Property management and the management agreement

The owner sets the assignment

Property management is the operation of real estate for an owner: collecting rent, arranging maintenance, coordinating leasing, paying authorized expenses, and reporting results. The owner is the principal; the manager acts as an agent within delegated authority. Broad responsibility for a property's ongoing business does not mean unlimited power.

A written management agreement should identify the parties and property, the term, renewal and termination procedures, services, compensation, and each party's responsibilities. It should specify authority to advertise, negotiate or sign leases, collect rent, hire contractors, and spend money. State approval limits, an emergency procedure, reserve requirements, reporting frequency, and how records and funds will be transferred when management ends. These provisions reduce disputes; an owner's instruction cannot authorize unlawful conduct.

Apply the agreement

If a routine repair exceeds the manager's spending limit, obtain the required approval. For an emergency, apply the agreement's emergency authority and document the response. Compensation might be a flat fee, a percentage of rent collected, or separately agreed leasing fees. Read the fee base carefully: rent collected is different from rent scheduled. A budget guides operations but does not replace a specific approval restriction.

New York duties

For a New York broker managing property as an agent, 19 NYCRR § 175.3(a) bars accepting a commission, rebate, or profit on client expenditures without the client's full knowledge and consent. A contractor's rebate is not simply extra management compensation.

Under 19 NYCRR § 175.1, a broker must keep the principal's money and property separate from the broker's own. Maintain a separate, special bank account exclusively for that money, deposit it within three business days, and safeguard it securely before deposit. The money must be in a federally insured bank account, not another fund or investment. Accrued interest cannot benefit the broker except when applied to and deducted from earned commission with all parties' consent. Section 175.2 requires an accounting and remittance of collected, unexpended client money within a reasonable time. Section 175.3(b) requires brokers holding tenant security to comply with New York's security-money law, including required interest.

When acting as a landlord's agent in a residential transaction covered by Real Property Law § 443, the agent owes the landlord reasonable care, undivided loyalty, confidentiality, full disclosure, obedience, and accounting. The agent must also deal honestly, fairly, and in good faith with tenants. Agency disclosure explains representation; it does not replace the management agreement's operational terms.