Breaking a Property Management Contract

Breaking a Property Management Contract

Raleigh, NC · Member since 2017 · 4 posts · 2 votes

I need to break my contract with my Property Manager, but I am unsure whether or not my reasons have legal standing. It says that unless it is for legal reasons, I will be charged the remaining property management fees for the year from the date the contract is broken. 

But, my reasons are that they have been charging me more than our contract amount of 8% for multiple months now and have not responded to my requests to refund the money. As well as the fact that they have taken money out of my owner's draw for work done to the property last year, but I just got a letter from the vendor stating they still haven't been paid by my PM. My PM responded once saying they have had communication issues with that vendor so they aren't paying them until they get it straightened out. I spoke with the accounting department for the vendor who tells a different story and says that my particular PM has been horrible to work with and won't pay them for work done for multiple properties, even after sending multiple communications. This is why they sent letters to the owners of the properties instead, trying to recoup some of the money owed.

My PM also refuses to send me itemized reports of what I am getting for my owner's draw and why. It is just a random number each month, so I feel like they are skimming off the top.

Do these reasons count as legal reasons to break my contract?

Any advice would be appreciated!

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Nathan GesnerBusiness Member
Moderator
Real Estate Broker · Cody, WY · Member since 2010 · 28k+ posts · 41k+ votes
7y

If what you posted is correct then I would argue you have a right to cancel without penalty. Here's how I would proceed:

1. Send a letter to the PM via certified mail. Demand a written response within 14 days. If the response is not received within 14 days, or is unsatisfactory, you intend to terminate the agreement and sue to recover the lost funds.

2. If no response, contact an attorney and have them draft the termination letter as well as a demand for payment of any moneys owed.

3. At the same time, or shortly thereafter, I would contact the North Carolina Real Estate Commission and verbally explain the situation. Have a copy of your PM agreement, any invoices, etc. Give them the facts. They will typically reach out to the Broker and "motivate them" to fix the issue. If the Broker refuses and you still feel you are justified, you can file a formal, written complaint.

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  • Property Manager · Ketchum, ID · Member since 2016 · 277 posts · 132 votes
    7y

    You will need to read your contract to see what the terms are first of all.  Do they promise an itemized statement monthly? (they should)  When you say they are charging more that 8% does that mean that they are charging for rent collection at 8% and adding other charges or maybe you cannot see what they are charging you for.  If your contract states that you will just be paid an amount each month, but does not promise a statement you may have trouble in court getting the contract terminated.  

    I had this issue with a property management company.  They were leaving my units vacant for many months at a time (loss of income to me) and after an audit, my accountant found that they were charging me for materials that were being used for repairs that were not on my property.  But I lost in court for my request to cancel the contract even with this proof.  So that is why I suggest that you read your contract carefully.

    Good luck.

  • Brad LarsenPro Member
    Property Manager · San Antonio and Austin, TX · Member since 2016 · 377 posts · 380 votes
    7y

    This issue sounds very unfortunate that you are having.  The advice given of understanding the agreement is first and foremost.  From there, open and level headed communication with the PM is next.  

    From a PM company perspective - we see a lot of owners make stuff up in their heads to try and justify canceling.  We don't charge a lot of up front fees and we don't get five figure commissions like Realtor's on transactions - so to stay in business and provide a great service - we have to protect ourselves.  From what you may ask?  Owners who want to hire us, allow us to do the work of finding and placing a tenant (for a minimal up front), and then find a way to fire us now that all of the "hard work" is done in their perception.  We call them "C" Class Landlords.  

    This does not seem to be your situation as I would imagine you as an "A" Class Landlord just for seeking out the answers to difficult questions in a rationale manner.  

    Would recommend open communication with the PM and refrain from making threats of legal action or online reviews.  That only causes them to posture accordingly to any blackmail attempts.  We see this a lot by tenants and owners!  "If you don't do exactly as I want, I'm going to leave you a negative review"  Some would call that extortion.  It's the way of the online world we live in. 

    If all else fails, seek out attorney advice for a 2nd opinion on what actions would be needed next.  

  • Nathan GesnerBusiness Member
    Moderator
    Real Estate Broker · Cody, WY · Member since 2010 · 28k+ posts · 41k+ votes
    7y

    If what you posted is correct then I would argue you have a right to cancel without penalty. Here's how I would proceed:

    1. Send a letter to the PM via certified mail. Demand a written response within 14 days. If the response is not received within 14 days, or is unsatisfactory, you intend to terminate the agreement and sue to recover the lost funds.

    2. If no response, contact an attorney and have them draft the termination letter as well as a demand for payment of any moneys owed.

    3. At the same time, or shortly thereafter, I would contact the North Carolina Real Estate Commission and verbally explain the situation. Have a copy of your PM agreement, any invoices, etc. Give them the facts. They will typically reach out to the Broker and "motivate them" to fix the issue. If the Broker refuses and you still feel you are justified, you can file a formal, written complaint.

    The DIY Landlord Book4.7248 Reviews
  • Adam SchneiderPro Member
    Lender · Raleigh, NC · Member since 2012 · 955 posts · 639 votes
    7y

    @Shanah Bell Recommendation: First contact the NC Real Estate Commission (NC REC). NC REC takes these issues very seriously and has the authority to yank the PM's real estate license and some other powers. Ask the NC REC about this issue. Next step would be to have an attorney write a letter. My hunch is that the NC REC will address this right away.

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