Key Takeaways

  • A personal service contract legally binds an individual or company to perform specific tasks that rely on their personal skills, expertise, or professional judgment.
  • In real estate, service contracts define the terms of services like property maintenance, repair, inspection, or management—clarifying expectations, costs, and liability.
  • Common types of service contracts include maintenance agreements, management contracts, and home warranty service contracts, each addressing different needs for property owners and tenants.
  • Key components of a valid service contract include scope of services, duration, payment terms, termination clauses, and liability limitations.
  • Understanding what is a service contract in real estate helps protect both property owners and service providers from disputes and financial risks.

Personal service contracts are legal contracts that cover actions being performed instead of goods or services being provided. 

What is a Personal Service Contract?

A personal service contract can be written in several ways, but the important thing to remember is that it will always cover actions. Individual contractors are frequently hired by small businesses. Similarly, the government can hire contracting companies, which creates a relationship between the government and the employees of the company.

Generally, there will be limits placed on personal service contracts, including:

  • Fees.
  • Responsibilities.
  • Length of time.

Personal services are typically defined in two parts. Primarily, a personal service contract is used to define the legal relationship between a person providing a service and the person receiving the service. When offering a unique service, this service cannot be substituted. It is for this reason that the entertainment and sports industries frequently use personal service contracts.

When an employed contract is continuously controlled and supervised while fulfilling their contractual duties, a personal service contract exists under U.S. Code Title 10. This means that when a contractor is a de facto government employee, their non-personal service contract will be legally considered a personal service contract. 

Understanding What Is a Service Contract in Real Estate

In real estate, a service contract—also known as a home service contract or property service agreement—is a legally binding document that outlines the specific services a contractor or company will provide to a property owner or manager. These agreements ensure that maintenance, repairs, or specialized services are performed according to defined terms and conditions.

When asking “what is a service contract in real estate?”, it typically refers to agreements between homeowners, landlords, or property managers and third-party vendors (such as plumbers, HVAC technicians, landscapers, or pest control professionals). These contracts are particularly valuable for real estate investors managing multiple properties, helping them maintain consistency, compliance, and cost predictability.

A service contract in real estate commonly includes:

  • Scope of Services: Defines the exact work or maintenance tasks covered.
  • Duration: Specifies start and end dates or renewal terms.
  • Payment Structure: Lists service fees, payment schedules, and potential penalties for late payments.
  • Liability Clauses: Clarifies each party’s responsibilities and limitations of liability.
  • Termination and Renewal Terms: Outlines how and when the contract may be canceled or extended.

These contracts differ from general personal service contracts because they are focused on maintaining or improving property assets rather than personal or artistic performance. For example, a landlord may use a service contract to guarantee regular HVAC maintenance, reducing unexpected costs and legal disputes with tenants.

Non-Government Contractor

If a person provides work for your business, or does work for you personally, but are not your employee, they are considered contractors.

Professionals that provide non-business personal services can include:

  • Shoppers.
  • Chefs.
  • Assistants.
  • Drivers.

Personal services that are business related might include an artist that illustrates a magazine cover or a voice actor that records a commercial. When someone signs a personal services contract, they are required to do the work described in the contract. For instance, if you hire someone to design an addition for your home and they sign a personal service contract, they must complete the work themselves, as you are paying them for their unique style. 

Types of Real Estate Service Contracts

Several types of service contracts exist within the real estate industry, each tailored to a specific function or relationship. Understanding these distinctions can help property owners and managers choose the right contract for their needs.

  1. Property Management Contracts:
    These agreements are between property owners and management companies, defining duties such as rent collection, tenant communication, repairs, and compliance with local laws.
  2. Maintenance or Repair Service Contracts:
    These cover routine or emergency maintenance for systems like plumbing, roofing, HVAC, or landscaping. Many real estate investors use these contracts to maintain property value and ensure tenant satisfaction.
  3. Home Warranty or Appliance Service Contracts:
    Common in residential real estate, these agreements protect homeowners against costly repairs or replacements of systems and appliances after purchase.
  4. Vendor or Contractor Service Agreements:
    Used when hiring third-party specialists (e.g., electricians, cleaning services), these define deliverables, quality standards, and safety compliance expectations.
  5. Inspection or Consulting Service Contracts:
    Often used during real estate transactions, these contracts govern relationships with appraisers, home inspectors, and environmental consultants.

