Hiring a property manager feels like a decision about people: who answers the phone, who screens your tenants, who shows up when a pipe bursts. But the relationship is governed by a document, and most owners sign it after a quick skim. That document decides how long you are committed, what you pay and when, how much the manager can spend without asking you, and what it costs to leave.
This guide answers the question "what is a property management agreement?" and walks through the clauses Montgomery County owners should read twice before signing, including the traps that catch owners most often: annual auto-renewals, termination penalties, and sale commissions paid for work nobody did.
This article is general information, not legal advice. Have an attorney review any contract before you sign it.
What Is a Property Management Agreement?
A property management agreement is the written contract between a rental owner and a property management company. It spells out the services the manager will provide, the authority you are handing over, how the manager is paid, how long the agreement lasts, and how either side can end it.
In Pennsylvania, these agreements are not a free-for-all. When a real estate broker signs a written agreement with a property owner that commits the owner to paying a fee, the Pennsylvania Code requires the agreement to describe the services to be provided and the fees to be charged, and to note that the commission and the length of the agreement were negotiated between the parties. You can read the rule in 49 Pa. Code § 35.331.
In practice, agreements vary a lot from company to company. Some managers write their own. First Lock uses the Pennsylvania Association of Realtors (PAR) Residential Property Management Agreement, an attorney-prepared document that we have found protects both the owner and the management company. You can read more about how we approach it on our property management agreement page.
1. Term and Termination: How Long You Are Committed
Start here, because this clause decides how easy it is to fix a bad decision. Look for three things: the length of the term, what happens when the term ends, and what it costs to leave early.
Fixed term or month to month
A fixed-term agreement commits you for a set period, often a year or more. A month-to-month agreement continues until one side ends it with notice. The question to ask is simple: if the service is poor, how quickly can you walk away?
Trap: the annual auto-renewal
Some agreements renew automatically for another full term unless you cancel within a narrow window before the anniversary date. Miss that window by a week and you are committed for another year. Pennsylvania regulations bar automatic renewal clauses in exclusive listing agreements, as set out in 49 Pa. Code § 35.332, but a property management agreement is not always written as a listing agreement. Do not assume that protection applies. Read the renewal language yourself.
Trap: termination penalties
Watch for a cancellation fee, a requirement to pay the remaining months of the term, or an ongoing fee on a tenant the manager placed even after you leave. Each one turns "you can cancel any time" into "you can cancel any time if you pay."
How First Lock handles it: our management agreement is month to month, with no termination fees or penalties. We would rather earn your business every month than hold onto it with a contract.
2. The Fee Schedule: Every Charge in One Place
A fair agreement lists every fee clearly in one section. If charges are scattered through the document, or only appear in an addendum, treat that as a warning sign that you will not see the full cost until it shows up on a statement.
What to check in the fee section
- When the monthly management fee is charged: on rent collected, or on rent due whether or not it comes in.
- When the leasing fee is due: at listing, at lease signing, or only after the tenant has paid.
- Whether maintenance carries a coordination fee or markup on vendor invoices.
- Whether there is a lease renewal fee.
- Any extra charges: setup, onboarding, inspection, technology, statement, or vacancy fees.
How First Lock handles it: the monthly management fee is charged only in months we collect your rent, and the leasing fee is not due until there is a signed lease and the tenant has paid. The only other charges are a coordination fee on maintenance we manage for you and a lease renewal fee when a tenant renews. Every charge is in your written management plan before you sign. You can see how our property management fees in Collegeville work, and our guide to property management fees in Montgomery County breaks down each type of fee in more detail. For the leasing fee specifically, read Leasing Fees Explained.
3. Scope of Authority and Maintenance Spending Limits
This clause sets out what the manager can do in your name without asking you first: signing leases, hiring vendors, approving repairs, and handling tenant issues. The part owners care about most is money, specifically how much the manager can spend on a repair before calling you.
What a strong maintenance clause defines
- A spending threshold: the dollar limit for repairs the manager can approve on its own.
- What counts as an emergency, and what the manager can do in one.
- Which repairs are the tenant's responsibility.
- How repair-or-replace decisions are made.
Trap: open-ended authority
An agreement that lets the manager spend "as needed" with no threshold, or that never defines an emergency, leaves you finding out about a large repair after it is done. Also check whether vendor invoices are marked up, and whether the manager can use its own in-house maintenance company without telling you.
How First Lock handles it: you set the rules. We put a spending threshold in your management agreement. Routine repairs under that amount are handled right away so small problems stay small, larger repairs come to you for approval first, and genuine emergencies that threaten safety or the property are handled immediately. Maintenance is monitored 24/7 through pre-screened vendors, with cost-control protocols in place.
Reserves, trust accounts, and owner payouts
The same section usually covers money flowing in and out. Expect the agreement to require a reserve in a trust account, used to pay property expenses before or after rent arrives. Check how large the reserve is, when it must be topped up, and how quickly rent reaches you after a tenant pays. First Lock sends owner payments by ACH directly to your bank account each month. Tenant security deposits are a separate matter and are held in escrow as Pennsylvania law requires. Our guide to Pennsylvania security deposit law explains those rules, and our post on what your monthly property management report should tell you covers how reserves and payouts should appear on your statement.
