Property management issues

33 Replies

TERM: It is mutually agreed by and between the parties that this Management Agreement shall be binding upon the party’s successors, estate and assigns and shall remain in full force and effect until termination pursuant to the terms of this paragraph. The term shall begin on the _____ day of _________, 2017 and will be in effect for one year and will automatically renew for successive year periods at the anniversary date so long as there has not been at least a thirty (30) day written notice prior to the next term given by either party to terminate. Termination by LANDLORD is effective when actually physically received by BROKER. In the event this agreement is terminated by LANDLORD, the BROKER shall continue to receive the rental commission set forth below as long as the TENANT(S) placed on the property by BROKER shall remain in the unit until the end of the current lease. In the event this agreement is terminated by LANDLORD, the BROKER'S rights provided for in paragraph 15 THROUGH 18 shall survive such termination. All monies expended by BROKER shall be paid to BROKER prior to this cancellation and BROKER is authorized to withhold any sums owed to BROKER from monies held prior to the final disbursement to LANDLORD. An additional cancellation fee of $125.00 will be charged to LANDLORD should LANDLORD terminate this agreement prior to TENANT(S) being placed and for a period of 3 months after TENANT(S) placement. BROKER reserves the right to terminate this agreement with 30 days written notice to LANDLORD at any time, or, immediately with written or verbal notice if in the opinion of BROKER'S legal counsel, LANDLORD'S actions or inactions violate the terms of this management agreement or are illegal, improper, jeopardize the safety or welfare of any TENANT(S) or other persons, interfere with this management agreement and/or a foreclosure action is filed against the LANDLORD.

I just did  any feed back Willa be great I just want to make sure I understand it right I’m new to this 
Originally posted by @Elenis C. :

Sorry to hear that @Christopher Cadenhead. Does it say anything in the contract about ending it? It should state everything in there clearly. If you aren't sure, post a copy on here with the private info crossed out and we can try to help.

@Christopher Cadenhead If you take it line by line, it’s a bit easier to read. I’m not a lawyer but this is what I get from the terms. I hope this helps. You can contact the PM and confirm if you cancel the contract today, is XYZ true. They will have to tell you. Make sure you get a signed termination so they won’t come back later asking you to pay anything. 1. You have a one year contract with them that automatically renews. To stop it from automatically renewing you need to physically give them written notice 30 days before it renews. “The term shall begin on the _____ day of _________, 2017 and will be in effect for one year and will automatically renew for successive year periods at the anniversary date so long as there has not been at least a thirty (30) day written notice prior to the next term given by either party to terminate.” 2. You may terminate, again has to be written and physically given to the PM, but you will have to keep paying the PM the monthly commission that you’re paying them now. You would pay them this until the tenants they put in the property leave or until their lease is up. “Termination by LANDLORD is effective when actually physically received by BROKER. In the event this agreement is terminated by LANDLORD, the BROKER shall continue to receive the rental commission set forth below as long as the TENANT(S) placed on the property by BROKER shall remain in the unit until the end of the current lease.” 3. I am not sure I have paragraphs 15 through 18 to explain the next part. “In the event this agreement is terminated by LANDLORD, the BROKER'S rights provided for in paragraph 15 THROUGH 18 shall survive such termination.” 4. If the PM has spent any money on maintenance, for example, and you haven’t paid them yet, then you would have to pay before cancelling the contract. “All monies expended by BROKER shall be paid to BROKER prior to this cancellation and BROKER is authorized to withhold any sums owed to BROKER from monies held prior to the final disbursement to LANDLORD.” 5. If you don’t have a tenant in the property now or if it’s been less than 3 months since the PM placed a tenant, you owe the PM an extra $125. “An additional cancellation fee of $125.00 will be charged to LANDLORD should LANDLORD terminate this agreement prior to TENANT(S) being placed and for a period of 3 months after TENANT(S) placement.” 6. And of course they always put a clause in there that allows them to cancel at any time within 30 days notice without any penalties to them. “BROKER reserves the right to terminate this agreement with 30 days written notice to LANDLORD at any time, or, immediately with written or verbal notice if in the opinion of BROKER'S legal counsel, LANDLORD'S actions or inactions violate the terms of this management agreement or are illegal, improper, jeopardize the safety or welfare of any TENANT(S) or other persons, interfere with this management agreement and/or a foreclosure action is filed against the LANDLORD.”

