Management Agreements

Property Management Agreements ## Overview of Property Management in California Property management is a distinct specialization within California real estate. A property manager who receives compensation for managing residential or commercial real estate on behalf of another must hold a California real estate license. This requirement distinguishes California from some other states and reflects the complexity of the legal, financial, and operational duties involved. The foundation of every property management relationship is the property management agreement (PMA) — a contract between the property owner (the principal) and the property manager (the agent). This agreement defines every aspect of the relationship and serves as the manager's authority to act. --- ## Required Contents of a Property Management Agreement A well-drafted property management agreement must address: 1. Scope of Authority The agreement must specify exactly what the manager is authorized to do. Authority is not implied — it must be granted expressly. Typical authority includes: - Advertising the property for lease - Screening and selecting tenants - Executing leases on the owner's behalf (within specified parameters) - Collecting rent and other payments - Issuing notices to tenants (pay-or-quit, cure-or-quit) - Coordinating repairs and maintenance - Disbursing funds for operating expenses 2. Duration The agreement must specify a start date and either a fixed end date or the conditions under which either party may terminate. Most residential PMAs run for one year with automatic monthly renewals. Commercial PMAs may have longer initial terms. 3. Compensation Structure Management fees must be clearly stated. The agreement should identify: - The management fee percentage or flat fee - The leasing fee for finding new tenants - Fees for lease renewals - Whether the manager retains…