Property manager keeping fees and not willing to work

[Mathew A.]

I've got myself in a bind, and any guidance would be helpful.

Here's the situation:

I bought a duplex, fixed up one unit, and hired a property manager to manage it.  The church across the street wanted to buy it, and after a few months of negotiation, we eventually agreed on price and terms. The new owner said they would continue with the management, however I didn't have the new owner sign an addendum stating this.  The first mortgage payment was paid to me from the property manager (the new owner must have told the property manager to pay me in lieu of making the mortgage payment himself).  In the second month, it was brought to my attention (being CC'ed on a string of emails) that the new owner did not want to use the property manager anymore. The property manager said to the new owner that I would be liable for the remaining eight months of management fees. The new owner said ok.  After all this, I called the new owner, and the new owner said that he didn't fully understand that there was a contract in place, and that they would backtrack and use the manager for the remaining eight months. I called the property manager and told him this. He said the new owner wasn't acting in good faith and he does not want to manage for the new owner. The manager said that the new owner "repudiated" and that the manager can keep the eight months of fees and not have to manage the property. I'm on the hook for the eight months of fees. The second month's rental proceeds had all eight months of fees deducted, and the remainder ($70) was sent to me in lieu of the mortgage payment ($500).

Can the property manager keep all the fees without managing if the new owner "repudiated" and then backtracked? 

Isn't the new owner still liable for the full mortgage payment? (i.e. The property manager took rents payable to the new owner. The new owner is in default for not paying the mortgage to me.)

Although there wasn't an explicit document, is it implied that the new owner is assuming the management agreement?

I really shouldn't be involved.  I'm just the lender expecting the mortgage payment.

Please offer advice. I know you may not be a lawyer, but you still may be able to help me. Thank you.

[Andrew Meyer]

You sold 1/2 of the duplex to the church and did seller financing correct? If you sold the property, why are you still even dealing with the property management company besides just getting mortgage payments? At least that is my take.

What does the property manager's contract say? To me, if you sold it WITH management, that contract now becomes the ownership of the new owner and you shouldn't be any part of it. If he doesn't want to use them fine, but the owner should have to break the contract and pay the fees.

I would agree with you, the new owner is in default for the mortgage payment. I don't really think the PM company had the right to deduct their 'fee' from the MORTGAGE payment, but I would have to look at their contract. IMO that PM company is a bunch of crooks if they want 8 months free for what looks to be a misunderstanding.