Affiliate Broker Tennessee (TN PSI) National Practice Exam `

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What is the purpose of the property management agreement?

To protect the tenant's rights
To cede ownership of the property
To establish standards for the property maintenance
To cement the relationship between the property manager and the owner

The correct answer is: To cement the relationship between the property manager and the owner

The purpose of the property management agreement primarily revolves around formalizing the relationship between the property manager and the property owner. This agreement outlines the responsibilities, expectations, and authority of each party, thereby ensuring a clear understanding of who manages the property and under what terms. Through this agreement, property owners grant property managers the authority to act on their behalf concerning the management of their investment. It details the scope of work, payment terms, duration of the agreement, and any specific duties that the manager is expected to perform, such as tenant relations, rent collection, property maintenance, and financial reporting. This formalization is critical as it helps both parties mitigate potential misunderstandings and establishes a framework for accountability. The focus on the relationship in this context is essential because effective property management relies on clear communication and collaboration between the owner and the manager, which the agreement aims to enhance.