@Christopher Cadenhead I like how @Elenis C. broke it down, I suggest you do the same.  Break it out in Excel with the "Statement" and then your actions so you can clearly see them all separate.

Why do you want to get rid of them?  Is there anything about the managers being in breach of contract?  If they're not living up to their end of the bargain then they could be in breach, which might require you sending them proper notice before just cancelling.  

Regarding #4, I would also suggest you get everything financially caught up before you terminate.  Meaning your expenses, have them clarify what you might still owe them so you have it 'dated'.  You don't want them adding bogus expenses because you wish to terminate, if you get expenses confirmed on a Monday and then terminate on a Tuesday, they can't go back to Sunday for "missed expenses".

Here are Elenis' comments broken out, you need to out 3 spaces between for some reason.

Originally posted by @Elenis C. :
@Christopher Cadenhead

If you take it line by line, it’s a bit easier to read. I’m not a lawyer but this is what I get from the terms. I hope this helps. You can contact the PM and confirm if you cancel the contract today, is XYZ true. They will have to tell you. Make sure you get a signed termination so they won’t come back later asking you to pay anything.

1. You have a one year contract with them that automatically renews. To stop it from automatically renewing you need to physically give them written notice 30 days before it renews. “The term shall begin on the _____ day of _________, 2017 and will be in effect for one year and will automatically renew for successive year periods at the anniversary date so long as there has not been at least a thirty (30) day written notice prior to the next term given by either party to terminate.”

2. You may terminate, again has to be written and physically given to the PM, but you will have to keep paying the PM the monthly commission that you’re paying them now. You would pay them this until the tenants they put in the property leave or until their lease is up. “Termination by LANDLORD is effective when actually physically received by BROKER. In the event this agreement is terminated by LANDLORD, the BROKER shall continue to receive the rental commission set forth below as long as the TENANT(S) placed on the property by BROKER shall remain in the unit until the end of the current lease.”

3. I am not sure I have paragraphs 15 through 18 to explain the next part. “In the event this agreement is terminated by LANDLORD, the BROKER'S rights provided for in paragraph 15 THROUGH 18 shall survive such termination.”

4. If the PM has spent any money on maintenance, for example, and you haven’t paid them yet, then you would have to pay before cancelling the contract. “All monies expended by BROKER shall be paid to BROKER prior to this cancellation and BROKER is authorized to withhold any sums owed to BROKER from monies held prior to the final disbursement to LANDLORD.”

5. If you don’t have a tenant in the property now or if it’s been less than 3 months since the PM placed a tenant, you owe the PM an extra $125. “An additional cancellation fee of $125.00 will be charged to LANDLORD should LANDLORD terminate this agreement prior to TENANT(S) being placed and for a period of 3 months after TENANT(S) placement.”

6. And of course they always put a clause in there that allows them to cancel at any time within 30 days notice without any penalties to them. “BROKER reserves the right to terminate this agreement with 30 days written notice to LANDLORD at any time, or, immediately with written or verbal notice if in the opinion of BROKER'S legal counsel, LANDLORD'S actions or inactions violate the terms of this management agreement or are illegal, improper, jeopardize the safety or welfare of any TENANT(S) or other persons, interfere with this management agreement and/or a foreclosure action is filed against the LANDLORD.”

@Kenny Dahill

Why?  Because most are not worth your time.  They sell you that they have contracts with different trades, and their handymen work for less.  Then they start spending your money, take their commissions, their monthly fee, and then they send you money when it is convenient for them.  Nope, I'm 0 for 2 on PM companies.  Doing it myself, because PM companies are in business for themselves, not for you, IMO.

