What is Included in a Property Management Agreement

BINDING OPERATIONAL LEGAL AGREEMENT: WHAT IS INCLUDED IN A PROPERTY MANAGEMENT AGREEMENT

1. Document Preamble & Recitals

This Property Management Agreement (the "Agreement") is entered into and made effective as of this [Day] day of [Month], [Year] (the "Effective Date"), by and between:

Owner: [Owner/Entity Name], having its principal place of business/residence at [Owner Address] (hereinafter referred to as the "Owner"), and

Manager: [Property Management Company Name], a [State of Incorporation, e.g., Delaware corporation], having its principal place of business at [Manager Address] (hereinafter referred to as the "Manager").

Recitals

WHEREAS, Owner is the lawful fee simple owner or authorized lessee of certain real property located at [Property Street Address, City, State, Zip] (the "Subject Property"); and

WHEREAS, Owner desires to retain Manager to provide comprehensive property management, operational oversight, leasing, and maintenance services for the Subject Property; and

WHEREAS, Manager possesses the requisite expertise, licensing, and operational infrastructure to manage commercial/residential real estate and agrees to provide such services under the terms and conditions set forth herein;

NOW, THEREFORE, in consideration of the mutual covenants, promises, and valuable consideration exchanged herein—the receipt and sufficiency of which are hereby acknowledged—the Parties agree as follows:

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2. Operational Definitions

For the purposes of this Agreement, the following terms shall have the meanings ascribed below, and such definitions shall apply equally to the singular and plural forms of the terms defined:

1. "Operating Account" means a segregated, dedicated financial account established by Manager in the name of the Owner at a federally insured financial institution, utilized exclusively for the deposit of Gross Receipts and the disbursement of Operating Expenses related to the Subject Property.
2. "Gross Receipts" means all monies, revenues, rents, issues, and profits derived from the operation, leasing, licensing, or use of the Subject Property, collected from tenants, licensees, concessionaires, or any other source whatsoever.
3. "Operating Expenses" means all reasonable, necessary, and documented costs and expenses incurred by Manager in the ordinary course of managing, operating, maintaining, and repairing the Subject Property, pursuant to the approved Annual Budget or explicit written authorization from Owner.
4. "Maintenance Threshold" means the maximum financial expenditure Manager is authorized to commit for non-emergency repairs, replacements, or maintenance without obtaining prior written consent from Owner, specifically established at [Dollar Amount, e.g., $500.00] per individual occurrence.
5. "Emergency" means any sudden, unexpected occurrence or condition at the Subject Property that poses an immediate, catastrophic threat to human life, safety, structural integrity, or threatens to cause severe, irreversible property damage.
6. "Annual Budget" means the comprehensive financial projection of projected Gross Receipts and Operating Expenses for a given calendar year, prepared by Manager and approved in writing by Owner pursuant to Section 3.
7. "Tenant Default" means the failure of any tenant or occupant of the Subject Property to pay rent, additional rent, security deposits, or to comply with any material covenant, term, or condition of their respective lease agreement.
8. "Force Majeure Event" means any act of God, war, terrorism, civil unrest, labor strike, fire, flood, earthquake, pandemic, epidemic, or governmental restriction beyond the reasonable control of the affected Party, which directly prevents performance of its contractual obligations.

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3. Substantive Terms & Obligations

3.1 Scope of Management Services

Manager shall act as the exclusive leasing and operating agent for the Subject Property. Manager's operational duties shall explicitly include:

• Marketing, advertising, showing, and leasing all vacant units or spaces.
• Screening prospective tenants, including credit checks, criminal background checks, employment verification, and past rental history evaluations.
• Negotiating, executing, renewing, and terminating lease agreements in the name of the Owner or as authorized agent.
• Establishing, collecting, holding, and disbursing tenant security deposits in strict compliance with applicable [Jurisdiction] trust account statutes.

3.2 Financial Management & Reporting

• Collection of Rents: Manager shall use commercially reasonable efforts to collect all rents and other charges due from tenants promptly when due.
• Disbursements: Manager shall pay all legitimate Operating Expenses from the Operating Account, including utility charges, mortgage debt service (if expressly delegated in writing), insurance premiums, taxes, and vendor invoices.
• Financial Reporting: Manager shall deliver to Owner, no later than the [Day, e.g., 15th] day of each calendar month, an accounting statement detailing the preceding month's Gross Receipts, Operating Expenses, cash flow, balance sheets, and bank reconciliations.

3.3 Maintenance, Repairs, and Capital Improvements

• Manager shall maintain the Subject Property in a clean, safe, and habitable condition, complying with all local, state, and federal building, housing, and environmental codes.
• Manager shall retain, supervise, and discharge third-party independent contractors, janitorial staff, and maintenance technicians necessary for property upkeep.
• Manager is authorized to execute repairs up to the Maintenance Threshold without Owner consent. For any single repair or maintenance item exceeding the Maintenance Threshold, Manager must obtain prior written (including email) approval from Owner, except in the case of an Emergency.
• In the event of an Emergency, Manager is fully authorized to take immediate, necessary action to mitigate risk and protect life and property, regardless of cost, and shall notify Owner within twenty-four (24) hours thereof.

