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There are many reasons why a landlord would want to know how to terminate a property management agreement.  And we’ll cover a few of those possibilities as well as provide you the insight and know-how for doing so.

It is important to start off by acknowledging the need for a Property Management Agreement.  Although it might not always feel this way it is to protect both parties.  Providing a written set of expectations, deliverables, corrections, and terminations.

If you want to learn more about management agreements, read our blogs for Understanding Property Management Agreements: leasing, management fees, maintenance.

 

Why Can A Landlord Terminate the Agreement?

For a multitude of reasons!  Generally, they will fall into 2 main categories: sold the property or bad property management.

Management agreements are typically a year in duration.  During that time, landlords can sell their property(s) and no longer have a use for property managers.  If this applies to you, we encourage you to negotiate with the property manager about potentially transferring service to the new landlord.

More commonly, these agreements are terminated because landlords have had enough.  Sadly.

 

Failing Obligations Or Just a Bad Property Manager?

All parties in a Property Management Agreement agree to provide, meet, follow, and deliver certain obligations.  That’s the power of any contract agreement.

It is important to clarify if the property manager was simply bad but in compliance with the agreed contract or if they were failing to deliver their end of the agreement.

Why does that matter?

Because a property manager who delivered on their requirements is still in good condition of their contract.  Anyways they are terrible, they still met their contractual obligations. By the way, if they truly are that bad then you’ll enjoy our blog that shares how to report the bad property management companies.

For example, hiring an expensive handyman for minor repairs is bad but still in compliance, not returning your phone calls for several days, selecting a tenant who pays late, etc.

Unfortunately, this will potentially lead to a termination fee.

On the other end of the spectrum, a property management company that blatantly fails to meet their contractual duties is in breach of their contract.  To get out of your agreement without paying any termination fees will require proper documentation and following the contract procedure.

For example, not providing your rental payouts on time, providing required notices, not providing proper documentation, etc.

 

Required Notice to Terminate

Your management agreement will have a Breach of Contract and Termination Clause.  Follow these exactly as it states!

Breach of Contract:

It is your responsibility to inform the property manager when they are not in good standing of the contract.  This is called ‘breach of contract’.

The contract will state exactly how and when you can send these notices.  A written notice is almost always required, if not then do so for your own records.  When in breach, the other party is given a defined duration of days to get back within good standing.

Make sure to note when you sent the notice and they got back in good standing.

Termination Clause:

The Termination Clause will typically require a duration for notification and a procedure for who to send the notice to and by what means.  Often through certified mail to the broker.

Remember that the property management company paid for this contract to be created, therefore it will always favor them.  You might notice the property management company can terminate with a 30-day notice but you are required to provide a 60-day notice.

 

Termination Fees or Costs

As we alluded to earlier, to terminate a Property Management Agreement can result in fees.  Especially when they are in compliance with the contract.

Typical termination fees will be the remainder of their fees owed.  Yep.  You read that correctly.  Regardless, they will end up making 100% of their fees.

Reread the last paragraph of the Termination Clause about who these agreements favor.  Hint: the property manager.

 

Termination Notice of Property Management

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