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A commercial property management agreement is a contract that spells out the relationship between the property owner and its manager. If there's a dispute between them, the deal will help resolve the issue in court. A commercial property management agreement usually specifies the terms and conditions of both parties' financial and operational obligations.
Commercial property management agreements can outline expectations of the property management company, such as the type of staffing they can and cannot hire, the property maintenance requirements, and things like fees and insurance that need to be in place. These agreements usually set their terms for one year but can vary.
Below is a list of common sections included in Commercial Property Management Agreements. These sections are linked to the below sample agreement for you to explore.
WATERTOWER APARTMENTS, EDEN PRAIRIE, MINNESOTA
PROPERTY MANAGEMENT AGREEMENT
LINCOLN APARTMENT MANAGEMENT LIMITED PARTNERSHIP
KBS LEGACY PARTNERS WATERTOWER LLC
TABLE OF CONTENTS
APPOINTMENT AND SERVICES OF PROPERTY MANAGER
COMPENSATION AND EXPENSES OF PROPERTY MANAGER
3.02. Expenses to be Borne by Property Manager
PERSONNEL AND BONDING
4.01. Stability of Management Team
4.02. Fidelity Bond
COMPLIANCE WITH LAWS
5.03. Hazardous Wastes
5.04. Asbestos and Similar Compliance Matters
ACCOUNTING AND FINANCIAL MATTERS
6.01. Books and Records
6.02. Reports and Reconciliation of Accounts
6.04. Other Reports and Statements
6.05. Contracts and Other Agreements
6.06. Final Accounting
6.07. Tax Returns
7.01. Property Accounts
7.02. Expenses Paid from Property Bank Account
INSURANCE AND INDEMNITY
8.02. Property Manager’s Insurance Responsibility
8.03. Contract Documents; Indemnity Provisions
8.04. Ratings of Insurance Companies
8.05. Owner’s Insurance Responsibility
RELATIONSHIP OF PARTIES and REPRESENTATIONS and WARRANTIES
9.01. Nature of Relationship
9.02. Communications Between Parties
9.03. Relationship of Owner and Property Manager with Respect to Leasing
9.04. No Sales Brokerage Agreement
9.06. Property Manager Not to Pledge Owner’s Credit
9.07 Representations and Warranties
10.01. Termination by Owner Without Cause
10.02. Termination by Owner for Cause
10.03. Termination by Property Manager
10.04. Orderly Transition
10.05. Rights Which Survive Termination or Expiration
11.01. Governing Law
11.02. Table of Contents and Headings
11.03. Entire Agreement
11.04. Successors and Assigns
11.08. Attorneys’ Fees
11.09. Further Acts
11.10. No Advertising
11.12. Owner Exculpatory Clause; Waivers of Jury Trial and Punitive Damages
A - LEGAL DESCRIPTION
B - RENTAL GUIDELINES
PROPERTY MANAGEMENT AGREEMENT
This PROPERTY MANAGEMENT AGREEMENT (this “ Agreement ”) is made as of January 15, 2013 (the “ Effective Date ”) between LINCOLN APARTMENT MANAGEMENT LIMITED PARTNERSHIP, a Delaware limited partnership (“ Property Manager ”), and KBS LEGACY PARTNERS WATERTOWER LLC, a Delaware limited liability company (“ Owner ”).
A. Owner is the record or beneficial owner of the Property (as defined below) and Property Manager is experienced in the management, operation, leasing, service, repair and supervision of residential apartment projects similar to the Property.
B. The parties desire to enter into this Agreement and set forth the terms and conditions under which Property Manager will manage the Property.
NOW, THEREFORE, in consideration of the mutual covenants herein contained and other good and valuable consideration, Owner and Property Manager agree as follows:
ARTICLE 1. DEFINITIONS .
