Before you sign a property management agreement, check eight things: the term and renewal rule, how you terminate and what it costs, the complete fee schedule, the maintenance spending limit, the reserve and trust accounting, who holds the security deposit, the insurance and indemnification clauses, and the manager's leasing authority. The agreement is the only document that tells you what a property manager will actually do, what it costs and how you get out, so read it before the sales conversation fades, because once it is signed, the brochure no longer counts.
Here is the clause-by-clause pass I would make on any agreement, including ours. Some run two pages and some run twelve. The length matters less than whether each of these points is answered plainly.
Term and automatic renewal
Look for three things: how long the initial term runs, whether it renews automatically, and how much notice you must give to stop the renewal. The combination is what matters. A one-year term that rolls into another full year unless you cancel in a narrow sixty-day window is a trap for busy owners.
A fair structure is an initial term followed by month-to-month, or a renewal you can decline with reasonable notice at any time. If you cannot explain the renewal rule in one sentence, ask the company to rewrite it. The two kinds of renewal clause and how to amend one are covered in do property management contracts renew automatically.
Termination: how you leave and what it costs
Every agreement should say how either side ends it, with how much notice, and what it costs. The clause to watch is a termination fee tied to the remaining months of management fees, or to the remaining term of the tenant's lease. That is not a fee for work done; it is a penalty for leaving.
Also check what happens to the tenant, the lease, the deposit, the keys and your file. A good agreement says all of those transfer to you or your next manager within a stated number of days. Our guide on switching property managers covers what that handover should look like in practice.
- Notice period for the owner and for the manager
- Termination fee, if any, and exactly how it is calculated
- Whether the manager keeps a leasing fee on a tenant it placed if you leave mid-lease
- Deadline for returning documents, deposits and keys
The fee schedule, every line
The fee schedule should be inside the agreement or attached to it, not on a website that can change. Read for the management fee, leasing fee, renewal fee, inspection fees, maintenance coordination or markup, eviction coordination, setup, vacancy and anything labeled "administrative." Then look for a sentence that says no fee outside this schedule may be charged.
If that sentence is missing, ask for it. A company that puts every fee in writing before you sign has no reason to object. Our guide to hidden property management fees lists the charges that most often appear only after signing.
One more detail: check whether the management fee is charged on rent collected or rent due. On collected rent, the manager is paid only when you are. On rent due, you can pay a fee on a month the tenant skipped.
Maintenance limits and emergency authority
This clause sets how much the manager can spend without calling you. A typical structure is a dollar limit per repair that you choose, above which the manager must get your approval, plus an exception for emergencies that threaten the property or the tenant's safety.
Read the emergency language closely. It should describe what counts (an active leak, no heat in winter, no air conditioning in a Texas summer, a security failure) and require the manager to notify you promptly even when it does not need your approval. Also read who chooses the vendor and whether the manager or an affiliated company is paid anything on the repair. Our maintenance page describes how we handle estimates, approvals and documentation.
Reserves, trust accounting and disbursements
The reserve is the amount of your money the manager keeps on hand to pay bills between rent payments. The agreement should state the amount, confirm it is held in a trust account, and say what happens when a repair drains it. In Texas, a broker handling other people's money must keep it separate from the company's operating funds; the agreement should reflect that.
Then look for the disbursement day. Rent collected early in the month should reach you on a stated schedule, with a statement showing rent, fees, repairs and the reserve balance. If the agreement does not mention monthly statements or an owner portal, ask why. Year-end tax reporting should also be named as the manager's job.
Who holds the security deposit
The agreement must say whether the tenant's deposit sits with the manager or with you, and who is responsible for itemizing and returning it. Under Texas law, the deposit accounting has to be completed within a set window after the tenant moves out, and the landlord carries the liability if that is missed. If the manager holds the deposit, the agreement should state that it is in a trust account and will transfer to you or your next manager if the relationship ends.
Read this alongside the move-out inspection process. The deposit is only defensible if move-in condition was documented. Our guide to Texas security deposit rules explains the timeline in general terms.
