Fired Prop Mgr, now getting charged with "Cancelation fees" - Is there a solution?

Question

Owner Termination - Cancellation Fee

Something you never hear about is HOW can an owner terminate a Prop Mgr!.  In my case I was fed up with lies and incompetence, and switched to another local Pro mgr company. but I am being hit with EXCESIVE cancelation fees.  Do I have a recourse?

the Prop mgmt contract -

14.  ... In the event that such notice of non-renewal by Owner is received by Broker, Owner shall pay Company the Management Fees, rental commissions, and all other outstanding fees set forth in this Agreement for the length of the tenant lease (including any lease extensions or renewals) or the remainder of the term of this Agreement, whichever is the greater of the two. The cancellation fee will be calculated at the amount of the last full month Management Fee rate multiplied by the remaining number of months in the term or until expiration of the existing tenant’s lease, whichever is greater.

The background: I was using LSI Property Mgtm Corp to manage my 3 duplexes in Panama City FL.  It was going, OK, until, out of the blue they served an eviction  on an elderly tenant, without cause.  Although the Prop mgr claimed late payments, that was false. The tenants went to court, but the prop mgr failed to respond and failed to go to court. The tenants rightfully won.  The prop mgr refused to apologize to the tenants, and continued lies about late payments.   I found a better Prop mgmt company.  Upon termination of LSI, they are now charging me  CANCELLATION FEES which are equal to the regular monthly Prop Mgmt fees (8%)  for the remainder off EACH lease.  This amounts to thousands of dollars. I emailed and called LSI, complaining, but they stand by the cancelation fees.

Is there a Solution for me? - at this point -  to avoid the cancellation fee?

thanks

Steve

Nathan Gesner · Answer

The cancellation fee is fully disclosed, so you are obligated to pay it.

However, you are firing them for failing to uphold their end of the agreement, therefore the contract should be voidable at your option. You are firing them for cause. They can't fail to do their job and then punish you for not working with them.

I think this is an easy solution.

1. Contact the Broker and let them know you are firing them for violating their fiduciary responsibility to protect you, their client. You expect immediate termination without penalty.

2. If they insist on charging you, then file a complaint with the Florida licensing board here: https://www2.myfloridalicense.com/real-estate-commission/complaints/

When you file the complaint, the licensing board will notify the Broker. There's a very good chance they will immediately let you go because they don't want the state investigating their business.

Kevin Sobilo · Answer

@Steve Sayler, I echo what @Nathan Gesner said.

In addition, I would point out that the failure of this old PM to live up to their obligations caused you "damage" which they are responsible for. The cost of the failed eviction, tenant relationship issues, and subsequent need to hire a competent PM to do the work the old PM was unable to do.

So, my argument to the old PM would be that they OWE you MORE than the cancellation fees from the contract you signed. So, if they want to go to court, they may well be coming out of pocket for not only the court costs but a judgement in YOUR favor.

Whether you would actually win that who knows, but I think there is enough meat on the bone there to dissuade them from pursuing it. If they can't get the PM work right, chances are they don't have their act together enough to go after you in court for these fees anyways.

Collin Hays · Answer

That is just awful business practice.  We have a 30-day out for our clients for "good cause, bad cause, or no cause." No questions asked, no due to/due from. And that's for either of us. If something isn't working and one of the parties wants to move along, they should be free to do so unfettered.

Unfortunately, we have had to exercise the provision ourselves a couple of times over the last year.

Dan H. · Answer

My stance is that the PM did not uphold their end of the contract when they evicted a tenant paying on time for not paying.  They compounded the issue when they falsified records trying to justify the eviction.  They have not met minimum threshold expected of a professional PM.  I would not pay them $0.01 and if they did not provide me all my money bock, I would sue them for what they owe me.

I recently had a suit I brought settled mostly to my satisfaction and have another suit in process.  it is as much about the point as the financials.   If the PM wants to waste their resource defending evicting a tenant that paid on time for not paying, I am fine with that.  Let them also explain falsifying financial records to try to make their actions seem reasonable.  They will look bad and it will likely cost them customers.   Also do not accept binding arbitration as the arbitrator will strive for a compromise when there us no reason for you to pay.

