Management Agreement
Synonyms: Property Management Agreement، Property Management Contract، Management Contract
Last updated: 2026-09-25
Short Definition
A management agreement is the written contract between a property owner and a property management establishment that sets out the scope of services, the manager's powers, the fee and how it is calculated, the term, how it ends and the reports to be provided; it is the reference point for resolving any dispute between the parties.
Overview
Legal Basis
The law does not impose a single mandatory template for the property management agreement itself, but it is governed by the agency provisions of the Civil Transactions Law (M/191 dated 29/11/1444H), including Articles 482 and 484 (specifying the agency, and a special agency for non-administrative acts), Article 487 (ordinary-person care in a paid agency), Article 497 (duty to account) and Article 498 (payment of the agreed fee or a fair fee). The Real Estate Brokerage Law (M/130 dated 30/11/1443H) requires the provider to be licensed and, where the mandate includes brokerage or marketing, the brokerage contract to be written and deposited with REGA (Article 7).
Practical Example
The owner of a small retail centre in Dammam (8 shops at SAR 45,000 a year each) signs a two-year management agreement with a licensed establishment. It sets a fee of 6% of rent collected, excluding VAT, a maintenance cap of SAR 5,000 per request, remittance of collections within 5 working days of each month-end, a 60-day termination notice, and the establishment's right to hire approved maintenance contractors. At full occupancy annual rent is SAR 360,000, so the fee is SAR 21,600 a year plus SAR 3,240 VAT. Because the commercial rent itself is subject to 15% VAT, the agreement also states who issues tax invoices to tenants and who remits the tax.
Common Mistakes
- ✗Drafting powers in general terms such as 'managing all affairs of the property' — an agency in general terms that does not specify the type of act is legally invalid.
- ✗Not stating whether the fee includes VAT or is subject to it, which triggers a dispute on the first invoice.
- ✗Setting no maintenance spending cap and no clear approval path for larger amounts.
- ✗Mixing up the recurring management fee and the leasing brokerage commission without defining each and when it becomes due.
- ✗Omitting termination clauses and the handover of files, contracts and platform account access when the relationship ends.
International Differences
In Dubai, the US and the UK the management agreement is a detailed document that usually combines a recurring fee with separate leasing and renewal fees, and in the UK a 'let-only' service is commonly distinguished from 'full management'. In Turkey and Egypt the relationship is more often a general power of attorney or a simple arrangement with a brokerage office. In Saudi Arabia the agreement falls under the agency provisions of the Civil Transactions Law, which do not allow an agency in general terms, alongside the establishment licence requirement and mandatory lease documentation on Ejar, so clauses on who may document contracts on the platform are a core part of the agreement.
