PM Termination Fees = Robbery

PM Termination Fees = Robbery

Financial Advisor · Glendora, CA · Member since 2015 · 209 posts · 94 votes

Just found out that through a buddy of mine (and other research from asking other PM's) that these PM's charge an exit fee or termination fee to get out of a contract.  Sometimes these fees can be very aggressive. Even to the point where they'll charge a fee to escape a contract for a vacant home if they just barely started the advertising process.  These fees could run up to hundreds if not thousands of dollars.  Sure, I can see some expense in advertising your place for rent however its not like its a wireless carrier charging you an exit fee because they incur fees to give you a phone at a discounted price.  There is not an underlying cost to rent out your home other than advertising and personnel.  

I really think these exit fees are for purposes of forcing people to stay with a PM with crappy service.  If your PM is that good and has great service, I can't see why they would charge an exit fee.  

I will not do business personally with a PM that has crazy exit fees.  Let your service do the talking.  

I'd like to hear some of your crazy fees that you incurred to exit a crappy PM.

Rant over.
Yooch

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Nathan MillerPro Member
Property Manager · Grants Pass, OR · Member since 2009 · 429 posts · 201 votes
10y

I like to follow the same principals.  A business should be re-earning their clients business every single month.  I see this happen a lot with our competitors, their sales people are very good and require 12 month terms and once the client gets into it they find out the product stinks, yet they are stuck on a 12 month contract and it costs too much to exit.  It's a sneaky tactic used by so many these days.  I applaud the companies that resist and just go month-to-month.  Keep your clients by providing excellent service rather than through language in a contract.

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  • San Jose, CA · Member since 2015 · 4k+ posts · 3k+ votes
    10y

    I agree.  When my daughter fired her PM, and rightly so, and the PM started talking about exit fees, my daughter told them if they want to try and enforce that, then they will see her in court where she will sue the pants off them for all of the fraudulent maintenance fees they charged her without permission by calling everything an emergency.  Don't get me started, either.

    Of course, there are great PMs.  But, a clause like that is insane - yet is standard in the industry.  Just FYI, to landlords who sign one of these contracts, just know that you can always threaten to sue them for whatever they did that made you want to fire them - or they can agree in writing to waive any termination fee.

    When I was young, I hired a PM for my rental when I moved across country.  I lost money big time.  Same happened to my daughter just a few years ago.  I think it's difficult to plan on making a profit on your property, if you have to hire one of these companies.

    And yes, there are exceptions.  But, unfortunately, it seems to be more the rule than not, that landlords don't make a profit when they hire one.

  • Financial Advisor · Glendora, CA · Member since 2015 · 209 posts · 94 votes
    10y

    @Account Closed yeah it really is a shame.   Why would I ever leave if a PM provides me great service.  I would think only the crappy ones would charge a fee.  

  • Nathan MillerPro Member
    Property Manager · Grants Pass, OR · Member since 2009 · 429 posts · 201 votes
    10y

    I like to follow the same principals.  A business should be re-earning their clients business every single month.  I see this happen a lot with our competitors, their sales people are very good and require 12 month terms and once the client gets into it they find out the product stinks, yet they are stuck on a 12 month contract and it costs too much to exit.  It's a sneaky tactic used by so many these days.  I applaud the companies that resist and just go month-to-month.  Keep your clients by providing excellent service rather than through language in a contract.

  • Investor · Philadelphia, PA · Member since 2015 · 3k+ posts · 3k+ votes
    10y

    If you're firing them they are probably in breach of contract. Don't pay and let them take you to court. I bet none will.

    My guess is that the exit fees are there to discourage owners from hiring a PM to do the dirty work (eviction, make ready, tenant screening) and then cutting loose once the checks are flowing in each month.

  • Property Manager · Cumming, GA · Member since 2015 · 261 posts · 199 votes
    10y

    Termination clauses are there to protect all parties.   Every now and then, a landlord wants to terminate because of a need for a sale, they need to move back in, a family member needs help, etc. Not all terminations are because of poor behavior by one of the parties.  These changes in personal life affect the Tenant and Property Manager monetarily.  

    I have never had a landlord tell me to remove the termination fees in my lease if a tenant wants to leave early for whatever reason or because the tenant complains about the lack of service a landlord is offering.  The term "slum lord" originated from somewhere so we do get the calls.  

    Terminations for breach are to protect the Landlord, Tenant, or Property Manager.  The courts won't allow any one party to take advantage of another so at the end of the day, we are all protected.  

    Being reasonable and stepping in someone else's shoes is the key.

  • Financial Advisor · Glendora, CA · Member since 2015 · 209 posts · 94 votes
    10y

    Hi @Phil Earley, I fail to see how if a PM is providing poor service that the termination fee is there to protect the landlord.  If i'm paying you a tenant placement fee and I routinely get a poor tenant, why should I have to pay a termination fee to keep poor service.  

    I totally agree with @Nathan Miller that the PM has to continually re-earn business.  There is no way I should have to keep paying for crappy service.  

  • Property Manager · Cumming, GA · Member since 2015 · 261 posts · 199 votes
    10y

    Hi @Yoochul C., If anyone is providing poor service, the other 2 parties shouldn't suffer for it so I completely agree with your concerns.   When a landlord, tenant and management company enter into an agreement for the first time, all 3 are taking a risk that one may not perform well or to their standards.   This is a 3 way street.  

    Terminating for "cause" is a legitimate reason for termination and no fees would be due from either party including a tenant who terminates for cause. 

    As a property owner looking to hire a management company, we need to hire a company that shares the same definition of service as we do.  If we share the same definition, it will be a great long term relationship.  

    "A business absolutely devoted to service will have only one worry about profits.  They will be embarrassingly large"........Henry Ford

  • San Jose, CA · Member since 2015 · 4k+ posts · 3k+ votes
    10y

    But, the thing is, the PM company is not out any money by losing the client, because they have not fronted any fees or labor.  All of their initial fees have already covered their labor, etc., by charging the upfront fees.  So, to then soak a landlord again for the right to end the contract, is unreasonable - to put it nicely.

    Now, if there was no upfront fee to find a tenant, etc., and the PM was relying on the next 12 months percentage of the rent to make their time worthwhile to find the tenant - then a termination fee would be fair.

    But, in my opinion, a termination fee is double-dipping.  It's almost like advertising that the PM doesn't do a good job.

    There are also usually additional fees for evicting a tenant, too - that they put in there in the first place.

    These are the kinds of "standard" clauses in contracts that simply give the industry a bad reputation, and with good reason.  Kind of like a company wanting to charge you for an "extended warranty" on their product - which says to me that they are loudly proclaiming that their product is faulty.

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