They failed to perform their end of the contract and was fired for cause.  They should not expect to get future compensation.  If I have to file suit to collect what I am owed, the amount includes lost revenue a result of the wrongfully evicted tenant (lost rent, unit turnover costs, cost to place new tenant (does new Pm charge to place new tenant?)).

good luck

Dan H. · Answer

>Sometimes the timing of the payment dates can be a little off depending on if the tenant paid a weekend or holiday and when that major retailer posted the payment to the PMs system. This may be a timing issue and not incompetence, be careful before you start rattling the sword.

BS.   PM chose to accept payment in this manner.   If tenant met the deadline, all else is on the PM regardless if the pay near me reflected incorrect dates because they chose that means of payment.  the tenant met their obligation.   It is PM’s responsibility to verify before proceeding toward eviction.   Then PM falsified financial records.   This PM failed to abide by their part of the contract and are being fired for cause.

>Lastly, I think the suggestion about encouraging the tenant to write a bad review about this PM is a terrible idea because you could get dragged into a business interference lawsuit for encouraging it.

Further BS.  If the statements are true encourage as desired.  However, I would first present the argument about the PM failing to perform their end of the contract and plan to report them to license board if they hold $0.01 of the money owed.  If they pay what is owed and drop future fees, I would stay out of tenant PM dispute.  If they fail to pay all that is owed, I team with tenant.  I encourage tenant to collect from PM all costs associated with the wrongful eviction and encourage them to post their experience with this PM on social media.  I also post my experience with the PM.

PM would be foolish to push this.  They were correctly fired for behavior that more than warrants it. The PM is not owe $0.01.

Best wishes

Russell Brazil · Answer

If the cancelation fee is in the contract you signed, it seems pretty clear.

So why do you think your tenant is telling the truth, but the property manager is lying? Seems pretty weird for someone to try to evict a tenant for late payments if they are in fact paying on time. What does the rent ledger show as to tining of rent payments?

Ben Zimmerman · Answer

If it was incompetence, I would contact the PM to attempt to get the fees waived.  I would let them know that you have documented proof that they screwed up, and if they won't waive the fees then you will make it your personal mission in life to leave a negative review (with proof) on any website that allows reviews.  You mentioned that the tenant is elderly and doesn't do much online, but that doesn't stop YOU from writing a review.  I would also check to see if there is a local news channel that would be interested in covering a "shady PM company wrongfully tries to evict elderly tenant" story.While there is no legal grounds (based on the limited section you posted) to demand the removal of these fees since they are clearly stated in the contract, chances are good that the company won't want to go through all of the negative publicity and lost business due to poor reviews.  You would need to read the entire contract however, since there may be grounds to void the contract in its entirety if the PM company isn't doing that which they are required to, such as keep accurate records.

Dan H. · Answer

If the PM accepts payment through any means, the PM must verify the tenant is at fault and not the payment service before evicting.  Doing otherwise is not doing their job.  They wrongfully evicted per the courts (tenant won the law suit).   The courts in effect have already ruled that PM was in the wrong when the tenants won the suit.   It does not matter that PM chose not to attend, until the PM can successfully appeal the decision (which is unlikely to happen) the courts have their ruling.

Tortious interference requires a negligence.  Telling the truth or directing someone else to tell the truth will never qualify as a negligence.  Nothing to worry about.

PM was rightfully terminated for wrongfully evicting a tenant (per the courts) and for falsifying records.  This action caused the property owner financial Harm.  This is really an easy case that PM did not perform to acceptable level of the contact.

I am shocked how many posts before mine expressed that because the cancellation was in the contract the owner should pay it.  The PM did not abide by minimum expectations of the contract and was  fired for cause (with a court ruling that already indicates PM was in the wrong).

PM should pay owner the owner funds PM is in possession of and not even think about trying to collect a termination fee.

Owner should not agree to binding arbitration if he has a choice because arbitrator will be looking for a compromise when there is no reason for one in this case.  Pm is wrong (per a court ruling), was fired for cause (wrong behavior with dealing with tenant and falsifying records), and needs to return all owner funds to the owner.

I wish the OP the best of luck.

Rick Bassett · Answer

Hi Dan,

Two things:

1) We don't know if the owner-client agreed to this payment process in their PM contract as it is not attached, so it's a little hard to claim BS.

2) Read up on Tortious interference, it has bite.

Fired Prop Mgr, now getting charged with "Cancelation fees" - Is there a solution?

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