1.01. Definitions . As used in this Agreement, the following terms shall have the respective meanings set forth below:
“Affiliate” shall mean, when used with respect to any person (a) if such person is a corporation, any officer or director thereof and any person which is directly, or indirectly, the beneficial owner of more than 10% of any class of equity security (as defined in the Securities Exchange Act of 1934) thereof, or if any such beneficial owner is a partnership, any partner thereof, or if any such beneficial owner is a corporation, any person controlling, controlled by or under common control with such beneficial owner or of any officer or director of such beneficial owner or of any corporation occupying any such control relationship, (b) if such person is a partnership, any partner thereof, and (c) any other person which directly or indirectly controls or is controlled by or is under common control with such person. For the purpose of this definition, “control” (including the correlative meanings of the term “controlling,” “controlled by” and “under common control with”), with respect to any person, shall mean the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of such person, whether through the ownership of voting securities or by contract or otherwise. The term “Affiliate” shall also mean, when used with respect to any individual, the parents and grandparents of such individual, the parents and grandparents of any other individual who is an Affiliate of such individual by virtue of any one or more of the foregoing clauses (a), (b) and (c) of this definition, any descendant (whether natural or adopted) of any such parents or grandparents and any spouse of any such descendant.
“Approved Capital Budget” and “Approved Operating Budget” shall have the meanings described in Section 2.02(b).
“Fiscal Year” shall mean the twelve (12) months commencing January 1 and ending December 31.
“Gross Monthly Collections” shall mean the total gross monthly collections received from the Property, including, without limitation, tenant rental income, pet rents and other charges and miscellaneous income items of Owner as applicable. Any payments by tenants on account of any taxes imposed on rentals collected by Property Manager shall be excluded from Gross Monthly Collections. Any advance rental payments shall be included in Gross Monthly Collections when received. Security and other deposits shall not be included therein unless the same are no longer used for security purposes and are applied to income. Without limitation, any payment of money by a tenant to Owner or Property Manager in consideration for or in conjunction with a rental deposit, the termination, cancellation, expiration, renewal, extension or modification of a tenant’s lease, property insurance loss proceeds, remodeling and tenant improvement charge costs, condemnation proceeds, or proceeds received by Owner in connection with the sale of any portion of the Property or the refinancing of any indebtedness secured by a lien on any portion of the Property, shall be excluded from the Gross Monthly Collections. Proceeds of business interruption insurance shall be included in Gross Monthly Collections.
“Property” shall mean that certain real property consisting of approximately five and four tenths (5.4) acres and improvements constructed thereon consisting of two hundred and twenty eight (228) residential units (commonly known as the Water Tower Apartments) and approx. 7500 sq.ft . square feet of retail space located in the City of Eden Prairie, Minnesota as more particularly described on Exhibit A attached hereto.
“Records Office” shall mean Property Manager’s offices located at the Property and its corporate office in Oak Brook, Illinois.
“Rental Guidelines” shall mean those guidelines attached hereto as Exhibit B, as amended from time to time.
ARTICLE 2. APPOINTMENT AND SERVICES OF PROPERTY MANAGER .
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2.02. Services of Property Manager . Property Manager shall direct, supervise, manage,
operate, maintain and repair the Property and develop, institute and follow programs and policies to facilitate the efficient operation of the Property in compliance with this Agreement, the Rental Guidelines and all written directions of Owner on as profitable a basis as reasonably possible. Without limiting the generality of the foregoing and subject at all times to such procedures and directions that shall be set forth in this Agreement and the Rental Guidelines (as revised or amended from time to time), Property Manager shall do all of the following:
(a) Employees . Property Manager shall select, employ, pay, supervise and discharge all employees and personnel necessary for the operation, maintenance and protection of the Property (subject to the limitations set forth in Section 4.01 hereof). All persons so employed by Property Manager shall be employees of Property Manager or independent contractors retained by Property Manager, and not by Owner. All costs of gross salary and wages, payroll taxes, medical and dental insurance, worker’s compensation insurance, incentive leasing bonuses and other costs and employee benefit expenses payable on account of such employees, shall be included in the Approved Operating Budget. Property Manager shall fully comply with all applicable laws and regulations having to do with workers’ compensation, social security, unemployment insurance, hours of labor, wages, working conditions and other employer/employee-related subjects.
