Getting out of a Property Management contract??

Question

I have a tenant that is choosing to move out at the end of their lease term. I believe, from how I interpret my property management contract, I don't have to pay anything to sever the relationship with the property manager if I were to sever the PM relationship at the time the current tenant moves out (and i could begin marketing the property ahead of time as well). Would you agree? Here's the verbiage:

FEES UPON TERMINATION. At the time this agreement ends, Owner must pay Broker:

A. All amounts due broker under this agreement and

B. If the Property is leased to a tenant on the date this agreement ends and Owner terminates the agrement, an amount equal to the lesser of:

(a) the management fees that would accrue over the remainder of the term of the lease or

(b) One Month's rent

If more than one property or unit is made part of and subject to this agreement, this paragraph applies only to those properties or units then leased and applies to each property or unit separately

Let me know your thoughts. Thanks!

David Faulkner · Answer

If you need to cut off the relationship, then do it ASAP. Give them written 30 day notice that you are terminating the property management contract. Pay what fees you need to in order to get out if they are bad. Whether you owe one month's rent or nothing should not change your decision on if you terminate or timing. In the future, determine what these fees will be and are clear on the other details BEFORE you enter the contract. The manner in which a PM structures their contract and fees can give you a lot of insight as to how they operate.

Sankar Reddy · Answer

This is never ending clause. I will have to pay fee for remaining term of the lease for all the properties that are leased at that point.

Sankar Reddy · Answer

@Steve S. I have properties in DFW area managed by a bad PM. Recently I got out of their contract after 20 months with them. Unfortunately I didn't have any amount in the B. (b) and I ended up paying the PM company ~$5K as they charged fee for reminder of the lease for all 11 properties leased at that time :(

Learning lessons, and asked new PM to take that clause out completely to sign.

Steve S. · Answer

Thank you for the thoughts. They are largely doing a good job. However, I can do it cheaper than they can and don't see the value based on what I've been paying them for.

Jonathan Twombly · Answer

@Steve S. Having suffered through one bad management company that I left in place too long, I agree with @David Faulkner. Get the management company out as soon as you can. One month's rent is a small price to pay if they are not getting the job done and costing you more money than that.

Getting out of a Property Management contract??

Getting out of a Property Management contract??

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