A broker has the same legal duties to an owner in property management as to a client in listing a property for sale. The property manager generally handles these responsibilities:
- Renting units and collecting rents
- Arranging for maintenance & repairs
- Hiring & firing on-site personnel
- Providing a complete accounting to the owner
A property management agreement ordinarily would give the agent the right to advertise, lease to prescribed time and dollar limitations, collect rents, handle maintenance & repairs, contract for services (might have a dollar and/or time limit), hire & discharge personnel, pay bills & expenses, give tenant notices, and so on.
A property manager is the agent of the owner and therefore has agency responsibilities. The property management contract should require that the agent account for all income and expenses paid, provide statement to the owner, keep tenant deposits and other owner funds in a trust account, us diligence in carrying out the provision of the agreement, and obey all laws & regulations.
The owner should agree to provide the manager with applicable records, carry adequate liability insurance and workers' compensation to protect the owner and broker, indemnify the broker for any costs or expenses relating to the management, and pall all fees as agreed by contract.
Managers customarily receive a percentage of the gross income based on the type of property and management duties. A minimum management fee and a leasing commission also might be included as compensation. A minimum management fee is important when property is vacant. A separate leasing commission is customarily a percentage of the rent for the entire lease. On long-term leases, the percentage tends to be lower for later years than for the first year.
The manager also might be entitled to compensation for evictions, supervising improvements, and fire damage rehabilitation, as well as representing the owern before public agencies. Kickbacks from suppliers would constitute a secret profit and would breach the agent's fiduciary duty.