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What are the typical terms for a Property Management Agreement?

Introduction

A Property Management Agreement (PMA) is a legally binding contract between a property owner and a property management company or individual. This agreement outlines the responsibilities, duties, and obligations of both parties concerning the management of the property. In Kenya, the terms of a Property Management Agreement are governed by various laws, including the Land Act, 2012, the Land Registration Act, 2012, and the Law of Contract Act, among others. This document will delve into the typical terms of a Property Management Agreement in Kenya, citing relevant legal provisions.

Table of Contents

  1. Parties to the Agreement

  2. Property Description

  3. Term of the Agreement

  4. Management Fees

  5. Duties and Responsibilities of the Property Manager

  6. Duties and Responsibilities of the Property Owner

  7. Maintenance and Repairs

  8. Rent Collection and Financial Management

  9. Insurance

  10. Termination of the Agreement

  11. Dispute Resolution

  12. Governing Law

  13. Conclusion

1. Parties to the Agreement

The Property Management Agreement must clearly identify the parties involved:

  • Property Owner: The individual or entity that owns the property.

  • Property Manager: The individual or company responsible for managing the property.

Source: Law of Contract Act, Cap 23, Section 3.

2. Property Description

The agreement should provide a detailed description of the property being managed. This includes:

  • Location: Physical address and any unique identifiers.

  • Type of Property: Residential, commercial, industrial, etc.

  • Size and Boundaries: Land size, building size, and boundaries.

Source: Land Registration Act, 2012, Section 14.

3. Term of the Agreement

The duration of the agreement should be specified, including:

  • Start Date: When the agreement becomes effective.

  • End Date: When the agreement terminates.

  • Renewal Terms: Conditions under which the agreement can be renewed.

Source: Law of Contract Act, Cap 23, Section 4.

4. Management Fees

The agreement must outline the fees payable to the property manager, including:

  • Management Fee: Usually a percentage of the monthly rent collected.

  • Additional Fees: Fees for specific services like tenant placement, maintenance, and repairs.

Source: Law of Contract Act, Cap 23, Section 5.

5. Duties and Responsibilities of the Property Manager

The property manager's responsibilities should be clearly defined, including:

  • Tenant Management: Screening, placement, and eviction of tenants.

  • Rent Collection: Collecting rent and handling late payments.

  • Maintenance and Repairs: Regular maintenance and emergency repairs.

  • Financial Reporting: Providing regular financial statements to the property owner.

Source: Land Act, 2012, Section 55.

6. Duties and Responsibilities of the Property Owner

The property owner's responsibilities should also be outlined, including:

  • Payment of Fees: Timely payment of management fees and other charges.

  • Provision of Funds: Providing funds for maintenance and repairs.

  • Insurance: Ensuring the property is adequately insured.

Source: Law of Contract Act, Cap 23, Section 6.

7. Maintenance and Repairs

The agreement should specify how maintenance and repairs will be handled, including:

  • Routine Maintenance: Regular upkeep of the property.

  • Emergency Repairs: Procedures for handling urgent repairs.

  • Cost Allocation: Who bears the cost of maintenance and repairs.

Source: Land Act, 2012, Section 56.

8. Rent Collection and Financial Management

The agreement should detail the procedures for rent collection and financial management, including:

  • Rent Collection: Methods and timelines for collecting rent.

  • Financial Reporting: Frequency and format of financial reports.

  • Bank Accounts: Details of bank accounts where rent will be deposited.

Source: Law of Contract Act, Cap 23, Section 7.

9. Insurance

The agreement should specify the insurance requirements for the property, including:

  • Types of Insurance: Property insurance, liability insurance, etc.

  • Responsibility: Who is responsible for obtaining and maintaining insurance.

Source: Land Act, 2012, Section 57.

10. Termination of the Agreement

The conditions under which the agreement can be terminated should be clearly outlined, including:

  • Notice Period: Required notice period for termination.

  • Termination for Cause: Conditions under which the agreement can be terminated for cause.

  • Termination without Cause: Conditions under which the agreement can be terminated without cause.

Source: Law of Contract Act, Cap 23, Section 8.

11. Dispute Resolution

The agreement should include a clause on how disputes will be resolved, including:

  • Mediation: Initial step for resolving disputes.

  • Arbitration: Binding arbitration as a method of dispute resolution.

  • Court Proceedings: Conditions under which parties can resort to court proceedings.

Source: Arbitration Act, 1995, Section 4.

12. Governing Law

The agreement should specify the governing law, which in this case is Kenyan law.

Source: Law of Contract Act, Cap 23, Section 9.

Conclusion

A Property Management Agreement is a crucial document that outlines the roles, responsibilities, and expectations of both the property owner and the property manager. By clearly defining these terms, the agreement helps to prevent misunderstandings and disputes. It is essential to ensure that the agreement complies with relevant Kenyan laws, including the Land Act, 2012, the Land Registration Act, 2012, and the Law of Contract Act. Properly drafted, a Property Management Agreement can provide a solid foundation for a successful property management relationship.

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