Every beginning has an end, and that includes any partnerships or employment. In the world of property management, there will also come a time when a client wants to fire a property manager. But, how exactly should owners end contract with a property management company?
The Proper Way to End Contract With Property Management Companies
There are a couple of reasons why clients would want to terminate a contract with a property management company. The company may not be doing a good job performing their tasks or they may have violated a term in the agreement.
In these cases, it is best for property owners, such as yourself, to end contracts with property management companies. After all, once a company has broken your trust, you can never feel assured that they will manage your property well from then on. Continuing your partnership may only compromise your property or your tenants.
Of course, not all property management companies are created equal. Some companies will let you terminate a property management agreement freely, i.e. without cause. However, others will only allow you to end contracts with property management companies for certain reasons.
In the case of the latter, if you try to terminate your agreement without just cause, the company can disregard your cancellation. Worse yet, they can even take legal action for violating the contract.
If you want to cancel your property management contract properly, here are the steps you must take:
1. Check Your Agreement
Unlike most human relationships, contracts are binding. When you enter into an agreement with a property management company, you seal the deal with your respective signatures.
That means if any party violates the terms of the contract, the other party can take legal action, holding the violator accountable.
That said, if you intend to cancel the services of a property management company, the first thing you must do is check your agreement. Most contracts will contain a cancellation policy.
It is important to review the terms of the cancellation and follow them accordingly. Find out if there are any fees involved. Check for language pertaining to how and when you will receive your fund balance (if any).
2. Send a Notice of Cancellation
Some contracts will also outline how much lead time you must give the company your termination. You may need to provide them with a 30- or 60-day notice. It is in your best interest to follow this stipulation not only for your legal protection but also because it will allow the company time to transition.
When terminating your management contract, verbal notice is not enough. You must put your notification in writing and then send it to the company via certified mail with a request for a return receipt. This way, you can ensure the company receives it.
When writing your notice of cancellation, make sure to use a professional tone, and stay away from fancy fonts. Stick to something formal like Arial or Times New Roman.
Additionally, do not forget to include the effective date of contract termination. You also have the option to outline your reason for termination, though you can also do this over the phone.
You can download our sample notice to terminate a property management agreement here.
3. Anticipate Costs
Typically, terminating a property management agreement before its natural end will entail costs, even if the company has a more lax cancellation policy. You will find the cancellation fee within your agreement as well.
There is no fixed amount for this, as it will vary from contract to contract. Some companies only charge a few hundred dollars, whereas others will ask you to cover the management fee for the rest of the contract’s remaining time. If there are any work orders that have yet to be accounted for, you will need to pay for them, too.
On the other hand, if the company owes you money, do not expect to receive them immediately after termination. You will probably need to wait a couple of months before the company settles them. This includes reserve fund money, rent money, security deposits, and other miscellaneous income.
4. Provide Notice to the Tenant
You will need to inform your tenant/s of the change in property management. As with everything else, the management contract should also outline which party is responsible for performing this task.
Make sure you or the company puts this notice in writing. It is also best to include any pertinent information in the notice, such as who will replace the current property manager and where their security deposits will fall.
What to Do Before Property Management Contract Termination
Before you end contracts with property management companies, it is imperative that you have a new one lined up to switch over to. When talking to prospects, make sure you let them know why you are changing property managers in the first place.
You do not want to go over the same mistakes and problems, so your new management company should perform better in all respects. You also want to make sure the company you ultimately hire can handle taking over managing a property mid-lease.
Of course, finding a new property manager is only an option. You can always choose to manage the property yourself. Keep in mind, though, that property management requires a great deal of time and effort.
You will also need to be familiar with accounting and marketing as well as secure a license (in some states). No doubt, the pros of hiring a property manager outweigh the cons.
The Road to a New Beginning
Some people find it easy to end their contracts with property management companies while others deem the process awkward and nerve-wracking. Luckily, you can save yourself the unpleasantries by going through the company’s cancellation policy.
In doing so, you can follow the proper protocols with the utmost professionalism, barring any personal quarrels or feelings in the process. And, when you do switch to a new manager, make sure to set your expectations so they know exactly what went wrong in the past and can avoid it from happening again.
If you need to change property management companies, start your search using Florida Property Management’s online directory. Our directory also consists of reputable HOA management and real estate companies.