By distinguishing between these categories, property owners can avoid overlap, clarify expectations, and ensure they have coverage for every operational aspect of their real estate assets

Government Contractors

Government agencies frequently use personal service contracts when they need work completed but don't require a full-time employee. Typically, the government agency would sign a contract with a business, and then the employees of that business would complete the work.

Service contracts result in an employee/employer relationship when the government agency directs and supervises the person completing the work. It's possible for the personal service contract to result in an unlawful relationship depending on how the contracted employees are being used.

To determine whether the contract you intend to use is considered personal, you can keep in mind the following factors:

  • On-site performance.
  • Equipment and tools provided by the government agency.
  • If the services are being used directly by the agency.
  • Comparing the services being provided to those performed by civil servants.
  • If the service provided will be needed for more than when year.
  • If the service requires direct supervision from the government agency.

The Classifications Act limits personal service contracts that will be used for consultants or experts. There are also requirements for obtaining services from consultants and experts that are maintained by the Office of Personnel Management. A good example of a government agency using a personal service contract is a private security firm hired by the military for the purpose of protecting U.S. contractors that are working for the government overseas. For these contracts to be valid, they must meet strict requirements, including those for civil service employment.

A contractor would be considered an employee if the government agency dictates issues such as:

  • Where the contractor works.
  • How they should complete their responsibilities.
  • The equipment they must use.
  • What hours they will work. 

Key Clauses in Real Estate Service Contracts

Regardless of type, every real estate service contract should include several essential clauses to protect both parties:

  • Scope of Work: Clearly defines the tasks the service provider must perform and those excluded from the contract.
  • Compensation Terms: Describes how and when payments will be made, including retainers, performance bonuses, or penalties.
  • Liability and Indemnification: Outlines how damages or injuries occurring during the service are handled.
  • Insurance Requirements: Mandates that the contractor carry sufficient liability or workers’ compensation insurance.
  • Termination and Renewal: Explains procedures for ending or extending the contract, ensuring flexibility and legal protection.
  • Dispute Resolution: Provides methods—such as mediation, arbitration, or jurisdiction—for resolving conflicts efficiently.

Including these clauses ensures that the agreement complies with real estate laws and minimizes disputes over performance or payment.

Authorized Personal Service Contracts

Under 10 U.S.C. 1091, it is possible to use a personal service contract to hire a health care provider.

Before a personal service contract can be used for an expert or consultant, determinations and findings must authorize the contract by deciding:

  • The services will be temporary.
  • The services are beneficial to national defense.
  • There are no Department of Defense employees that could fill the role.
  • Excepted appointment is not possible.
  • Using a non-personal contract is not suitable. 

Impact and Consequences

When a personal service contract is unlawful, there can be very serious consequences. For example, unlawful contracts will generally violate the Anti-Deficiency Act, particularly if the services in the contract are not legally authorized. Using an unlawful contract may also result in an investigation by the Inspector General and disciplinary/administrative action.

Importance of Service Contracts in Real Estate

Service contracts are vital in real estate because they create accountability and financial predictability for both parties. For property owners, they help maintain assets, control costs, and comply with local housing or safety regulations. For service providers, they establish a steady revenue stream and legal protection against unfair claims.

Without a written service contract, disagreements about scope, cost, or performance are more likely to escalate into legal disputes. A well-drafted contract can prevent such issues by setting measurable standards for performance and response times—critical in property management and maintenance contexts.

When real estate professionals understand what is a service contract in real estate, they can better protect their investments and build lasting relationships with vendors and contractors.

Frequently Asked Questions

1. What is a service contract in real estate?

It’s a legal agreement between a property owner or manager and a service provider defining duties, costs, timelines, and liability for maintenance, repair, or management tasks.

2. How does a real estate service contract differ from a personal service contract?

A personal service contract focuses on individual expertise or performance, while a real estate service contract covers ongoing property-related tasks and asset maintenance.

3. What should be included in a real estate service contract?

Essential elements include the scope of work, duration, compensation terms, insurance requirements, liability clauses, and termination provisions.

4. Who benefits most from service contracts in real estate?

Both property owners and service providers benefit—owners gain predictable maintenance and compliance, while providers secure consistent work and clear payment terms.

5. Can service contracts help avoid legal disputes?

Yes. Detailed terms and clear performance standards reduce misunderstandings and provide a basis for dispute resolution before litigation becomes necessary.

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