Real Estate

Property Management Agreement

A property management agreement hires a manager to run a rental property for the owner: collecting rent, handling tenants and repairs, and remitting the balance. It fixes the management fee, the manager's spending authority, how funds are held and reported, and how either side can end the relationship.

Hand your rental to a manager with the fees, spending limits, and reporting spelled out.

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Template reviewed and updated on August 18, 2026

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Property owner

Owner's full name or entity *

Owner's street address *

City *

State *

ZIP code *

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[Owner's street address][City], AL [ZIP code]

[Manager's name or company][Manager's street address][City], AL [ZIP code]

[Today's date]

Re: Property Management Agreement: [Property (or properties) under management]

This Property Management Agreement is made between [Owner's full name or entity] (the "Owner") and [Manager's name or company] (the "Manager") for the following property: [Property (or properties) under management] (the "Property"). This agreement runs for an initial term of 12 months from the start date, then continues month to month beginning [Agreement starts], until terminated as provided below.

Manager's services and authority. The Owner appoints the Manager as exclusive agent to manage the Property, and the Manager agrees to perform with reasonable skill and diligence: advertising vacancies and showing units; screening applicants in compliance with fair housing and screening laws; signing, renewing, and terminating leases in the Owner's name on terms consistent with the Owner's instructions; collecting rents and deposits; serving notices and, at the Owner's expense and direction, initiating eviction proceedings through counsel where required; arranging maintenance and repairs; and responding to tenant communications. The Manager may spend up to $[Repair spending limit without owner approval (USD)] per repair or occurrence without prior approval, and more only with the Owner's consent, except in an emergency threatening life, safety, or the Property, where the Manager may act first and notify the Owner promptly.

Fees. The Owner will pay the Manager a management fee of [Fee (% of collected rent)]% of gross rents actually collected each month. The Owner will also pay a leasing fee of $[Leasing fee for each new tenancy (USD)] for each new tenancy the Manager procures, covering marketing, showings, screening, and lease signing. Fees are deducted from collected rents before remittance. The Manager receives no undisclosed markups, rebates, or referral fees on the Owner's expenses; any affiliated-vendor relationship must be disclosed in writing.

Funds and accounting. All rents, deposits, and Owner funds are held in a trust or escrow account separate from the Manager's own funds, as the law of Alabama requires, with tenant security deposits held and returned according to state deposit law. The Manager will maintain an Owner reserve of $[Owner reserve held by the manager (USD)], replenished from rent. Each month the Manager will remit collected rent, less fees, authorized expenses, and the reserve, and deliver a statement itemizing all income and expenses, with receipts available on request. A year-end summary suitable for tax preparation, including amounts reportable on Form 1099 where applicable, will be provided.

Owner's obligations. The Owner will maintain property and liability insurance naming the Manager as an additional insured for management activities, fund repairs and legal costs beyond the reserve promptly, keep mortgage, tax, and HOA obligations current, and disclose known defects and pending disputes affecting the Property. The Owner warrants authority to lease the Property.

Compliance and indemnity. Each party will comply with applicable law, including fair housing, habitability, security deposit, and licensing requirements. The Owner indemnifies the Manager against claims arising from the condition or ownership of the Property, except to the extent caused by the Manager's negligence or misconduct; the Manager indemnifies the Owner against claims caused by the Manager's negligence, misconduct, or breach of this agreement.

Termination. Either party may terminate with [Termination notice (days)] days' written notice, and the Owner may terminate immediately for the Manager's material breach, loss of any required license, or misapplication of funds. On termination the Manager will deliver all keys, leases, records, deposits, and funds (less earned fees and authorized expenses) within 14 days, and will cooperate in an orderly handover to the Owner or a successor manager. Fees stop accruing at termination except leasing fees already earned.

General. This agreement is governed by the law of Alabama, is the entire agreement between the parties, and may be amended only in a signed writing. Both parties sign below and each keeps a signed original.

Signature[Owner's full name or entity]

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Handing a rental property to a manager is a delegation of money and legal exposure: the manager signs leases in your name, holds your tenants' deposits, and spends your funds on repairs. The property management agreement is where that delegation gets boundaries: what the manager may do alone, what needs your approval, what everything costs, and how you get your property back.

This template fixes the terms owners and managers actually fight about: the management and leasing fees, the repair spending cap, trust accounting for rents and deposits, and clean termination with a full handover.

