1st time landlord - need help with PM contract language

6 Replies


I am looking for a PM in Milwaukee, WI for my SFH. Am a bit uncomfortable with the language I'm reading in various contracts. Is it typical for the property owner to include the PM as 'insured' on my liability insurance? And do they (PMs) typically ask POs to carry $2M in liability? Since I'm hiring them - shouldn't they insure me against their errors? Who's in charge here?

what am i missing here?



None of the property managers I've used had the $2M requirement, but most wanted to be additional insured on my landlord policy. I thought it was weird at first, but seems standard these days. Some insurance companies actually charge more for this, so talk to your insurance first. It took me lots of research to find a decent PM in Vancouver, WA -- there were some nutty things in their contracts, mostly using their property management business to force you to use their other businesses. It took some time to find a decent one that I felt comfortable with.

Hi Lynn - thanks for the info. I too, am having a difficult time finding a PM. Most want a 1 year contract and I just won't do that. Will keep researching.


Property managers do not have an insurable interest in a property owned by someone else. The risk, and costs of liability and casualty insurance is one of the joys of property ownership.

Two million is standard in commercial contracts that I deal with in Arizona.

However, you as owner can ask the management company for Errors and Omissions coverage and employee dishonesty coverage if they are handling your funds,

I would suggest you provide the proposed management agreement's insurance provisions to your insurance carrier for their review. This should cost you nothing. They should be able to advise you if the limits are reasonable and ordinary.

On the issue of term, you should be able to negotiate an immediate termination provision for cause. Most management companies do not make much money on short term contracts. They usually do not make money until they understand their clients and property operational issues.

Definitely ask for references and take the time to check them out. A good company will be happy to give you references. Go by the properties and look at the curb appeal. If you're lucky, you might even be able to talk to a tenant to ask them Waht they think of the manager in terms of responsiveness and professionalism.

Good luck with your search!

Hi Paul - thanks for your input - very helpful! What is "Errors and Omissions" and "employee dishonesty" (maybe that one is self explanatory) coverage? Is this a line item I could add to the contract when I sign it? How does this work?

Also, most companies offer their own contractors/laborers for maintenance. If I"m liable for the Agent's actions - am I also liable for their 'employees' and work they do on my house - say up to a $200/item or incident amount. This sounds dangerous! Maybe if they're just painting. How do repairs/maintenance work - should I start another post?

Is there a good book/website out there! This is becoming more complicated than I expected. I am self-employed consultant and many/most of my clients ask me to carry commercial liablilty insurance ($2M) and include them as an insured. This made sense to me as I am doing the work. I don't get the PM side - why don't they have to carry it? maybe I should take a closer look at what my insurance covers me for!

thanks again


E & O insurance is a topic that elicits two responses: I don't like it, or it's necessary to protect my business interests. As a third party, commercial management firm and Accredited Management Organization (AMO) through the Institute of Real Estate Management, we are required to maintain E & O insurance. (I would do it without the requirement). It protects my company in the event of a claim by a client that we made an error under the provisions of the management contract. There is usually a large deductible; but, it covers cost beyond that for attorneys and awards, up to a certain limit.

Employee dishonesty would protect and owner against losses as a result of employee theft of client's monies. As a hypothetical: "Betty, who has a gambling habit, has been taking $x,xxx,.00 a month from 7 client's accounts through fraudulent invoices and payments to a fictitious company. Paul, unaware of Betty's habit, promptly investigates those accounts when Kelly asks why the monthly expenses have escalated. Betty breaks down and confesses. Paul calls the insurance company, fires Betty, and reimburses the client's accounts for the over billings or fraudulent amounts. Paul waits for the insurance check to reimburse him.

On the contractors, laborers issue, I would require that the provider shows proof of insurance; however, this might limit the number of service providers that do "handiman" work. In the commercial world, I do not allow vendors on the premises unless they have their own insurances that protect the owners and take care of their laborers.

Go to IREM.org and I believe their library includes general books relating to property management of residential and commercial.

Again, ask for references, look for licenses, and ask that they carry insurance protecting you against their actions. It is up to you to provide general liability for "trips and falls" and property casualty insurance.

I am not an attorney; but, as a licensee in the State of Arizona, I can draft legal documents relating to leases, purchase contracts, binding letters of intent, etc. Contracts are agreements between two or more parties, wherein, you can add any provision that you wish to negotiate. I like to give the example that you could include a provision relating to what the parties will wear on a certain day. A waste of time; but, anything that the parties agree to be bound by, that is probably not against the law, can be included in a contract.

On my side of the equation, I ask for indemnification against any and all claims from owners.

Good luck.


Wow! Thank you sooo much for this great information! I was not aware of IREM - will check them out.

yeah - that 'indemnification against any and all claims' from owners is on every contract I've read, and it makes me really nervous - probably because I don't understand it. It suggests that if I hire 'you' to manage my property you are not responsible for anything and I am responsible for everything that you do! Scary! but maybe I have much more homework to do.

Again - thank you so much for taking the time to reply - it is greatly appreciated.

Perhaps BP could do a STICKY on hiring a PM and all the ins and outs for all of us newbies! Just a thought - or is there one that I missed?


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