Insurance, indemnification and liability
Most agreements require you to carry a landlord insurance policy and to name the management company as an additional insured. That is normal and protects you both. What deserves a closer read is the indemnification clause: the paragraph that says who covers whom if a lawsuit arrives.
A one-sided clause makes you responsible for everything, including the manager's own mistakes. A balanced clause has you cover claims arising from the property and the manager cover claims arising from its own negligence or misconduct. If a company refuses to carry its own errors and omissions coverage, that tells you something about how it views its responsibility. Our guarantees page explains what we stand behind in writing.
Leasing authority and the sale clause
The leasing section should say what the manager may decide alone: the rent range, lease length, pet policy, who signs the lease, and whether the manager may offer concessions. You want authority with limits, not a blank check and not a manager who has to call you about every showing.
Finally, look for a sale clause. Some agreements give the manager a commission if you sell the property to the tenant, or to anyone, during or after the term. That is a brokerage arrangement hidden in a management contract. If you may want to sell the property later, decide now whether you want that commitment, and if you do not, strike the clause before signing. Most companies will agree; the ones that will not have told you where their interest lies.
Also check the clause on advertising and signage. The manager should have the right to market the property in your name and place a sign, but the agreement should not give it the right to list the property for sale, or to refer you to a particular agent, without a separate agreement that you sign later.
This article is general information, not legal advice. Have an attorney review any agreement you are unsure about. If you would like to see how ours reads, ask us for a copy before you ever talk numbers.
The takeaway: If a management agreement answers term, termination, every fee, spending limits, the reserve, the deposit and liability in plain language, you can sign it; if it is vague on any of them, the vagueness is the point.
Questions owners ask
How long is a typical property management contract?
Most management agreements start with an initial term of about six months to a year, and what happens after that matters more than the initial length. The fair structures are an initial term that rolls into month-to-month, or a renewal you can decline with reasonable notice at any time. The structure to avoid is a term that rolls into another full year unless you cancel inside a narrow window. If the company cannot explain its renewal rule in one sentence, ask for it to be rewritten before you sign. Perpetual puts the term, the renewal rule and the notice period in plain language in the agreement itself.
Can I cancel a property management contract early?
Usually yes, with the notice period the agreement specifies, and sometimes with a termination fee. Read how that fee is calculated before signing. A flat, modest fee is common; a fee equal to the remaining months of management is a penalty worth negotiating out.
Who holds the security deposit, the owner or the property manager?
Either can, but the agreement must say which, and the funds should be in a trust account if the manager holds them. In Texas, the owner remains responsible for the deposit being accounted for on time, so you want a manager with a documented move-out process.
How much notice do I need to give before ending a management agreement?
The notice period is whatever the agreement says, so read the termination clause before you sign rather than after. A reasonable agreement states the notice period for both sides and says what it costs, if anything, to leave. Watch for a termination fee tied to the remaining months of the term or to the tenant's lease, which is a penalty for leaving rather than a fee for work done. The clause should also say how quickly the lease, deposit, keys and your file transfer to you or your next manager. Perpetual states the notice period and the handover steps in writing so leaving is never a negotiation.
Do property management contracts renew automatically?
Many do, and automatic renewal is not a problem by itself; the problem is a renewal that locks you into another full term unless you cancel inside a short window. Look for three things together: how long the initial term runs, whether it renews automatically, and how much notice you must give to stop the renewal. A fair agreement renews month-to-month or lets you decline the renewal with reasonable notice at any time. If the renewal rule takes more than one sentence to explain, ask the company to rewrite it. Perpetual's agreement spells out the renewal rule so there is no surprise at the anniversary.
What should I watch out for in a property management agreement?
Read eight things: the term and automatic renewal, how you terminate and what it costs, the complete fee schedule attached to the agreement, the maintenance spending limit and emergency authority, the reserve and trust accounting, who holds the security deposit, the insurance and indemnification clauses, and the manager's leasing authority. The specific traps are a termination fee tied to remaining months, fees that live on a website instead of in the contract, a one-sided indemnification clause, and a sales commission if you ever sell the home. Vague language on any of these is the warning. Perpetual answers each in plain language, with every fee listed before you sign.
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