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What are the typical terms for a Property Management Agreement?

A Property Management Agreement is a legally binding contract between a property owner and a property management company. It outlines the terms and conditions under which the property management company will manage the property on behalf of the owner.

Table of Contents

  1. Introduction

  2. Essential Terms of a Property Management Agreement 2.1. Parties to the Agreement 2.2. Property Description 2.3. Scope of Services 2.4. Management Fees 2.5. Responsibilities of the Property Manager 2.6. Responsibilities of the Property Owner 2.7. Insurance 2.8. Accounting and Reporting 2.9. Termination Clause 2.10. Dispute Resolution

  3. Case Laws

  4. Sample Property Management Agreement

  5. Conclusion

  6. TLDR

Introduction

A Property Management Agreement is a crucial document in the real estate industry in Kenya. It establishes a clear framework for the relationship between the property owner and the property manager, outlining their respective rights and obligations. This agreement ensures that both parties are aware of their responsibilities and protects their interests.

Essential Terms of a Property Management Agreement

A comprehensive Property Management Agreement should include the following essential terms:

2.1. Parties to the Agreement

  • The agreement should clearly identify the parties involved, including the property owner's full name and address, and the property management company's name, address, and registration details.

  • This section should also specify the legal capacity of each party to enter into the agreement.

2.2. Property Description

  • The agreement should provide a detailed description of the property being managed, including its address, legal description, and any relevant identifying features.

  • This section should also include information about the type of property, such as residential, commercial, or industrial.

2.3. Scope of Services

  • This section outlines the specific services that the property management company will provide.

  • It should be comprehensive and detailed, covering all aspects of property management, including:

    • Tenant Screening and Selection: This includes conducting background checks, verifying income and credit history, and selecting suitable tenants.

    • Lease Administration: This involves drafting and negotiating lease agreements, collecting rent, and enforcing lease terms.

    • Property Maintenance: This includes handling routine maintenance requests, coordinating repairs, and ensuring the property is in good condition.

    • Financial Management: This involves collecting and depositing rent, paying property expenses, and providing regular financial reports to the owner.

    • Marketing and Advertising: This involves finding and attracting new tenants, advertising vacant units, and managing the property's online presence.

    • Legal Compliance: This involves ensuring that the property management company complies with all applicable laws and regulations, including landlord-tenant laws, building codes, and safety regulations.

2.4. Management Fees

  • The agreement should clearly state the property management company's fees, including the fee structure, payment terms, and any applicable taxes or charges.

  • The fee structure can be based on a percentage of the rental income, a fixed monthly fee, or a combination of both.

2.5. Responsibilities of the Property Manager

  • This section outlines the property management company's specific responsibilities, including:

    • Marketing and Leasing: The property manager is responsible for finding and screening tenants, negotiating lease agreements, and collecting rent.

    • Property Maintenance: The property manager is responsible for maintaining the property in good condition, handling repairs, and ensuring compliance with building codes and safety regulations.

    • Financial Management: The property manager is responsible for collecting and depositing rent, paying property expenses, and providing regular financial reports to the owner.

    • Legal Compliance: The property manager is responsible for ensuring that the property is managed in compliance with all applicable laws and regulations.

2.6. Responsibilities of the Property Owner

  • This section outlines the property owner's specific responsibilities, including:

    • Providing Access: The property owner is responsible for providing the property manager with access to the property for the purpose of managing it.

    • Paying Expenses: The property owner is responsible for paying any expenses that are not covered by the management fees, such as property taxes, insurance premiums, and major repairs.

    • Providing Information: The property owner is responsible for providing the property manager with any relevant information about the property, such as the lease agreements, property records, and insurance policies.

2.7. Insurance

  • The agreement should specify the types of insurance coverage that the property owner and the property management company are responsible for.

  • This section should also include information about the insurance policy limits and deductibles.

2.8. Accounting and Reporting

  • The agreement should outline the property management company's accounting procedures and reporting requirements.

  • This section should specify the frequency of financial reports, the format of the reports, and the information that will be included in the reports.

2.9. Termination Clause

  • The agreement should include a termination clause that specifies the conditions under which either party can terminate the agreement.

  • This clause should also specify the notice period required for termination and any applicable termination fees.

2.10. Dispute Resolution

  • The agreement should include a dispute resolution clause that outlines the process for resolving any disputes that may arise between the property owner and the property management company.

  • This clause may specify that disputes will be resolved through mediation, arbitration, or litigation.