(b) Records and Budgets . Property Manager shall keep or cause to be kept at the Records Office suitable books of control and account as provided in this Agreement. Property Manager shall prepare on Microsoft Excel worksheets (using Yardi templates) and submit to Owner such monthly, quarterly, annual or other operating and capital budgets as shall be required by Owner. Without limitation, Property Manager shall prepare and submit to Owner a proposed operating budget and a proposed capital budget for the Property for the management and operation of the Property for the forthcoming Fiscal Year no later than November 1 of each year during the term hereof. All proposed operating budgets and capital budgets shall be on a form submitted by Property Manager and approved by Owner. Owner will consider the proposed budgets and endeavor to approve such budgets by December 1 of each year during the term hereof. The proposed budgets shall become the Approved Capital Budget and the Approved Operating Budget only when approved by Owner. Following approval by Owner the Approved Capital Budget and the Approved Operating Budget shall be promptly uploaded into the Yardi accounting system for the Property.
In the event an annual operating budget for a Property has not been approved by Owner prior to the commencement of any Fiscal Year during the term hereof, the operating budget for each month (the “ Current Month ”) until the annual operating budget is approved shall be the amount of the most recent Approved Operating Budget for the Property for the same calendar month (“ Base Month ”), as adjusted to reflect (a) any increase or decrease between the Base Month and the Current Month in the Consumer Price Index for All Urban Consumers for the metropolitan area in which the Property is located (base year 1982-84=100) published by the United States Department of Labor, Bureau of Labor Statistics and (b) any increase or decrease in the occupancy of the Property between the Base Month and the Current Month and (c) any increase or decrease in the taxes, insurance and utilities of the Property.
Owner may revoke its approval of either Budget at any time upon twenty (20) days’ prior written notice to Property Manager. Owner may amend its approval of either Budget and cause the Budget to be amended to conform to such approval at any time upon twenty (20) days’ prior written notice to Property Manager and, in such event, only the Budget as so amended shall be deemed approved.
With respect to the first Fiscal Year of the term, if not a full twelve months, Property Manager shall submit to Owner for approval an operating and capital budget for the balance of such calendar year as soon as possible and no later than thirty (30) days after the date hereof.
Property Manager shall have the right, from time to time, during each calendar year to submit revised Budgets to Owner for approval. Property Manager agrees to use diligence and all reasonable efforts to ensure that the actual costs of maintaining and operating the Property shall not exceed the Approved Operating Budget or the Approved Capital Budget pertaining thereto, as applicable.
(c) Leasing . Property Manager shall coordinate the leasing activities of the Property and, subject to Section 9.03 below, shall use commercially reasonable efforts to obtain responsible tenants for all unleased units and to renew existing leases at rental rates at least equal to the Rental Guidelines. Property Manager may negotiate and execute leases using the most current version of the National Apartment Association form of Apartment Lease for Minnesota. Any deviation from the standard lease forms or the Rental Guidelines shall require the prior written consent of Owner.
(d) Rent . Property Manager shall use reasonable efforts to ensure that all rents and all other monies payable under the leases are paid by the tenants of the Property as and when the same shall become due and payable directly to Property Manager. Property Manager shall adjust rentals and other required payments where adjustment is contemplated by the leases, shall notify Owner and tenants of such adjustments and shall sign and serve in the name of Owner such notices (except as limited by Section 2.02(e) below), including without limitation letters demanding past due and currently owed rents and other monies, as are deemed appropriate or necessary by Property Manager. Property Manager shall collect and identify any income due Owner from miscellaneous services provided to tenants or the public, including, but not limited to, parking income, tenant storage and cable television charges. All rents and other monies so collected by Property Manager shall be immediately deposited in the Property Bank Account (as defined below).
