What is a property management agreement?

A property management agreement is a formal contract that specifically details the roles, responsibilities, and authority granted to a property manager by the property owner. It serves as a vital framework for the management relationship, clearly defining what tasks the property manager is expected to perform, such as tenant screening, lease negotiations, property maintenance, rent collection, and financial reporting.

This agreement also delineates the scope of authority that the property manager holds in making decisions on behalf of the property owner, which can include approving expenditures and handling tenant relations. Having this structured and legally binding document helps protect both parties and ensures clarity in their business relationship, reducing the likelihood of disputes arising from misunderstandings about duties and obligations.

On the other hand, a verbal agreement lacks the formal structure and specificity that a written property management agreement provides, leaving both parties vulnerable to miscommunication. An informal document covering rental terms would not include comprehensive management details and obligations. Lastly, while a property management agreement can touch on aspects related to tenant deposits, it is not solely a legal document for that purpose; its focus is much broader encompassing multiple management facets.