When the relationship between an owner and property manager goes south, parting ways can prove complex. After all, if you signed a property management agreement, the terms of cancellation are not always up to you. That said, if the property management firm is not living up to what they promised, you may be well within your legal rights to cancel. So, join us below as we discuss when and how to terminate a property management agreement for a smooth and, most importantly, legal transition.
A PMA is a legally binding agreement between a property owner and a property management company. This contract lays out the responsibilities and terms of both parties as part of a business relationship. Furthermore, it outlines the owner’s intention to hand over control of daily operations to a management firm for a monthly fee. As with any contract, it is vital that owners thoroughly read and understand the terms before signing.
Despite having a signed contract, there are generally some reasons a manager or owner can lawfully cancel the agreement. It is important to note that failing to have a lawful reason means the terminating party may breach the contract.
For example, if the manager never did or is no longer fulfilling your expectations, parting ways may be necessary. That said, each property management agreement may differ in its specific wording regarding why an owner can cancel. So, it is vital to read the contract before moving forward. Most often, the termination part of a property management agreement involves “just cause.” Some common examples for how to terminate a property management agreement are –
So, if your PMA can be terminated for “cause,” ensure you are clear on what qualifies as “cause” to the management firm. Ideally, the agreement needs to clearly address what reasons are acceptable and which are not.
Owner Termination vs. Property Manager TerminationThe terms for cancellation may vary slightly depending on which party seeks termination. That said, owners that lack “just cause” may find themselves stuck or paying hefty fees. Let’s review a few key points owners need to look for when figuring out how to terminate a property management agreement.
If the agreement does not offer a clearly defined way out or requires owners to pay fees for the duration of the PMA regardless, this is a red flag. Ideally, companies with faith in their processes allow property owners the security of knowing they can cancel if they are dissatisfied for any reason with adequate notice.
There are instances in a business relationship where the manager will terminate the PMA with a property owner. Keep in mind; some PMAs may be vague. That said, these contracts can include a wide range of agent termination circumstances which can have financial implications for owners. Some of these instances may include, but are not limited to the following –
Regardless of the reason for canceling a PMA, every owner must follow a few essential steps. To better understand the process, continue reading as we lay out the process below.
Before canceling a contract, it is important to refresh yourself on the specific termination requirements. So, check out the terms and see what fees you may face, along with possible restrictions or waiting periods. Furthermore, it is crucial to note any notice requirements to ensure a smooth transition and avoid potential disputes.
Send Written Notice to the Property Management FirmMany property managers may appreciate a phone call if you are considering cancellation. After all, if there is an issue that could be resolved, opening up the lines of communication can go a long way. However, if cancellation is the final decision, sending notice in writing is advised. This protects both sides from any confusion and serves as a record if a dispute arises.
Rarely do owners incur zero fees or costs when it comes to terminating a property management contract. Depending on the contract, these can range from a minimal flat fee to several hundred dollars. Additionally, owners may need to settle any unpaid maintenance expenses or invoices. So, it is better to prepare for what financial implications will come from terminating the contract.
If you are switching directly to another management company, the current firm should forward all applicable records to the new manager. Additionally, as the owner, you can request copies of any records you need. Check out the list below of documents and records you need before cutting all ties with your property manager.
In general, property owners do not have direct contact with tenants. After all, that is one of the biggest benefits to a third-party management firm. That said, the tenant must be made aware of any management changes. Furthermore, this notice should be in writing. So, make sure the existing company informs the tenant of the change and always request a copy of that notice for your records.
Renting out your property is a complex undertaking full of many rewards and some concerns. Successful investors know that the support of a qualified Northern Virginia property management company is a huge asset.
The experienced team at Bay Property Management Group helps owners feel confident that their rental business needs are taken care of. Our staff offers a comprehensive marketing strategy, dedicated property managers, tenant communication services, maintenance coordination, and financial reporting. So, if you are looking for a true partner to take your investment to the next level, give us a call today to learn more!