(e) Collections . Property Manager shall undertake the collection of rents and monetary payments of every kind and of any form due from tenants of the Property. Property Manager shall thereafter actively pursue collection of all such rent and payments. Except as allowed by applicable law, Property Manager shall not terminate any lease, lock out a tenant, institute a suit for rent or for use and occupancy, or institute proceedings for recovery of possession. In the event that any tenant at the Property shall be delinquent in any payment due to Owner beyond any applicable grace periods or otherwise be in default under the terms of its lease, Property Manager shall employ such methods as are
commercially reasonable to either collect unpaid rent or to evict the tenant from the premises. Property Manager shall employ a collection agency to pursue payment collection and, except as otherwise required by applicable law, shall utilize legal counsel only if a tenant refuses to vacate an apartment unit following proper notice. The commencement of any litigation (other than for routine residential tenant eviction and residential rent collection matters, including bringing suit for and recovery of any delinquent rents or damages and possession of the premises in the name of Owner as an agent with a beneficial interest), shall require the prior written approval of Owner. In connection with all suits or proceedings (other than for routine residential tenant eviction and residential rent collection matters, including bringing suit for and recovery of any delinquent rents or damages and possession of the premises in the name of Owner as an agent with a beneficial interest), only legal counsel approved by Owner shall be retained, but Property Manager shall recommend legal counsel and furnish Owner with the estimated costs of legal services to be incurred in bringing such suit or proceeding.
(f) Maintenance . Property Manager shall maintain or cause to be maintained (to the extent not maintained by tenants) the Property and common areas thereof, external and internal, including, without limitation, sidewalks, signs, mechanical, electrical and other systems, parking lots and landscaping, in good and clean condition and repair, provided no maintenance expense, repairs or alterations other than emergency repairs, which are not specifically identified within the Approved Operating Budget, shall be undertaken without the prior written consent of Owner. Property Manager shall coordinate and supervise all construction activities (including, without limitation, tenant improvements, tenant refurbishment, common area refurbishment, maintenance and repairs) on the Property. All maintenance expenses, repairs or alterations (including, without limitation, alterations required for the occupancy of new tenants) requiring expenditures in excess of $25,000 shall, at Owner’s election, be planned and supervised by an architect, designer, inspector or general contractor designated by Property Manager and approved in writing by Owner. Property Manager shall institute and effectuate a preventative maintenance program. Notwithstanding the foregoing, in the event of an emergency in which there is an immediate danger to persons or property or in which action is required in order to avoid suspension of services, Property Manager shall take such action as is reasonable and prudent under the circumstances and shall be reimbursed for any expense incurred in such action, even if not in the Approved Operating Budget, so long as Property Manager attempts to consult with Owner in advance and, in any event, notifies Owner within 48 hours of taking such action explaining the reasons therefor. Property Manager shall obtain all necessary receipts, releases, waivers, discharges and assurances necessary to keep the Property free of any mechanics’, laborers’, materials suppliers’ or vendors’ liens in connection with the maintenance or operation of the Property. All such documentation shall be in such form as required by Owner.
(g) Contracts . Property Manager shall not enter into any contract without Owner’s prior written approval (including approval of the provisions of any equipment lease); provided, however, that Owner’s prior written approval shall not be required with respect to any utility or service contract which is (i) entered into in the usual course of business, (ii) for a term of one year or less, and (iii) specifically provided for in the Approved Operating Budget. Without limiting the foregoing, each contract entered into by
Property Manager pursuant to this Section 2.02(g) shall contain a thirty (30) day (or less) cancellation clause exercisable by Owner without cause and without penalty or fee, unless otherwise approved in writing by Owner. All utility, supply, service, vending and related contracts or equipment leases are to be entered into by Property Manager on behalf of Owner. Property Manager shall assure that any contractor performing work on the Property maintains insurance satisfactory to Owner, including, but not limited to, Workers’ Compensation Insurance (and, when required by law, compulsory Non-Occupational Disability Insurance) and insurance against liability for injury to persons and property arising out of all such contractor’s operations naming Property Manager and Owner as additional insureds. Property Manager shall obtain certificates of insurance for all such insurance before the work begins. Property Manager shall furnish copies of the certificates to Owner if requested by Owner.
