Skip to content
×
Try PRO Free Today!
BiggerPockets Pro offers you a comprehensive suite of tools and resources
Market and Deal Finder Tools
Deal Analysis Calculators
Property Management Software
Exclusive discounts to Home Depot, RentRedi, and more
$0
7 days free
$828/yr or $69/mo when billed monthly.
$390/yr or $32.5/mo when billed annually.
7 days free. Cancel anytime.
Already a Pro Member? Sign in here

Join Over 3 Million Real Estate Investors

Create a free BiggerPockets account to comment, participate, and connect with over 3 million real estate investors.
Use your real name
By signing up, you indicate that you agree to the BiggerPockets Terms & Conditions.
The community here is like my own little personal real estate army that I can depend upon to help me through ANY problems I come across.
Managing Your Property
All Forum Categories
Followed Discussions
Followed Categories
Followed People
Followed Locations
Market News & Data
General Info
Real Estate Strategies
Landlording & Rental Properties
Real Estate Professionals
Financial, Tax, & Legal
Real Estate Classifieds
Reviews & Feedback

Updated about 2 years ago on . Most recent reply

User Stats

98
Posts
24
Votes
Felipe Ocampo
  • Robotics Engineer
  • Germantown, MD
24
Votes |
98
Posts

Property Management Predatory Clause

Felipe Ocampo
  • Robotics Engineer
  • Germantown, MD
Posted

The property management company of one of my properties is terrible. They are extremely unresponsive, taking days if not weeks to respond to my emails. At some point, they switched email servers and did not let any of their clients know of the switch. After about 3 months of not getting my emails answered, I found an old personal email of one of the employees and they finally gave me the new email. The straw that broke the camel's back was that they took over 2 months to get the property rented. The property is in great condition and it's in a great area; there was no reason for it to take that long. After all this, I decided to find a different property management company and gave them their 30 days notice, but they then told me that their management agreement has a clause that if I want to go to a different property management company, I must pay them all the property management fees left on the newly signed 12-month lease. This seems extremely predatory. They are already getting the 1st month of rent, which means they got paid for all the work they did to get the property listed and rented. Unfortunately, I did not catch this clause when I first signed this contract a few years back. I checked the property management contract that I have with other companies and none of them have this sort of ridiculous clause. 
Here is the clause: "Owner can terminate Broker "without cause” if the Property “is under a Rental Agreement", provided the following conditions are satisfied: 1) Owner shall first give Broker thirty (30) days written notice; 2) Owner shall pay a sum equal to the commissions due for the remainder of the current tenant's occupancy"

I argued that this was a termination with cause because of the above-mentioned reasons, but none of those reasons are "causes" within the management agreement. You are basically only allowed to do a termination with cause if the company basically steals money which they haven't done. I haven't actually heard back from them regarding what I am arguing which is not really surprising since again they are not very responsive. 

Any recommendations? I don't want to pay them over $1500 to do nothing, but I am also tired of working with them.

Most Popular Reply

User Stats

28,047
Posts
41,040
Votes
Nathan Gesner
  • Real Estate Broker
  • Cody, WY
41,040
Votes |
28,047
Posts
Nathan Gesner
  • Real Estate Broker
  • Cody, WY
ModeratorReplied
Quote from @Felipe Ocampo:

It's hard to know how to respond with only one side of the story. 

Many PM Agreements penalize the owner for termination "without cause" so that's expected. However, a good Agreement would include a clause regarding how to deal with disagreements or mistakes. In mine, I instruct the owner to give me a written notice of the complaint and 15 days to fix it or explain it to their satisfaction. If I can't/don't, then they can terminate "with cause" and pay no penalty.

The contract doesn't say they need to respond to you within one week, but it's still a reasonable expectation. If they fail to provide you with current contact information, that's also a lack of care. I would write them an email with a list of failings and demand they terminate without penalty in 30 days. I would also demand they respond within two business days. Finally, I would close the letter with something like this:

"If you fail to respond in a timely manner, or if you refuse to let me out of this contract despite your poor performance these past two years, I will file a complaint with the Ohio Division of Real Estate and Professional Licensing."

Most Brokers would rather let you go than face an investigation. Even if they are completely innocent of all your charges, the investigation may discover paperwork errors or other problems that can get them in trouble.

  • Nathan Gesner
business profile image
The DIY Landlord Book
4.7 stars
165 Reviews

Loading replies...