What is actually in a property management agreement

A management agreement is the document that determines what the relationship actually costs and how easily you can leave it. It deserves twenty minutes of proper reading. Here is what to look at.

1. The management fee — and what it is charged on

Usually a percentage of monthly rent, commonly in the region of 8–10% along the Front Range, sometimes a flat fee.

The question that matters is what it is charged on:

• Rent collected — you pay when money comes in. If the unit is vacant or the tenant does not pay, you pay nothing. This aligns interests properly.
• Rent due — you pay regardless. This means paying a fee during vacancy and during non-payment, which is exactly when you can least afford it and when the manager has least incentive to fix it.

Prefer rent collected. If an agreement charges on rent due, ask why.

2. The leasing fee

A separate charge for finding and placing a tenant — commonly anywhere from a few hundred dollars to a full month's rent. This is legitimate work, but it is also where the incentives can go wrong.

Ask two questions. Is there a renewal fee, and how large? A company that charges a large leasing fee and a small renewal fee has a quiet incentive toward turnover, which is the most expensive thing that can happen to you — see our breakdown of what turnover actually costs.

And is there a guarantee? Many companies re-place a tenant at no leasing fee if the tenancy fails within a defined period. That is a meaningful signal of confidence in their screening.

3. The termination clause — read this first

This is the most important clause in the document, and the one owners read last.

• What notice is required? 30 days is standard and reasonable.
• Is there a minimum term? A one-year lock-in is common. Longer deserves scrutiny.
• Is there a termination fee? Some agreements charge several months of fees to leave.
• Can you terminate for cause immediately? There should be a route out if the company simply is not performing.
• What happens to the tenant? The tenancy continues — it is your tenant, not theirs. Make sure the agreement says the lease, deposit, records and keys transfer to you cleanly.

A company confident in its service does not need to trap you. A long lock-in with a heavy exit penalty is the clearest warning available, and it costs nothing to notice.

4. Maintenance authority and markups

• The spending threshold — how much can be spent on a repair without contacting you. A few hundred dollars is normal and sensible; nobody wants a call about a $90 faucet. A very high threshold deserves a question.
• Emergency authority — there must be some, because Colorado's habitability deadlines are measured in hours. See our habitability guide.
• Markups. Does the company add a percentage to vendor invoices? Some do, some do not. Either is defensible; not disclosing it is not. Ask directly.
• In-house maintenance. If the company has its own crew, ask how rates compare to outside vendors and whether you can decline.

5. The fees nobody mentions

Ask for a complete written fee schedule. Common additions:

• Setup or onboarding fee
• Vacancy fee — a reduced monthly charge while empty
• Inspection fees beyond a set number per year
• Eviction handling fees
• Year-end statement or 1099 preparation fee
• Advertising costs beyond a base
• Technology or portal fees

None of these is inherently unreasonable. All of them should be visible before you sign rather than after.

6. Who keeps the ancillary income

Application fees, late fees, pet fees and lease-break fees all go somewhere. It is often the management company, which can be reasonable — they do the associated work. What is not reasonable is discovering it from a statement.

Late fees are worth particular attention, since a company that keeps them has a mild interest in rent being late. Ask.

7. Reporting, funds and insurance

• Statements — monthly, itemized, with an owner portal.
• Disbursement date — when your money actually reaches you each month.
• Trust accounting — tenant funds and deposits held in a separate trust account, not operating funds. This is a basic requirement.
• Reserve — how much they hold, and when it is replenished.
• Insurance — that they carry errors and omissions cover, and whether you must name them as additional insured on your policy.
• Indemnification — read this. Some agreements indemnify the manager extremely broadly, including for their own negligence.

The questions worth asking out loud

Beyond the document: how many units per manager, what is their average days-on-market, what is their average tenancy length, who answers after hours, and can you speak to two current owner clients. Our guide to questions to ask a property manager covers the rest.

Average tenancy length is the most revealing number of all, and the one companies volunteer least often.

Two operational clauses to check while you have the agreement open: how rent is collected and disbursed — see rent collection — and what happens if you sell with a tenant in place.