@Christopher Cadenhead

I cannot believe these terms.  My goodness, they have you over a barrell.  If they place tenants, they continue to collect fees for that placement until the end of their lease, even after you cancel.  And you can only cancel one each year, and that 30 days prior the auto renewal date, and only when they have received the written notice.

This is a great lesson to be considered when you are tempted to use a Property Management company.  Do they seem to have your interests in mind, or theirs?

Originally posted by @David Moore :

@Kenny Dahill

Why?  Because most are not worth your time.  They sell you that they have contracts with different trades, and their handymen work for less.  Then they start spending your money, take their commissions, their monthly fee, and then they send you money when it is convenient for them.  Nope, I'm 0 for 2 on PM companies.  Doing it myself, because PM companies are in business for themselves, not for you, IMO.

 Unfortunately that is not uncommon.  Also, I'm not a property manager.  In fact, I self-manage for similar reasons.  All valid points, although there are great managers out there as well but we just need to identify them.

However, if he has a valid reason to terminate the contract because they're in breach then he could have his way out without paying the fees.  If they're performing all required scopes of services but terrible at responding or pick expensive vendors, that might not justify as breaching and could result in him having to pay the fees.

@Kenny Dahill

If there is even one great property manager out there, let's at least set the terms.  A great property manager not only saves you time, but ads value.  Most just take your money.   A PM that ads value...I'd be interested to find even one.  

@David Moore and the reason those thieving property managers exist is...because Landlords hire them.

If Landlords did their due diligence and screened their property manager, there wouldn't be so many problems. Unfortunately, most Landlords have no clue how to read a contract or how to evaluate which manager would be best for their property and situation or put the most money in their pocket.

It's the same reason so many Landlord have bad tenants: failure to screen.

@Nathan G.

I hope you are not using your answer as advertising for property management.  Again, I have not yet seen one PM that ads value.  When I acquire a property, or when my lawyer created a lease, you can bet I read through those.  Landlord's are not the simpletons your post seems to suggest.  Landlord's are busy maintaining and improving their acquisition skills, their tenant skills, their leasing skills.  The lesson never really ends.   We landlord's know, for instance, to sign non-exclusive contracts with realtors...we know they exist, even though some realtors don't know they exist.  

I guess we want to believe a PM could be like that contractor who nails his number every time, or that banker who is looking for a win/win.  But PM companies aren't like the rest, in my experience.  There is no excellence.

@David Moore I'm in Cody, Wyoming with a population of 9,500. I personally manage about 20% of the entire rental market which is about 18% higher than my nearest competitor. I've been a member of BP since 2010 and just picked up my first client four months ago that bought a property through me in another town so I don't manage it. In other words, there's nothing I can do on this forum that would help my business.

If you haven't seen a PM that adds value then you haven't looked hard enough. Maybe you're a super-Landlord that actually reads laws and consults attorneys; most do not. Do you know where I get the majority of my business? From Landlords that attempted to self manage, failed miserably, and then begged me to dig them out. I do, I do it well, and about 80% of them make more money AFTER paying my fees and their properties are better maintained with higher-quality tenants. It would be easy for you to dismiss this as a unicorn story but I network with thousands of property managers around the country that are high-quality professionals with more knowledge in their pinky than the average Landlord.

I started out as a private Landlord and had a couple bad property managers but I never smeared the entire profession. In fact, I saw it as an opportunity to elevate the profession. My intent on this forum is to educate self-help Landlords so they know how to research and find quality managers. Some real pros are out here and we're worth the money.

@Christopher Cadenhead the cancellation process should be outlined in your agreement with them. Most say 30 days notice. In the future always be sure you don’t enter into an agreement if you can’t get out in 30 days. Many times there are state statutes that regulate that anyway so look it up for your state. Good luck!
@David Moore It's something I'm considering. I puchased both properties this year and I inherited tenants and chose to stay with existing pm. My contract to get out is not as sticky as the one discussed here. But I did have my attorney review and she gave me pointers going in to protect myself. At some point though I'd like to self manage if its possible. How are you able to self manage? I need my rental income to be truly passive. I work part time, I'm a mother, wife and I care for my mom who has cancer. If the pm is doing a great job in my current situation it pays to keep them. In time I will be able to tell if they are worth the money or not.
Originally posted by @Tiffany U. :
@David Moore I agree PM companies nickel and dime you. Their contracts are ridiculous. I have two properties both are with a PM company but only because they are not in my area.