(h) Purchases . Property Manager shall supervise and purchase or arrange for the purchase of all reasonable inventories, provisions, supplies and operating equipment which are provided for in the Approved Operating Budget or otherwise specifically approved by Owner in writing. To the extent available, Property Manager shall give, or obtain for Owner, all volume purchasing benefits and discounts available to Property Manager or to properties of the size and class of the Property.
(i) Operating Expenses . Property Manager shall pay all normal operating expenses specifically provided for in the Approved Operating Budget not paid for by tenants of the Property in a manner commercially reasonable for the Property from funds in the Property Bank Account described in Section 7.01(a). Property Manager shall recommend that Owner purchase major items of new or replacement equipment when Property Manager believes such purchase to be necessary or desirable. Owner may arrange to purchase and install such items itself or may authorize Property Manager to do so subject to any supervision and specification requirements and conditions prescribed by Owner. Prior to purchasing, Property Manager must obtain Owner’s specific written authorization for all capital expenditures that are not included in the Approved Capital Budget as well as for all capital expenditures of $25,000 or more that are included and itemized with specificity in any one (1) line item in the Approved Capital Budget. Unless otherwise directed by Owner, Property Manager shall obtain at least three (3) written estimates from qualified bidders for any capital improvement project if the cost of such project is reasonably expected to exceed $25,000. All capital improvement projects requiring expenditures in excess of $25,000 shall, at Owner’s election, be planned and supervised by an architect, designer, inspector or general contractor designated by Property Manager and approved in writing by Owner.
(j) Conservation Techniques . Property Manager shall provide proper energy management and utilize utility conservation techniques.
(k) Security . Property Manager shall use reasonable efforts to maintain security adequate to the needs of the Property as directed by Owner from time to time. Property Manager shall promptly notify Owner of any incidents or conditions which reflect on or affect the adequacy of the security provisions for the Property.
(l) Taxes . Property Manager shall obtain and caused to be verified bills for real estate and personal property taxes, sales taxes on rental payments, improvement assessments and other like charges which are or may become liens against any portion of the Property (collectively, “Taxes” ). Owner may elect to pay some or all of such bills for Taxes and, in such event, Property Manager shall remit all bills for Taxes to Owner not less than thirty (30) calendar days prior to the date on which each becomes delinquent. Upon Property Manager’s receipt of written notice from Owner of Owner’s election to pay a bill for Taxes, Property Manager shall pay such bill not less than fifteen (15) calendar days prior to the date on which it becomes delinquent. If Owner decides to contest any Taxes, Owner shall advise Property Manager and Property Manager shall not pay such Taxes until directed by Owner.
(m) Compliance . Property Manager shall operate the Property in compliance with all terms and conditions of applicable law, any ground lease, space lease, mortgage, deed of trust or other security instrument affecting the Property and of which Property Manager has knowledge, but Property Manager shall not be required to make any payment (except those provided in the Approved Operating Budget) on account thereof unless specifically instructed to do so by Owner in writing. Property Manager shall also comply or supervise compliance with the provisions of any insurance policy or policies insuring Owner in relation to the Property (so as not to decrease the insurance coverage or increase the insurance premiums). Property Manager shall be responsible for performance by Owner under all license agreements, easement agreements, covenants, conditions, restrictions, documents of record, use permits, development agreements, operating agreements or other similar documents governing or applicable to the title, operation, management, occupancy, promotion and leasing of the Property known to Property Manager.
(n) Licenses and Permits . Property Manager shall assist in obtaining at Owner’s expense all licenses, permits or other instruments required for the operation of the Property or any portion thereof (collectively, “ Licenses ”). Property Manager shall send to Owner a copy of all initial or renewal license applications. Licenses shall be obtained in Owner’s name whenever possible. Any Licenses held in the name of Property Manager shall be held by it on behalf of Owner, and upon the termination or expiration of this Agreement, Property Manager shall transfer or assign any such Licenses to Owner or to such person as Owner may direct. Property Manager shall keep in full force and effect all licenses, permits, consents and authorizations as may be necessary for the proper performance by Property Manager of its duties and obligations under this Agreement (including, without limitation, qualification to do business) or as may be required under any lease covering any portion of the Property. All such licenses, permits, consents and authorizations shall be in the name of Property Manager.
