Property Management Contract Template for Short-Term Rentals

Landlords and property owners planning to hire a property management company should prepare a formal contract that clearly outlines the details of the arrangement.

One of the key reasons is to ensure that responsibilities are clearly defined—whether we talk about long-term or short-term rental property management.

In STR practice, the manager is involved in daily operations like check-ins, and check-outs, scheduling cleanings, arranging repairs, responding to guest reviews, being available for emergencies, and managing listings.

The scope of work can vary, and companies charge different fees based on the responsibilities they take on themselves.

To help you get started, iGMS offers a free downloadable agreement form that you can customize to fit your needs.

Download Your Free Property Management Agreement Form

At iGMS, we get the challenges rental owners and hosts face and how these impact their business. That’s why we’ve created this template for you. If you’re considering hiring a property management company for your vacation rentals, you’ve probably realized you can’t do it all alone.

Our software helps create a seamless guest experience and cuts down on property management errors. You can relax knowing that cleaners get notified about guest checkouts, and you have full control over guest communication and all your listings through one unified inbox.

If you’re planning to hire property management services, grab our free contract template. We’ve laid out what should be in the contract and how to structure it.

After downloading, you can customize the property management agreement template to your specific needs and the terms you’ve agreed on with your property manager.

What Is a Property Management Agreement and Why Is It Important?

A property management agreement, or contract, is a formal document signed by the landlord or property owner and the property management service provider.

Not having a formal agreement leaves both parties in a vulnerable position. The document clearly outlines the property manager’s duties, fees, payments, and contract terms.

A well-structured agreement provides:

• Clearly defined responsibilities
• Financial arrangements
• Legal protection
• Regulatory compliance

Be sure to sign two copies of the property management agreement—one for yourself and one for the property manager. The contract sets clear terms for the length of the agreement, renewal options, and termination procedures, giving the host control over the management relationship.

With a formal agreement in place, property managers are held accountable for meeting specific performance standards. If they’re paid a percentage of the rental income, they’ll have even more reason to make sure your property performs well.

After both parties agree to the terms, it may be wise to have a lawyer review the contract to ensure it meets legal standards and protects your interests.

Types of Property Management Agreements

Let’s break down a few types of agreements based on the nature of the property and the services provided.

Here they are:

Residential Property Management Agreement

Landlords who own single-family homes, apartments, or condominiums often hire a manager to handle tenant relations and rent collection. Responsibilities typically include finding and screening tenants, collecting rent, handling repairs and maintenance, and ensuring the property complies with local housing laws.

If there are issues with lease enforcement, the manager can charge late fees or proceed with evictions on the owner’s behalf as an authorized representative. They also take care of property inspections.

Commercial Property Management Agreement

It applies to the management of commercial real estate, such as office buildings, retail spaces, or industrial properties. Commercial leases are often more complex, and they must comply strictly with regulations.

The contract may specify what types of staff business tenants can and cannot hire, as well as outline property maintenance requirements, among other details.

Short Term Rental Property Agreement

Vacation rental management comes into play when a property owner has vacation homes or Airbnb-style rentals. Compared to managing long-term residential properties, short-term rental management is much more demanding due to the high guest turnover. Vacation rental management isn’t a “set it and forget it” system—a proactive approach is essential, and it creates higher returns.

In addition to working with a trusted manager, you can maintain control over your rental properties by implementing an automated system, and that’s where iGMS steps in.

What to Look for in Property Management Agreements?

A property management agreement is presented as a business relationship proposal between the property manager and the property owner.

That said, owners can take the time to consult multiple property management companies, conduct due diligence, and compare the terms. According to Mark Cunningham from a reputable property management company Grace Property Management from Colorado, here are some key things owners should look for in contracts:

• Cancellation Policy: How easy is it to terminate the contract? Will they charge you a termination fee?
• Fee Transparency: Are the fees clearly outlined, or are there hidden costs? Be cautious of companies that aren’t upfront about their fees. Do they charge extra for services like setup, lease renewal, or early termination?
• Legal Involvement: Is an attorney involved in preparing the agreement?
• Trust Account: Will the property management company open a trust account (also known as a reserve) when handling funds on the owner’s behalf?
• Evictions: Who is responsible for handling tenant evictions?

What Will a Property Management Agreement Specify?

To sum up the most important elements of an agreement, here’s what it should include:

• Responsibilities of Both Parties and Scope of Work
• Property Details
• Term and Cancellation Policy
• Property Manager Compensation
• Dispute Resolution (How any disputes between the two parties will be resolved)
• Reporting and Financial Statements (How and when financial statements and other reports will be provided to the owner)
• Legal Disclosures (Such as the property manager’s licenses and liability insurance coverage)

Rental agreements may vary depending on the specific contract and situation. Let’s dive into the details of responsibilities and obligations that you can customize in your free property management agreement template.

