Fixed-Term vs Periodic Management Agreements: What Real Estate Business Owners Need to Know

When it comes to structuring property management contracts, understanding the difference between fixed-term and periodic management agreements is essential for real estate business owners. Each type offers distinct benefits and risks, and the right choice can have a direct impact on revenue stability, client retention, and operational flexibility.

What Is a Fixed-Term Management Agreement?

A fixed-term management agreement locks in the management relationship for a defined period—typically one or two years for residential properties, and two to five years for commercial assets. These agreements can provide income certainty for real estate businesses, ensuring a stable portfolio over time.

However, they also come with potential downsides. If a property owner wishes to terminate early, they may be subject to penalties or fees—terms that should be clearly outlined in the agreement. While this model provides greater security for the agency, it can also create friction if clients feel restricted or locked in.

What Is a Periodic Management Agreement?

A periodic management agreement operates on a month-to-month basis, with either party able to terminate the agreement—usually with 14 to 30 days’ notice. These rolling agreements have become increasingly common in today’s competitive property management landscape.

For real estate business owners, periodic agreements offer flexibility and can be attractive to new clients wary of long-term commitments. They also require a stronger focus on client experience and service delivery to retain managements long-term without contractual obligation.

Which Agreement Should You Use?

There’s no one-size-fits-all solution. The decision between a fixed-term or periodic agreement should align with your business goals, client expectations, and the nature of the properties under management.

•  Looking for stability and predictable revenue? Fixed-term agreements may be suitable for key clients or commercial portfolios.
• Want to remain competitive and reduce barriers to entry for new clients? Periodic agreements can offer agility and appeal.

Understanding these two management agreement types—and where each fits into your portfolio strategy—is a key part of building a high-performing real estate business.

Does The Type Impact The Value Of Your Rent Roll?

Whilst the number of periodic management agreements may not directly impact the value of a rent roll, it is an important metric when assessing demand and risk factors of a rent roll and even more critical when a business is being sold by way of a share sale.

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