(o) Notice and Cooperation in Legal Proceedings . Owner and Property Manager shall forthwith give notice to each other of the commencement of any action, suit or proceeding against Owner or against Property Manager with respect to the operations of the Property or otherwise affecting the Property. Property Manager shall fully cooperate, and shall cause all its employees to fully cooperate, in connection with the prosecution or defense of all legal proceedings affecting the Property.
(p) Other Complaints and Notices . Property Manager shall handle promptly complaints and requests from tenants, concessionaires and licensees and notify Owner of any major complaint made by a tenant, concessionaire or licensee. Property Manager shall notify Owner promptly of: (i) any notice received by Property Manager or known to Property Manager of violation of any governmental requirements (and make recommendations regarding compliance therewith); (ii) any defect or unsafe condition in the Property known to Property Manager; (iii) any notice received by Property Manager or known to Property Manager of violation of covenants, conditions and restrictions affecting the Property or noncompliance with loan documents affecting the Property, if any; (iv) any fire, accident or other casualty or damage to the Property; (v) any condemnation proceedings, rezoning or other governmental order, lawsuit or threat thereof involving the Property; (vi) any violations relative to the leasing, use, repair and maintenance of the Property under governmental laws, rules, regulations, ordinances or like provisions; (vii) defaults under any leases or other agreements affecting the Property (excluding resident leases); or (viii) any violation of any insurance requirement. Property Manager shall promptly deliver to Owner copies of any documentation in its possession relating to such matters. Property Manager shall keep Owner reasonably informed of the status of the particular matter through the final resolution thereof. In the case of any fire or other damage to the Property or violation or alleged violation of laws respecting Hazardous Wastes (as defined in Section 5.03), Property Manager shall immediately give telephonic notice thereof to Owner. Property Manager shall complete all necessary and customary loss reports in connection with any fire or other damage to the Property. Property Manager shall retain in the records it maintains for the Property copies of all supporting documentation with reference to such notices.
(q) Business Plan and Property Review Program . Property Manager shall provide Owner with a draft of a business plan for the Property for the forthcoming Fiscal Year no later than November 1 of each year during the term hereof containing such information as Owner may reasonably request, including (i) a list of all properties competitive with the Property, a list of the tenants of each and all other reasonably available information respecting each, and (ii) basic demographic data relating to the market area of the Property, including population growth, major employers, employment and unemployment levels and, if the Property is a retail property, retail sales and housing starts. With respect to the first Fiscal Year of the term, Property Manager shall submit to Owner for approval a draft of a business plan for the balance of such calendar year as soon as possible and no later than thirty (30) days after the date hereof. In addition, Property Manager shall participate in Owner’s property review programs to the extent requested by Owner. Such review shall include asset, investment, financial and strategy profiles in form and substance satisfactory to Owner and such assistance as Owner may request in connection with appraisals of the Property. Property Manager shall respond, within 10 days, to Owner’s management evaluation reports concerning actions to be taken by Property Manager to correct or modify its management standards for the operations or financial services provided for the Property.
(r) General . Property Manager shall afford such supervision, professional management and in-house staff services as may be necessary or desirable to operate the Property in the same manner as is customary and usual in the operation of other properties of substantially comparable location, class, size and standing, and shall provide such services at
the Property as are consistent with the Property’s size and existing facilities. Subject only to those express limitations set forth in this Agreement, Property Manager shall have control and discretion in the management and operation of the Property and in the performance of the foregoing services. Without limiting the foregoing, if applicable, Property Manager shall review and, if so directed by Owner, conduct an audit of each retail tenant’s compliance with its obligation to pay a percentage rent or any other amount determined on the basis of the tenant’s sales or gross or net income.
ARTICLE 3. COMPENSATION AND EXPENSES OF PROPERTY MANAGER .