I have a triplex in San Antonio, TX that is managed by a PM. There are still a few month left until the PM agreement ends, but I am pretty unhappy with their services and would like to get a new PM before that time. There is a clause saying that I have to pay them for each rented unit at the time that I switch, but that is after it has expired. Anyone has an idea about the implications of me terminating earlier? Nothing is mentioned about that in the agreement.

Originally posted by @Simon Stahl :

I have a triplex in San Antonio, TX that is managed by a PM. There are still a few month left until the PM agreement ends, but I am pretty unhappy with their services and would like to get a new PM before that time. There is a clause saying that I have to pay them for each rented unit at the time that I switch, but that is after it has expired. Anyone has an idea about the implications of me terminating earlier? Nothing is mentioned about that in the agreement.

I would have to read the actual agreement to answer your question fully.

They can't charge you a termination fee after the management agreement has already terminated. My guess you've read it wrong. What they most likely said is that if you terminate three months early, then you will still have to pay three months of management fees.

NOTE: if they have somehow violated the agreement or failed to perform, you should be able to terminate without penalty. If you're just unhappy with them because they don't communicate as well as you would like or don't do things the way you would, then you may be subject to the termination fees.

Here's what I recommend:

1. Talk to your current PM. Tell them you are unhappy and that you intend to leave when the contract is up. Don't say a lot. just tell them you are unhappy with their service and would like to terminate without penalty. See if they'll accept that or negotiate a lesser penalty.

2. If they refuse to let you go without penalty, confirm that the agreement terminates in three months and that there will be no penalty for failing to renew. If they tell you there will still be a penalty, go to step 3.

3. Contact the Texas Real Estate Commission and explain your situation. They can probably advise you on whether a termination fee is legal and, if not, may be able to put pressure on the PM to let you go.

In the meantime, you need to start looking for a new property manager. I can personally recommend RentWerx or Liberty Management.

Remember: cheaper doesn't mean you'll make more money.

You can start by going to www.narpm.org to search their directory of managers. These are professionals with additional training and a stricter code of ethics. It's no guarantee but it's a good place to start. Regardless of how you find them, try to interview at least three managers

1. Ask how many units they manage and how much experience they have. If it's a larger organization, feel free to inquire about their different staff qualifications.

2. Review their management agreement. Make sure it explicitly explains the process for termination if you are unhappy with their services, but especially if they violate the terms of your agreement.

3. Understand the fees involved and calculate the total cost for an entire year of management so you can compare the different managers. It may sound nice to pay a 5% management fee but the extra fees can add up to be more than the other company that charges 10% with no add-on fees. Fees should be clearly stated, easy to understand, and justifiable. If you ask the manager to justify a fee and he starts hemming and hawing, move on or require them to remove the fee. Don't be afraid to negotiate!

4. Review their lease agreement and addenda. Think of all the things that could go wrong and see if the lease addresses them: unauthorized pets or tenants, early termination, security deposit, lease violations, late rent, eviction, lawn maintenance, parking, etc.

5. Don't just read the lease! Ask the manager to explain their process for dealing with maintenance, late rent, evictions, turnover, etc. If they are professional, they can explain this quickly and easily. If they are VERY professional, they will have their processes in writing as verification that it is enforced equally and fairly by their entire staff.

6. Ask to speak with some of their current owners and current/former tenants. You can also check their reviews online at Google, Facebook, or Yelp. Just remember: most negative reviews are written by problematic tenants. The fact they are complaining online might be an indication the property manager dealt with them properly so be sure to ask the manager for their side of the story.

7. Look at their marketing strategy. Are they doing everything they can to expose properties to the widest possible market? Are their listings detailed with good quality photos? Can they prove how long it takes to rent a vacant property?

This isn't inclusive but should give you a good start. If you have specific questions about property management, I'll be happy to help!

 

The best place to get legal advice for a legal document (not included in the post) is legal counsel.

Originally posted by @Simon Stahl :

I have a triplex in San Antonio, TX that is managed by a PM. There are still a few month left until the PM agreement ends, but I am pretty unhappy with their services and would like to get a new PM before that time. There is a clause saying that I have to pay them for each rented unit at the time that I switch, but that is after it has expired. Anyone has an idea about the implications of me terminating earlier? Nothing is mentioned about that in the agreement.