3.4 Management Compensation

• Management Fee: Owner shall pay Manager a monthly management fee equal to [Percentage, e.g., 8]% of the monthly Gross Receipts actually collected from the Subject Property.
• Leasing Commission: For every newly executed lease, Owner shall pay Manager a leasing commission equal to [Percentage/Flat Fee, e.g., 50% of one month's rent].
• Timing: Compensation shall be deducted directly by Manager from the Operating Account on the [Day, e.g., 1st] day of each respective month concurrently with the delivery of the monthly financial report.

3.5 Owner Representations and Warranties

Owner represents and warrants that:

• Owner holds unencumbered legal title or lawful leasehold authority to the Subject Property and possesses full legal capacity to enter into this Agreement.
• The Subject Property complies with all applicable zoning, environmental, health, and safety laws.
• Owner shall maintain comprehensive general liability insurance in an amount not less than [Dollar Amount, e.g., $1,000,000.00] per occurrence, naming Manager as an additional insured.

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4. Default, Termination, and Remedies

4.1 Events of Default

The occurrence of any of the following shall constitute a material breach and "Event of Default" under this Agreement:

1. Failure of Owner to pay Manager any management fees, commissions, or reimbursements within ten (10) days of the due date.
2. Failure of Manager to remit collected Gross Receipts to Owner or maintain required trust account balances.
3. Breach by either Party of any material covenant, representation, or warranty contained herein.
4. Insolvency, bankruptcy, assignment for the benefit of creditors, or appointment of a receiver for either Party.

4.2 Notice and Cure Periods

Except where a shorter period is explicitly provided herein, the non-defaulting Party shall provide written notice of default detailing the specific factual grounds. The defaulting Party shall have thirty (30) business days from the receipt of such written notice to cure said default.

4.3 Termination Rights

• Termination for Cause: If a defaulting Party fails to cure an Event of Default within the thirty (30) business day cure period, the non-defaulting Party may terminate this Agreement immediately upon written notice.
• Termination for Convenience: Either Party may terminate this Agreement without cause upon providing [Number, e.g., 60] days prior written notice to the other Party.

4.4 Post-Termination Obligations

Upon the effective date of termination of this Agreement:

• Manager shall deliver to Owner all books, records, lease agreements, keys, access codes, and tenant security deposit balances held by Manager within ten (10) business days.
• Manager shall provide a final accounting statement and transfer all remaining funds in the Operating Account to Owner, subject to a reasonable reserve (not to exceed [Dollar Amount, e.g., $2,000.00]) held for thirty (30) days to clear outstanding, un-cleared vendor checks.
• Owner shall pay Manager all accrued management fees, commissions, and legitimate out-of-pocket expenses incurred up to the date of termination.

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5. Boilerplate Legal Provisions

5.1 Severability

If any provision of this Agreement is held to be invalid, illegal, or unenforceable by a court of competent jurisdiction, such provision shall be modified to the minimum extent necessary to make it valid and enforceable. The remaining provisions of this Agreement shall remain in full force and effect.

5.2 Entire Agreement

This Agreement, including any attached exhibits or addenda, constitutes the entire understanding and agreement between the Parties concerning the subject matter hereof, superseding all prior oral or written negotiations, representations, understandings, or agreements.

5.3 Force Majeure

Neither Party shall be held liable for any failure or delay in performing its obligations under this Agreement if such failure arises directly or indirectly from a Force Majeure Event, provided that the affected Party uses diligent efforts to resume performance as soon as practicable.

5.4 Governing Law and Venue

This Agreement shall be construed, interpreted, and governed by the laws of the State of [Jurisdiction], without regard to its conflict of laws principles. Any legal action or proceeding arising under this Agreement shall be brought exclusively in the state or federal courts located in [County, State].

5.5 Dispute Resolution

Any dispute, controversy, or claim arising out of or relating to this Agreement, including its formation or breach, shall be settled by binding arbitration administered by the [Arbitration Association, e.g., American Arbitration Association] in accordance with its commercial arbitration rules. Judgment upon the award rendered by the arbitrator(s) may be entered in any court having jurisdiction thereof. The prevailing party in any such dispute shall be entitled to recover reasonable attorney's fees and costs.

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6. Formal Execution Block

IN WITNESS WHEREOF, the Parties hereto have caused this Property Management Agreement to be duly executed by their respective authorized officers or representatives as of the Effective Date written above.

OWNER:

[Owner Entity Name]

By: _____________________________________
Name: [Signatory Name]
Title: [Signatory Title]
Date: ___________________________________

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MANAGER:

[Property Management Company Name]

By: _____________________________________
Name: [Signatory Name]
Title: [Signatory Title]
Date: ___________________________________