract. Negotiation is key!

Legal Notes to Your Property Management Contract

Cooling-off Period
In some jurisdictions (e.g. South Africa), an Owner may cancel a property management contract within a specified number of days WITHOUT having to give a reason for cancellation or paying penalties IF the Manager or Agent first approached the Owner to offer his/her services and that resulted in a contractual agreement.

However, if the owner contacted the Manager or Agent of his own accord, then this cooling-off cancellation provision does not apply.

Protection of Privacy for All Rental Applicants
There is an increased awareness regarding the Protection of Personal Information! The Manager needs to warrant to store or transmit such information in a secure manner and to get explicit consent from prospective tenants if any such information will be passed on to the Owner.

Pre-qualifying Prospective Tenants
A rule of thumb is earning a salary roughly equivalent to 3 times the rental. If a prospective tenant does not pass this first affordability test, then there is no point wasting time showing the property and moreover inconveniencing a resident tenant.

The same will hold true for a tenant that has a bad credit score or has been lawfully evicted from a previous property.

Incidentally, some Property Management Contracts do not allow for an Owner to place a Tenant. This is not because the Agent or Manager does not want to miss out on the placement fee, but rather because they do not want to take responsibility for a Tenant which they did not screen themselves.

What does it mean for a Landlord/Owner to warrant a Property is fit and habitable?

peeling paint on door

In most every country or state or province Landlord Tenant Law specifies what constitutes a dwelling fit to live in.

Even if there is no specific mention of this warranty, there is still an implied warranty.

So a landlord cannot add a disclaimer to the Property Management Contract that will absolve him from this responsibility - it will be one of the clauses not upheld in court.

The requirements for a habitable dwelling will range from a broken hot water heater to lead paint or asbestos deterioration, vermin infestation or structures that are unsafe ... and many more.

Follow these links to get to our full range of free Landlord Forms,
and Real Estate Contracts.

Payment Services offered by the Property Management Company

coins and houses

Who will be responsible for the monthly service payments - the Property Manager or the Owner?

As a landlord I prefer to maintain control of payments to 3rd parties such as levies, homeowners dues, rates and taxes etc. You may prefer (and trust) the managing agent to take care of this.

It all depends on how your accounting system is set up and whether you record Net income only or account separately for all types of expenses associated with your investment rental properties.

It is important to specify in your property management contract exactly how and by whom this will be done. You would not want to be faced with any overdue accounts because of a misunderstanding.

Do Property Management Companies pay for repairs, maintenance, cleaning and decorating?

  • Some Property Management Companies require the Owner to deposit an amount of money (keeping it topped-up as and when) into an Operating Account from which they will cover expenses, salaries and disbursements.
  • This will not really be necessary where the rental income collected by the Managing Company will be more than adequate to cover any fees or expenses, with the remaining balance paid over to the Owner.
    We've made provision for this method of payment in our property management contract.
  • A third scenario is where the Tenant pays the rental to the Owner and the Owner pays the Manager his monthly fee/retainer and any repairs or maintenance directly to the contractors.

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