Ending a Contract With a Property Manager

Learn how to terminate an agreement properly

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Ending a contract with a property manager is not easy, but it is necessary sometimes. If a manager is not fulfilling the terms of a contract or is failing to manage a rental property to your standards, it is time to cut ties and move on. Before terminating any contract, make sure you understand the terms of the contract and your legal rights for ending the contract so you are not in jeopardy of breaching the contract.

Additionally, be sure to focus on the numbers and the results and don't make the issue personal. If a property manager is not living up to expectations by taking too long to fill vacancies or responding to maintenance requests too slowly, you need to cut ties and find someone who will produce better results for your investment.

Just Cause

If management violates the terms of a contract, it is in your best interest to terminate the deal. Once they have violated your trust or put your tenants or rental property in jeopardy, it will be difficult to feel secure allowing them to manage your property. However, while some management contracts do not require cause to terminate them, others allow you to cancel them only for specified reasons.

Examples of cause could be a property manager not storing tenants' security deposits according to state law or failing to follow Fair Housing Laws.

If you attempt to end a property management agreement without proper cause, the manager could ignore your request or take you to court for breach of contract.

Required Notice

Terminating a property management contract requires advance notice. The termination clause of your management contract should specify how much notice must be given. Most contracts require between 30 and 90 days notice to terminate a contract. If you are not within this window, your termination request will not be honored or your request could be considered a breach of contract. In this situation, you may find yourself involved in a lawsuit.

Provide your notification to terminate the management contract in writing and not by email. Best practice is to send the notice by certified mail, return receipt requested, so you will have a record that it was sent and that the property manager received it. Make sure you include the effective date of the contract termination.

Depending on the contract, either you or the current property manager must inform tenants that you have parted ways with the current management company. This also is best done in writing. Provide tenants information about who will manage them moving forward and let them know where their security deposits will be held.

Costs and Paperwork

Even if you provide proper notice, some termination clauses include a fee for ending the contract early. It can be as little as a few hundred dollars or as much as the management fee for the remainder of the contract.

Make sure you are given copies of all leases, records of security deposits, and a statement of all income and expenses immediately upon termination of the contract. There is no reason for a lag of more than three or four days.

If funds are owed to you, anticipate waiting one to two months to receive them. Managers must make sure they have the necessary funds to pay all expenses owed before they can determine the amount you are owed.

Funds that will be owed to you include monthly rent collected, any money in a reserve fund, and miscellaneous income such as revenue from a cell phone tower or billboard. The management company also is responsible for transferring tenants' security deposits to you or to the new management company you are using. Be sure they are put in a proper account according to your state laws.