Management fees: what is standard, what to watch

Full-service management of single-family homes and small multifamily properties commonly runs 8% to 12% of collected rent, with big-city and large-portfolio deals lower and small or remote properties higher. The base on which the percentage is charged matters more than the number: collected rent aligns the manager with occupancy, while scheduled rent pays the manager even through vacancies. On top of the base fee, expect a leasing fee per new tenancy (often half a month's to a full month's rent), and sometimes renewal fees or setup fees. The clause worth insisting on is the no-hidden-markup rule: managers should pass through vendor invoices at cost or disclose any affiliated-vendor margin in writing.

Percentage of collected rent: the standard structure; the manager earns nothing on an empty unit.
Flat monthly fee: predictable, and sensible for high-rent properties where a percentage overpays the work.
Leasing fee: one-time, per new tenant; check whether renewals trigger a smaller fee or none.

Spending authority and trust accounting

The repair cap is the heart of the delegation: below it, the manager fixes things without calling you; above it, your approval is required, with a carve-out for genuine emergencies. Set it where the value of your time crosses the value of control, commonly a few hundred dollars for a single home. On funds, the non-negotiable is separation: rents and deposits belong in a trust or escrow account apart from the manager's operating money, which most states require of licensed managers, with security deposits handled under the state's deposit statute. Monthly itemized statements and a year-end tax summary are standard deliverables, and receipts should be available on request, not on negotiation.

Most states require managers to be licensed

Managing rentals for others, leasing, and collecting rent generally require a real estate broker license (or work under one), with a minority of states offering a specific property manager license or exemptions for on-site employees. An unlicensed manager may be uninsurable and unable to sue for fees; verify the license before signing.

Ending the relationship without losing your property records

Management relationships end more often over reporting and responsiveness than over fees, and the exit clause determines whether the transition is a handover or a hostage negotiation. This template provides termination on notice for both sides, immediate termination for material breach or loss of license, and a 14-day handover duty covering keys, leases, tenant files, deposits, and funds. Two details deserve attention: leasing fees already earned survive termination (a manager who placed a tenant last month keeps that fee), and tenant deposits must transfer in compliance with state law, usually with written notice to tenants of where their deposit now lives.

The property's state controls

Trust account rules, licensing, deposit handling, and eviction procedure all come from the state where the property sits, wherever the owner or the management company is based. This template is a self-help document, not legal advice.

Frequently asked questions

What does a property manager typically charge?

Commonly 8% to 12% of collected rent for full-service management of houses and small buildings, plus a leasing fee per new tenancy that often equals half a month's to a month's rent. Flat fees are an alternative for high-rent homes. The structure and every extra fee belong in the agreement, which is what this template documents.

Can the manager sign leases and evict tenants for me?

Under this agreement, yes for leases: the manager signs, renews, and terminates leases as your agent within your instructions. Evictions are initiated at your direction and expense, and in most states the court case itself must be handled by an attorney rather than the manager.

Who holds the tenants' security deposits?

The manager, in a trust or escrow account separate from its own funds, handled under the state's deposit statute. On termination the deposits transfer to you or the successor manager with the required tenant notifications. Commingling deposits with the manager's operating funds is a license violation in most states.

What is a reasonable repair approval limit?

A few hundred dollars per occurrence is typical for a single-family rental: enough that the manager is not calling about every faucet, low enough that meaningful money still needs your sign-off. Emergencies that threaten safety or the property are the standard exception, with prompt notification after the fact.

How do I terminate a property management agreement?

Under this template, with written notice of the agreed length (30 days is common), or immediately for material breach, loss of license, or misuse of funds. The manager must hand over keys, leases, records, deposits, and remaining funds within 14 days, keeping only fees already earned.

You may also need these documents

Real EstateResidential Lease AgreementA ready-to-sign residential lease covering rent, deposit, term, pets, and utilities. Editable Word file and print-ready PDF.Real EstateRental ApplicationA standard application for prospective tenants: identity, employment, income, rental history, and consent to background and credit checks.Real EstateEviction NoticeA formal notice to pay rent, cure a lease violation, or vacate, with a notice period you set to match your state's law.BusinessService AgreementA general contract for services of any kind: description of the work, price and payment schedule, warranties, and how either side can end the deal.

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