Maryland Home Improvement PSI Practice Exam

What typically creates an agency relationship between a property owner and a property manager?

1. A management agreement.

2. Payment of a management fee.

3. An exclusive agency agreement.

4. An independent contractor agreement.

The correct answer is: A management agreement.

An agency relationship between a property owner and a property manager is typically established through a management agreement. This document outlines the specific responsibilities, authority, and obligations of the property manager on behalf of the owner. It serves as a legal framework that defines how the manager will operate the property, manage tenant relations, handle maintenance issues, and ensure compliance with relevant laws and regulations. In such agreements, the property owner grants the property manager the authority to act on their behalf in managing the property. This includes making decisions related to leasing, maintenance, and financial matters. The clarity provided by a management agreement is crucial for both parties, as it sets the expectations and parameters of the relationship, ensuring that the property manager's actions are aligned with the property owner's objectives. While payment of a management fee and other agreements may support the relationship, they do not, in themselves, create the agency relationship. The management agreement specifically establishes the legal authority necessary for the property manager to represent the property owner in dealings related to the property.