How to Read a Property Management Contract Before You Sign
Before signing your property management agreement, read the scope, the full fee schedule (especially project supervision), the renewal and termination clauses, and the records-handover terms. While most boards choose to have their attorney review the contract, it’s good practice to familiarize yourself with it and know what’s in it. The base management fee is rarely the real cost.
The pitch tells you what a firm wants you to hear. The contract tells you what you are actually buying, for how long, and how hard it will be to leave.
The clauses that matter most
Read these six closely:
Scope of services. What is included versus billed separately. Anything not named here shows up later as an extra.
Fee structure. The base fee plus every add-on (see below).
Term and renewal. How long, and whether it auto-renews unless you give notice in a narrow window.
Termination. How you exit, how much notice, and whether it is for cause only.
Records handover. What the firm must return, and how fast, when you leave.
Bank accounts and signing authority. Who controls the money and at what approval limits.
Hidden fees to hunt for
The headline fee is the tip of the iceberg. Look for:
Closing and transfer fees on unit sales
Technology or resident portal fees
After-hours and emergency charges
Project supervision markups, often a percentage of total project cost
That last one is the big one. On a large facade or boiler job, the supervision fee can dwarf the annual management fee.
Red flags
A vague, one-paragraph scope
Auto-renewal with a short notice window
Termination only "for cause," with a long cure process
No affiliated-vendor disclosure
Loose or missing spending limits
Where boards get burned
Boards sign the version the firm drafted, after their attorney reviews it, skim the exit terms, and discover two years later that leaving requires proving cause through a process designed to keep them in.
By then, the leverage is gone.
The contract is negotiable before you sign and nearly impossible to fix after. That single window is where a board-side advisor saves you the most, because we know which clauses to push on and what "market" actually looks like.
Reviewing a proposed agreement now? The Folson Group helps boards evaluate proposals and contracts before they sign.
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