4. Indemnification and Insurance
Indemnification decides who pays when something goes wrong and someone gets sued. Most agreements ask the owner to protect the manager from claims that come from the property itself, such as a defect the owner knew about. That is normal. What matters is whether the protection runs both ways.
Trap: one-sided indemnification
Read the clause for the words "negligence" and "willful misconduct". A balanced agreement makes the owner responsible for the property and the manager responsible for its own mistakes. A one-sided one asks you to cover the manager even when the manager caused the problem. This is the clause most worth showing to an attorney.
Insurance requirements
Agreements usually require the owner to carry property and liability insurance and to name the management company as an additional insured. First Lock asks for a property insurance declaration naming First Lock as an additional insured as part of onboarding. Ask any manager what insurance it carries on its own side as well.
5. Exclusivity: Who Gets Paid When You Find the Tenant
Many agreements give the manager the exclusive right to lease the property. In plain terms, that means the manager earns its leasing fee on any lease signed during the agreement, even if you found the tenant yourself through a friend or a coworker.
Pennsylvania takes this seriously. For an exclusive right-to-lease listing agreement, 49 Pa. Code § 35.332 requires a statement in bold print that the broker earns a commission on a lease made during the listing period, by whomever made, including the owner. If you see that bold sentence, or similar language in a management agreement, know what it means before you sign.
Exclusivity is not automatically bad. The manager is investing in marketing, photos, and showings, and you would not hire two companies to lease the same home. Just make sure you understand what you owe if you bring the tenant yourself.
6. Sale Commission Clauses: Paying for Work Nobody Did
This is the trap owners notice last, usually when they decide to sell. Some management agreements include language that gives the manager a sales commission, or the right to list the property, if you sell it. Watch for three versions:
- A commission owed if you sell during the agreement, even if you use a different agent or sell on your own.
- A commission owed if you sell to your current tenant, because the manager placed that tenant.
- A "tail" period, where the commission is still owed for a set time after you end the management agreement.
For exclusive right-to-sell listings, Pennsylvania requires a bold statement that the broker earns a commission on a sale made during the listing period, by whomever made, including the owner (49 Pa. Code § 35.332). Sale language tucked inside a management agreement may be much easier to miss. Ask directly: "If I sell this property, do I owe you anything if you do not represent me?"
How First Lock handles it: as an owner-client, you get reduced fees whenever you choose to buy or sell properties with us. You can see this with our other commitments on the Owner Benefits page.
7. Evictions and Legal Costs
Evictions should be rare, but the agreement should say who handles one and who pays for it. Look for language that requires you to hire your own attorney, or that bills every notice and court filing as an extra. First Lock oversees the entire eviction process from start to finish and prepares and serves the required Pennsylvania notices at no cost to you.
Red Flags to Read Twice: A Quick Checklist
Before you sign any property management agreement, find the answer to each of these in the document itself, not in the sales conversation:
- Does the agreement renew automatically, and how much notice do I need to give to stop it?
- Is there a termination fee, or any fee owed on a tenant after I leave?
- Is the management fee charged on rent collected or on rent due?
- When is the leasing fee due, and do I owe it if I find the tenant myself?
- Are all fees listed in one section, with nothing hidden in addendums?
- What is the repair spending limit, and how is an emergency defined?
- Are vendor invoices marked up?
- Does the indemnification clause protect me from the manager's own negligence?
- Do I owe a commission if I sell, sell to my tenant, or sell after ending the agreement?
- Who pays for eviction notices and filings?
What the Agreement Cannot Tell You
A contract describes the legal relationship, not the working one. It will not tell you how quickly the manager answers your calls, how it treats your tenants, or whether it tells you the truth when something goes wrong. Ask for references, read reviews, and pay attention to how the company communicates before you sign. At First Lock, every owner has one dedicated Executive Property Manager, and we return owner communication within 24 business hours.
Property Management Agreement FAQs
A property management agreement is the written contract between a rental owner and a property management company. It sets out what the manager will do, what authority it has, how and when it is paid, how long the relationship lasts, and how either side can end it.
It depends on the agreement. Some run month to month and can be ended without a penalty, while others lock you into a fixed term and charge a termination fee to leave early. First Lock's management agreement is month to month with no termination fees or penalties.
Every fee you could be charged: the monthly management fee, the leasing fee, any maintenance coordination fee, the lease renewal fee, and any other charges. Pennsylvania's real estate regulations require a broker's written agreement to describe the services and the fees to be charged.
Whatever spending limit the agreement sets. At First Lock, we set a spending threshold in your management agreement. Routine repairs under it are handled right away, larger repairs come to you for approval, and genuine emergencies that threaten safety or the property are handled immediately.
First Lock uses the Pennsylvania Association of Realtors (PAR) Residential Property Management Agreement, an attorney-prepared document that sets out the agreed terms for managing your property.
Talk to a Collegeville Property Manager
First Lock Property Management manages residential and commercial rentals in Collegeville and across Montgomery County from our office at 400 Arcola Rd A-5. If you want to see how a month-to-month agreement with clear fees and a set repair limit would work for your property, call us at (484) 222-0495 and we will walk you through every clause.