How to Safely Terminate Contracts with Your Property Manager

The termination provision in your contract is important because it outlines the circumstances in which you or the property management may end the working relationship early and details the related fines or charges. If the relationship does not work out as planned, not having a clear exit strategy might bind you. It is typical for contracts to automatically renew themselves for extra terms after the first or “primary” term has passed, continuing the cycle with each new expiration date. However, it is crucial to find out how long this auto-renewal would keep you bound.

An owner must understand that the majority of companies normally establish a contract duration spanning 1 to 2 years in property management agreements, commonly referred to as “Duration of Agreement” or “Retainer Period,” with just a few companies offering flexible month-to-month options. It’s important to keep in mind that the moment you put pen to paper and sign the contract, it becomes legal.

It is also more likely that the property owner will have extra fees or penalties if they decide to end the contract early. These fees are not often imposed by property managers but when they are, they might take several forms. It might be a simple flat price or it could be conditional. The limitations imposed by these fees might be very different. In more serious circumstances, some contracts provide that if your lease is terminated early, you will still be required to pay monthly management fees for the rest of the lease term(s).

Some contracts stipulate that to terminate the agreement early, you must pay the whole management charge for the duration of the agreement in advance. This price is determined based on the planned rentals. For the sake of protecting your interests and guaranteeing flexibility when handling your property, it is essential to understand and negotiate these termination conditions. A penalty-free departure plan should also be included if the management is unable to find a tenant within a given amount of time, usually 3 to 4 months.

To prevent paying any penalties when choosing to terminate, make sure the written date is the same as the contract’s natural expiration date. Certain important decisions must be made after agreeing to end the contract to guarantee a smooth transition. These responsibilities, as stated in the contract, must include the following:

1.  Receiving a final financial report from the management business, which will include any unpaid rent after deducting agent fees and other property management-related costs.

2. Gathering the necessary records and papers, including a list of the security deposit dues from tenants, copies of their leases, and other pertinent paperwork.

3. Transferring security deposits with deductions by the contract to either the owner or the owner’s new agent.

4. Informing tenants in writing of the precise amount of their security deposit.

5. Providing contact information for the owner’s new agent or representative and informing tenants in writing that the management company is no longer in charge of the property.

In order to accomplish an easy and orderly conclusion to the property management agreement, it is essential to put these procedures into action. Following these guidelines will help both parties have an easy termination procedure that causes the fewest delays and promotes a clean break. This “attention to detail” promotes professionalism and confidence throughout the termination process, in addition to protecting the interests of the property owner and the management company.