Obligations of A Property Manager

In the case of residential properties, the property manager’s responsibilities include handling various tasks and tenant requests to ensure smooth operation. Here is a breakdown of some key obligations:

Rent Payments

The property manager collects rent payments from tenants and ensures timely disbursement of funds to the property owner. Duties include tracking payments, sending reminders, and enforcing late payment policies.

Trust Accounts

All funds collected on behalf of the owner, including rent and security deposits, must be deposited into a separate trust or reserve account, ensuring legal compliance.

Security Deposits

Manage tenant security deposits at the start of the tenancy. They are also responsible for refunding the deposit at the lease expiration, following state and local laws.

Advertising Vacancies

For long-term rentals, the property manager is responsible for marketing strategies to advertise vacant units through various channels, such as online listings and local advertising, to attract tenants. In the case of short-term rentals, they focus on optimizing listings on platforms like Airbnb or VRBO to attract guests and maintain high occupancy rates.

Tenant Screening

The property manager screens prospective tenants by verifying references, conducting background checks, and ensuring that applicants meet legal criteria, such as income and credit requirements.

Lease Management

Property managers manage lease terms, including signing month-to-month tenancies, renewing leases, and handling terminations.

Notices and Legal Action:

Property managers serve necessary legal notices, such as notices to pay rent or vacate, and take legal action against delinquent tenants on behalf of the owner. This may include filing legal proceedings for eviction.

Managers’ list of duties also includes:

Utility and Service Contracts

Manage contracts for utilities and services (e.g., electricity, water, pest control). Will the rental property manager be the one paying the bills?

Record Keeping

Keep detailed records of all receipts, expenses, and accruals, which are necessary for preparing financial reports, tax filings.

Hiring and Supervision of Labor

Hire, discharge, and supervise employees and contractors for property management. This could include maintenance workers, cleaning crews, or specialized contractors for repairs and renovations. Proper supervision ensures that all work is completed efficiently and up to standard.

Financial Reporting

Provide periodic financial statements, including income, expenses incurred, and security deposits.

Remittance of Income

Remit all income (minus expenses) to the owner.

Legal Compliance

Ensuring that the property complies with all applicable local, state, and federal laws is a key responsibility of the property manager. This includes adhering to fair housing regulations, anti-discrimination laws, and any other property-related legal requirements to avoid fines, lawsuits, or other legal issues.

Part of it is health and safety compliance to ensure compliance with health and safety standards, such as fire alarms, carbon monoxide detectors, and emergency exits.

Insurance Policy

The agreement will specify who is responsible for insurance. The property manager (at the property owner’s expense) may obtain and keep in force adequate insurance for the property. This includes coverage against physical damage and liability insurance.

Vacation Rental Specific Responsibilities

And when it comes to short-term rentals, the agreement includes responsibilities specific to short-term leases.

Will every proposed contract cover all the aspects we listed? No, it won’t. It depends on what services they charge for.

Here are some vacation rental-specific duties:

Guest Turnover, Inventory Management and Cleaning

Coordinate quick turnover services between guests, including cleaning and restocking supplies. Hire and supervise professional cleaners.

This also includes conducting inventory checks and managing amenities. In the agreement, the owner can provide detailed information about the property, including amenities and furniture.

24/7 Guest Support

Owners who outsource property management do so because they lack time to be everpresent and available to guests. Agents provide round-the-clock guest communication and support for any issues that arise during the stay.

Check-In/Check-Out Procedures

Manage the guest check-in and check-out processes. iGMS users have automated messaging to handle basic tasks like sending check-in and check-out instructions. The managers take care of additional individual requests.

Online Listings Management and Price Optimization

Create, manage, and optimize listings on short-term rental platforms (e.g., Airbnb, VRBO). Price optimization is crucial for maximizing revenue, so ensure the manager understands factors like seasonality and local events influencing pricing.

Guest Review Management

Handle the listing’s reputation by monitoring and responding to guest reviews. Address feedback to maintain a positive online presence. iGMS automates most parts of this process with smart templates.

Emergency Response

Provide immediate response and coordinate emergency repairs or issues during a guest’s stay.

Short-Term Rental Tax Compliance

The manager may handle occupancy taxes or provide necessary documentation to help the owner comply with tax requirements.

Licensing and Permit Compliance

Ensure the property complies with local short-term rental regulations, including obtaining necessary permits.

The property management agreement also outlines other aspects of daily operations.

Automation and Technology

For example, define how technology will be used to automate bookings, guest communication, and property access (e.g., smart locks, and property management software like iGMS).

