Can you terminate property management in place at purchase?

Question

I have 2 properties under contract that have property management (In this question referred to as "ABC Property Management Company") in place currently. So far I have been unhappy with what I have seen from this property management company and would like to terminate their management of these 2 properties when I purchase the homes.

My dilemma is the leases are between the "ABC Property Management Company" and the tenants. Does this affect my ability to fire this property management company when I purchase the homes?

My dilemma is the leases are between the "ABC Property Management Company" and the tenants.  Does this affect my ability to fire this property management company when I purchase the homes?

Tom Gimer · Answer

Part of the due diligence process is discovering what service and other contracts exist, and whether and how they may be enforceable against a new owner.

The leases should be assigned, security deposits transferred, and any service agreements which the buyer does not want continued should be terminated (or dealt with somehow) as of settlement date. These things don't happen on their own.

Do nothing and the trash gets picked up, snow gets shoveled, pests get killed, and other bills you never expected to pay will be payable. And until the tenants are obligated to pay rent to someone else and properly notified of it... that's where those payments will be sent. Best course is to have all the appropriate paperwork prepared and ready to send to tenants and vendors as soon as settlement occurs.

Robert Gilstrap · Answer

@Chase Gibson @Lukas Zupan  I certainly don't know Oklahoma law but I find it incredibly difficult to believe that you can be held to any contract that you were never a party to, think about it. No clause in a previous management agreement would be binding on you since you never agreed to any of those terms.

Eugene Kemp · Answer

When it's your property, you can do whatever you want.

Ali Boone · Answer

Well I don't know if "sorting anything out" with the owner is necessarily required...you can just state to everyone involved that the PM agreement currently in place will be terminated upon sale of the property. End of story.

But I do agree with everyone- you're the boss.

Matt Stacy · Answer

@Chase Gibson @Robert Gilstrap is correct. The contract is between the seller and the PM company. You choose whether to keep them or not upon closing. You should inform the seller ahead of time so you can have the deposit money escrowed and/or transferred to your new PM company.

Who is the PM and what are the problems?

Chase Gibson · Answer

Thanks for all the information.  It sounds like my best bet is to talk with the current owner and try to get him to sort things out prior to the closing.

Lukas Zupan · Answer

Here in Oklahoma at least, Chase, that completely depends on your property manager and the contract as well. @Danny Randazzo and @Thomas S. have the right idea with a property management company that will try to hold you to the contract. Some will have it in the legal stuffs that you either have to pay them for the rest of the agreed management term, or will charge a fee for "cancelling". In that case, certainly get the seller to sort that out first or you could have a headache.

The property management company that I like and trust never hold you to such obligations from the start, they operate with the highest quality of service and basically maintain that if you don't like them you don't need to work with them. Change of owners or unsatisfactory results and you can drop them no strings attached.

Does that help you?

Thomas S. · Answer

Have the seller terminate the PM effective the day of closing. You do not have a contract with them so they will not get paid by you.

If the tenants are paying for a PM, which is extremely strange, you will need to inform the tenants that they may no longer hire a PM or that the PM must conform to your standards.

Is this a commercial rental property.

Can you terminate property management in place at purchase?

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