Case Laws

  • Mwaniki v AM Trailer Manufacturer Kenya Limited (Employment and Labour Relations Cause 3 of 2020): This case involved a dispute between an employee and his employer regarding the termination of his employment contract. The case highlights the importance of having a clear and comprehensive employment contract that outlines the terms of employment, including the termination process. (Source: https://kenyalaw.org/caselaw/cases/view/276546/index.html)

  • Noorali Manji v [Defendant Name] (Environment and Land Case E288 of 2021): This case involved a dispute between two landowners regarding the ownership of a parcel of land. The case highlights the importance of having clear and accurate property records and ensuring that all transactions involving land are properly documented. (Source: https://kenyalaw.org/caselaw/cases/view/219549)

  • [Plaintiff Name] v [Defendant Name] (Civil Case 22 of 2006): This case involved a dispute between a buyer and a seller regarding the purchase of a piece of land. The case highlights the importance of having a clear and enforceable purchase agreement that outlines the terms of the sale, including the payment schedule, the closing date, and the transfer of ownership. (Source: http://kenyalaw.org/caselaw/cases/view/22529/)

Sample Property Management Agreement


PROPERTY MANAGEMENT AGREEMENT

This Property Management Agreement ("Agreement") is made and entered into as of [Date] by and between [Property Owner Full Name], residing at [Property Owner Address] ("Owner"), and [Property Management Company Name], a company duly organized and existing under the laws of [Country], with its principal place of business at [Property Management Company Address] ("Manager").

WITNESSETH:

WHEREAS, Owner is the owner of the real property located at [Property Address] ("Property"); and

WHEREAS, Manager is engaged in the business of property management and desires to manage the Property for Owner;

NOW, THEREFORE, in consideration of the mutual covenants and agreements contained herein, the parties agree as follows:

1. Appointment of Manager

Owner hereby appoints Manager as its exclusive property manager for the Property, and Manager accepts such appointment.

2. Scope of Services

Manager shall provide the following property management services for the Property:

  • Tenant Screening and Selection: Manager shall screen and select tenants for the Property in accordance with applicable law and Owner's instructions.

  • Lease Administration: Manager shall draft and negotiate lease agreements with tenants, collect rent, and enforce lease terms.

  • Property Maintenance: Manager shall maintain the Property in good condition, handle repairs, and ensure compliance with building codes and safety regulations.

  • Financial Management: Manager shall collect and deposit rent, pay property expenses, and provide Owner with regular financial reports.

  • Marketing and Advertising: Manager shall market and advertise the Property to potential tenants.

  • Legal Compliance: Manager shall ensure that the Property is managed in compliance with all applicable laws and regulations.

3. Management Fees

Owner shall pay Manager a management fee of [Percentage] of the gross rental income from the Property. The management fee shall be payable monthly in arrears.

4. Responsibilities of Manager

Manager shall be responsible for the following:

  • Marketing and Leasing: Manager shall market and advertise the Property to potential tenants, screen and select tenants, and negotiate lease agreements.

  • Property Maintenance: Manager shall maintain the Property in good condition, handle repairs, and ensure compliance with building codes and safety regulations.

  • Financial Management: Manager shall collect and deposit rent, pay property expenses, and provide Owner with regular financial reports.

  • Legal Compliance: Manager shall ensure that the Property is managed in compliance with all applicable laws and regulations.

5. Responsibilities of Owner

Owner shall be responsible for the following:

  • Providing Access: Owner shall provide Manager with access to the Property for the purpose of managing it.

  • Paying Expenses: Owner shall pay any expenses that are not covered by the management fees, such as property taxes, insurance premiums, and major repairs.

  • Providing Information: Owner shall provide Manager with any relevant information about the Property, such as the lease agreements, property records, and insurance policies.

6. Insurance

Owner shall maintain the following insurance coverage for the Property:

  • Property Insurance: Owner shall maintain property insurance coverage for the Property in an amount not less than [Amount].

  • Liability Insurance: Owner shall maintain liability insurance coverage for the Property in an amount not less than [Amount].

7. Accounting and Reporting

Manager shall provide Owner with the following financial reports:

  • Monthly Statement: Manager shall provide Owner with a monthly statement of income and expenses for the Property.

  • Annual Report: Manager shall provide Owner with an annual report summarizing the Property's financial performance.

8. Termination

This Agreement may be terminated by either party upon [Number] days' written notice to the other party.

9. Dispute Resolution

Any dispute arising out of or relating to this Agreement shall be settled by [Method of Dispute Resolution].

10. Entire Agreement

This Agreement constitutes the entire agreement between the parties with respect to the subject matter hereof and supersedes all prior or contemporaneous communications, representations, or agreements, whether oral or written.

11. Governing Law

This Agreement shall be governed by and construed in accordance with the laws of [Country].

12. Notices

All notices and other communications hereunder shall be in writing and shall be deemed to have been duly given when delivered personally, sent by certified mail, return receipt requested, or sent by overnight courier service, addressed as follows:

If to Owner:

[Property Owner Full Name] [Property Owner Address]

If to Manager:

[Property Management Company Name] [Property Management Company Address]

13. Severability

If any provision of this Agreement is held to be invalid or unenforceable, such provision shall be struck and the remaining provisions shall remain in full force and effect.

IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above.

[Property Owner Signature]

[Property Owner Printed Name]

[Property Management Company Signature]

[Property Management Company Printed Name]


Conclusion

A well-drafted Property Management Agreement is essential for protecting the interests of both the property owner and the property manager. It provides a clear framework for their relationship, outlining their respective responsibilities and ensuring that both parties are aware of their obligations.

TLDR

A Property Management Agreement is a contract between a property owner and a property manager that outlines the terms and conditions of the management of the property. It should include details about the parties, the property, the scope of services, management fees, responsibilities, insurance, accounting, termination, and dispute resolution.

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