A management agreement is a legal contract that defines the relationship between property owners and the company that manages their rental properties. It is important for both parties because it reduces ambiguity, sets expectations, and clarifies roles and responsibilities. In this article, we will explore the basics of a management agreement including its definition and essential components.

Scope of Services: Clearly define the services that will be provided by the management company. This could include tasks like tenant screening, rent collection, maintenance, emergency response, and more. This section should also include any fees that will be charged for these services.

Term: Set the length of time that the management agreement will be in effect. Typically, these agreements are negotiated for one year but longer or shorter terms may be possible.

Conflict Resolution: Establish a process for resolving disputes between the owner and management company. This could include mediation or arbitration clauses to avoid costly litigation.

Requirements: The owner may include requirements in the management agreement that must be met to demonstrate compliance with its obligations. This could include requiring approval of capital expenditures that exceed a certain amount or contracts that require the owner’s approval.

The agreement can also include non-compete and/or non-solicitation clauses to prevent the management company from competing with or soliciting the business’s clients or employees. However, the enforceability of these clauses depends on state and industry laws. The enforceable scope of these clauses can be difficult to determine and should always be discussed with your lawyer.