They clearly add value by performing a service you can't do yourself, which supports my point.

If they "nickel-and-dime" you to death, why not do your research and find a quality PM that doesn't? Or negotiate your terms? 

Imagine going to a restaurant for lunch and the menu says $10 for a hamburger. You ask them to add cheese, pickles, lettuce, and tomato. When you get the bill, you realize they charged $2.00 for the four items you added. You'd be mad, right?

But what if those charges were printed on the menu? What if the waiter told you, before you ordered, that there were additional charges for cheese, pickles, lettuce, and tomato?  Wouldn't it be your fault for ordering the additional items? Wouldn't it be your fault for going back to that restaurant every month to order that same burger?

Professional property managers disclose their fees up front and in writing, in which case you've agreed to the terms and should take responsibility for that decision. It's no different than a tenant that signs your rental agreement and then complains that you want the rent paid every month in full by the first! 

The reason crappy managers exist is because Landlords keep hiring them. Complaining on this board won't solve any problems.

@Nathan G.

Not complaining.  Sharing the poor guy's pain.  But to your example.  Here is the best example of Nickel and diming.  You sign the contract, know the stipulations, and you have a tenant moving out.  The PM Company, newly hired, wants to go in and do repairs, so they wait for the tenant to move out, instead of seeking the tenant first, which is what landlord's do.  Then, they ask you for a list of repairs to authorize.  They do extra, though, because that is what they do. But their contract doesn't have a cost estimate of repairs.  Then they pick contractors that are super expensive, and leave a mess.  Then, instead of the contractor, who are their lower paid but high charging guys, picking up after themselves as part of the contract, they leave a mess, that, you guessed it, a  cleanup person comes after to throw out the crap they left behind...and after that,  they hire a cleaning service to clean up after both these guys.

I got hit for $1600.00 bucks to remove a carpet, and paint a bathroom.  Both times I had a PM company, I lost money the months I had them.  The proof is not in their contract....the proof is in their conduct.  I want to spare all people who read this the expense....don't buy the dream.  Manage it yourself.  

In this example, the company wanted to do repairs, because that is where their bread is buttered.  I not only lost the $1600.00 for a job I could have done for $350.00, I lost a months rent.    Submit your proof as my previous challenge stated.  Don't defend them....prove to us that you can manage a property as if you are the owner.  Show us the value add.  We haven't seen it.  And both companies came with references...great reviews.  

Unfortunately you are obviously a rookie and you will have to pay for your lesson. I would never agree to the contract you presented but if you signed it then you will be held to it. I would advise next time to have an attorney review any contract you have in mind to sign to assure you protect your interest and do not make agreements in the future that are obviously to your disadvantage. 

live and learn. ouch !!!!!!!

@David Moore I hear you about interests not being aligned with owners and PMs when talking about, literally, 98% of PMs.  I am a DIY LL and have been for a long time because PMs are so bad in my area .  

Years ago the DB of the top brokerage in our town begged me to get licensed so I could manage for her clients.  I eventually decided not to get licensed even though I wanted to help the poor owners getting skewered in my town.  Some agency laws are ridiculous and I wanted no part of that.  My owner clients wouldn't have been mine at all.  I would've had to change my corporate name, etc.

However, arguing with @Nathan G. about bad PMs is ironic.  I have been quietly searching for the best PMs in the country so I have somewhere to invest when I 1031 out of some larger holdings next year.  You're arguing with 1 of the 2 I've realized that get it!   It was arguing vehemently with the other rockstar when I later came to realize he was the other one.  Just my observations.

The OP is going to get a seminar with this PM.  Shortcuts always cost in the end.  Want to armchair QB this LL thing and not bother to read a contract?  I call that stupid tax.  Pay your tax, learn your lesson and read the contract next time or get off your can and manage yourself.

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