Impractical Inherited Lease Terms

Member since 2024 · 1 post · 2 votes

I am purchasing a property that is currently managed by a property management firm. The property has tenants with a lease that does not end for several months. The lease includes a madatory "Resident Benefit Package" which includes things that I do not have the means to provide like credit reporting, home buying assistance, and a rewards program. This package also includes the tenants rental insurance through the property management company. To top it off, this mandatory package has a monthly fee paid with the rent. What are my options here? Can I ask the tenants to agree to void that part of the lease? But then what if they do not agree?

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Drew SygitBusiness Member

Property Manager · Royal Oak, MI · Member since 2012 · 13k+ posts · 9k+ votes

Agree with all posted by Stuart & Corby, except about the Renters Insurance.

We offer Renters Insurance to our tenants also and it's a special program only PMCs have access to and is a much better & cheaper "product" than tenants can get on their own.

You have 3 options:

1) Check the lease for a "transfer of management" clause to see if that can terminate those services.

2) Negotiate with the tenant to terminate those services.

3) Retain the PMC through the end of the lease.

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Stuart UdisPro Member
Attorney · Philadelphia · Member since 2018 · 2k+ posts · 3k+ votes
1y
@Zach Robbins Services like rent redi cost $150 a year and provides the tenants the ability to have rent payments reported. Should easily be absorbed by any rental property owner. It seems the other services, such as a home buying assistance program and rewards program are just funnels the Property Management company is using to convert the tenants to home buyers where their brokerage can collect brokerage revenue. It's a common practice. I would imagine the seller/PM would be willing to honor those services if it means potentially more revenue. More info is needed. The rental insurance likely was already paid for the term of the lease, and I assume this was paid by the tenant. The PM likely just directed the tenant to a preferred insurance provider. Have you spoken to the PM? Another option is to let the PM manage the property until the end of the lease.
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Corby GoadeBusiness Member
Investor · Boise, ID · Member since 2014 · 3k+ posts · 3k+ votes
1y
I run a PM company and we have a similar structure in our leases. There are companies that we contract with that provide all of those services and they are billed to the tenant through their rent payments, not the owners. A couple things to consider;
-Don't get me wrong, there are lots of awful PMs out there, but this is just one, small piece of the puzzle and doesn't mean your PM is good or bad. These packages benefit the tenants and help with preventative maintenance on your property.
-If this makes or breaks the deal, it's not a good deal. Don't sweat the small stuff- if you don't like this PM, you can part ways right after you close on the property, but the lease stays until it expires. At that point, you can do whatever you want.
That being said, most new investors lose their shorts through poor management- either self management or a terrible property manager. Don't sweat the small stuff- does the tenant pay on time? Are they happy with the property and service they get? Does your PM take reasonable care of the property and keep things fairly passive for you? If so, focus on your next deal, not being a landlord.
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Drew SygitBusiness Member
Property Manager · Royal Oak, MI · Member since 2012 · 13k+ posts · 9k+ votes
1y
Agree with all posted by Stuart & Corby, except about the Renters Insurance.
We offer Renters Insurance to our tenants also and it's a special program only PMCs have access to and is a much better & cheaper "product" than tenants can get on their own.
You have 3 options:
1) Check the lease for a "transfer of management" clause to see if that can terminate those services.
2) Negotiate with the tenant to terminate those services.

3) Retain the PMC through the end of the lease.

[email protected]248-209-6824
Logical Property Management4.9469 Reviews
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Kenneth Rockwell
Member since 2025 · 2 posts · 0 votes
1y
HI!
I agree, either hold onto the current company until end of lease, or approach them about a new lease without that package. The management company I've worked with for years merged with another which recently did roll out such a benefit package to my tenants with their lease renewals this year.
I tried self-managing back in the beginning (years ago) and made plenty of beginner mistakes - a tenant who turned the spare bedroom into a weed-smoking group meditation room, a tenant who let the oil tank run dry three times (I've since switch all prop to gas), and even my first management company I found was skimming off the top. But I've learned enough to know, I'd rather find a GOOD management company and once I do, stick with them, let them handle things I don't have time for.
Good luck!
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Stetson Oates
Member since 2024 · 65 posts · 63 votes
1y
I'm not sure this is the correct way, but I had the same issue with a lease I inherited. I just drew up a document saying we didn't offer that service with those programs and had the tenant sign it. It was a bundle of services for $49.95 a month. The tenants were happy to sign it and save the $49.95, they had never used the services.
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Clare PitcherBusiness Member
Property Manager · Milwaukee, WI · Member since 2024 · 162 posts · 97 votes
1y
Hi Zach!
The resident benefit package is very common in the property management industry and offers so many great services for tenants. You have a couple of options:
1- Work with that management company until the end of the lease term and then get the tenants on your own lease.
2- Find out who the package is sourced through (we have somehting similar provided through a company called Second Nature) and see if you can keep the package through them.
3- Have the tenants sign an adendum saying you are unable to provide this service. If you go this route it may cancel their insruance so just make sure they get renters insurance through another firm.

This isn't impractical and shouldn't be a deal breaker!
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