Security Measures

Ensure security systems are in place and comply with privacy laws. This includes managing camera installations and monitoring.

Keep in mind that Airbnb updated its camera policy in March 2024.

• Indoor security cameras are now banned in all Airbnb listings globally (no cameras allowed in living rooms or hallways).
• Outdoor security cameras and devices like doorbell cameras are still permitted, but hosts must disclose their presence and location before guests book.
• Noise decibel monitors must also be disclosed beforehand.

Obligations of a Property Owner

Property owners hire property managers when they lack the time or expertise to handle the rental business on a day-to-day basis and want to turn it into a more passive income source.

Property owners commit to paying management fees and covering property costs. They oversee financial support, strategic direction, and cooperation for effective business operations.

Property management agreements are partnerships where both parties should collaborate for mutual benefit. The owner may retain control over major decisions, such as property insurance payments, fulfilling tax obligations, approving repairs, and providing funds for unexpected expenses.

How Does a Property Management Company Work?

According to industry reports, revenue has grown over the past five years, reaching an estimated $119.1 billion in 2024, with more than 875,000 people employed in the property management sector. This is a substantial market, divided into segments such as residential, commercial, industrial, and vacation rental management.

The advice is to sign a property management agreement with a local agency because this type of work is highly location-specific. Real estate laws and rental compliance requirements vary from state to state, and there are logistical reasons for choosing a property manager close to the property.

License Requirements

Licensing is a regulatory measure designed to ensure that real estate professionals, such as brokers and property managers, meet certain professional standards and are qualified for the work they do.

One of the most important aspects is to ensure that the property manager you hire is properly licensed.

The governing law in most states in the U.S. requires property management companies to obtain a license from the local real estate board.

Bear in mind that property management licenses are not issued permanently. They must be renewed periodically, typically every 1-2 years, and in some states, up to 4 years.

The Property Manager’s Payment

Property managers may charge you in different ways. Some owners agree to a flat fee, regardless of revenue or short-term rental (STR) listing performance. Other property managers will take a percentage of rental income to perform services.

Here are the pros and cons of each payment structure:

Flat Fee

With a flat fee structure, hosts can easily predict their expenses since the management fee remains constant. However, this arrangement might not incentivize the property manager to maximize bookings or income, especially in the short-term rental market where income can vary greatly depending on the season and other factors.

Percentage Fee

If a property manager takes a percentage of the revenue, it can be beneficial for both parties, assuming the revenue is consistently high. During slow periods, however, this fee structure could end up costing the STR host more. In the STR market, this fee structure is generally preferred, with percentages ranging from 15-40% on average, depending on the scope of work.

A Standard Term for Management Contract

The length of a management contract is negotiable. For residential property management agreements, the standard term usually ranges from 12 to 24 months.

For vacation rental management, the term can vary depending on the company and its flexibility. Some might require a term of at least six months or 1-2 years. After the initial term, some companies may offer month-to-month agreements.

As long as there’s a fair cancellation policy in place, you don’t need to worry too much about the contract length.

Which brings us to the next question:

How to Terminate a Property Management Contract?

A cancellation policy ensures that either party can terminate the contract. It’s enough to submit a prior written notice, ideally via registered or certified mail, as a verbal statement won’t be sufficient.

In the agreement, you must specify the notice period, which typically ranges from 30 to 90 days.

Some common reasons for early contract termination include:

• Breach of Contract – If either the property manager or the host fails to meet their contractual obligations, such as not performing agreed-upon duties.
• Poor Performance – The termination clause allows the owner to cancel the contract if the property manager fails to secure guests within a specified timeframe.
• Non-Compliance with Legal or Regulatory Requirements -If either party violates local laws or fails to comply with regulations, such as licensing and zoning laws.
• Mutual Agreement – Both parties agree to terminate the contract early if the arrangement is no longer beneficial for either side.

Should I Contact an Attorney Before Signing Any Contract?

You’re welcome to download a property management contract template. For added security, consider having an attorney review the contract to ensure that all terms are clear, legally binding, and compliant with local rules.

Do I Need a Property Management Software?

If you don’t have time to manage short-term rentals but still consider it as a potential source of income, hiring a property management company is one option.

Another option is automation. Managing properties with iGMS is less of a grind and a much more enjoyable experience. Best of all, you have flexibility – you can use the software whether you work with a property manager or manage properties on your own.

Why choose iGMS?

With this system, you’ll be in control of guest communication, cleaning schedules, team management, and your listings’ performance on all platforms: Airbnb, VRBO, Booking.com, and direct bookings. Whether you rely on a third party or handle things yourself, you’ll always have a complete overview of your rental business.

Plus, we use innovative approaches inspired by new technologies and AI to help you stay ahead of the competition.