 I would assume you are misinterpreting it. Likely that you'd need to keep paying them the agreed upon monthly PM fee for each of the units until the contract expires. So if you were to cancel it 6 months early you'd get hit with 6 months of PM charges on the way out.

@Nathan G. Wow, thanks a lot for that wealth of information. I actually already talked to Rentwerx and also looked at Liberty. Both have minimum monthly payments of around $120 per unit. My units are small 1/1s and are not in the best area, so rents are too low for such a PM fee. I've already talked to others as well though and found one that would work and is listed on the NARPM page. Btw, the current PM is not really breaking the agreement, they just really suck at their job. I am not informed about tenants vacating units, 2 of the 3 units are empty for the last 2 month and they are not even rent ready yet. We ended up having squatters in one unit because a window AC got stolen and they did not close the hole. I keep on asking for pictures of repairs, but never get any. They cannot tell me what repairs they did just a year ago. And so on and so on.

@Nathan and @James Wise I don't think that I misinterpret that. See the exact wording below. They want at least $500 per unit if it is rented after the agreement ends.

Originally posted by @Simon Stahl :

@Nathan G. Wow, thanks a lot for that wealth of information. I actually already talked to Rentwerx and also looked at Liberty. Both have minimum monthly payments of around $120 per unit. My units are small 1/1s and are not in the best area, so rents are too low for such a PM fee. I've already talked to others as well though and found one that would work and is listed on the NARPM page. Btw, the current PM is not really breaking the agreement, they just really suck at their job. I am not informed about tenants vacating units, 2 of the 3 units are empty for the last 2 month and they are not even rent ready yet. We ended up having squatters in one unit because a window AC got stolen and they did not close the hole. I keep on asking for pictures of repairs, but never get any. They cannot tell me what repairs they did just a year ago. And so on and so on.

@Nathan and @James Wise I don't think that I misinterpret that. See the exact wording below. They want at least $500 per unit if it is rented after the agreement ends.

 Looks like the agreement you've agreed to has you paying that amount whenever you end the relationship with the PM. So given that you said you wanted to get a new PM and there isn't an additional early termination fee I see no reason why you'd need to wait to cancel your agreement with them. Looks like you're gonna pay the same today as you're gonna pay when it expires.

So if your property is tenanted when you terminate the agreement with the PM, you are on the hook for at least $500?  Per door? Wow what scumbags. On principle, I'd wait and kick the tenants out. Remember, it said "leased to a tenant".

So my strategy would be like said, not renew the tenant's lease and terminate the agreement (no fee that I see). Before or during the tenant's notice that you're not re signing the lease, have your new PM (or you) sign them to a lease for one of your other properties. 

You don't lose a tenant this way, and you don't pay above and beyond what you are already getting screwed for. 

Follow it up with a factual review on yelp, google, etc etc. 

Yup, $500 per door. I unfortunately didn't pay enough attention to the details when I signed. The thing is that 2 of the 3 units are empty right now, so it would be a great moment to switch. Sounds like if the agreement does not mention anything about an early termination fee, then I should be good. That is mostly why I asked here. 

Thanks everyone for the input. I appreciate it.

Originally posted by @Simon Stahl :

Yup, $500 per door. I unfortunately didn't pay enough attention to the details when I signed.

I would file a complaint. If your contract naturally terminates on a certain date, I don't think they can make you pay management fees for leases extending beyond that date.

i would file a complaint with the Texas commission. These are state-developed firms and they should be able to guide you. I would also write down any potential violation of the contract between you and the property manager, collecting ammunition for a complaint of violation which should be grounds for termination without penalty.

 

@Simon Stahl - Are they failing to meet their obligations under the terms of the contract?  If so, then you need to have that conversation with them and then give them an in writing request to re mediate within a certain period of time.  If they fail to do so, then you would have a case to break the contract due to their failure to meet their obligations under the contractual agreement you two entered into.

@Simon Stahl I'm in the same boat as you. I'm shopping around for PM in the Killeen area and I found 2 of the contracts that have these fees. 

@Nathan G. Thank you for bringing those questions up. I first asked each PM to send me their Terms of Agreement and prepped my questions. I'll add all of yours to my telephone interview! I find them very helpful! 

I have that same clause and I have seen over 5 contracts and they all have them. I spoke with the PM about it and they all say it is if I decide to "terminate" the agreement, not if it naturally is fulfilled... They are claiming fulfilment and termination are different... 

In my case it unfortunately specifically says that the fees are due when the agreement ends and I was stupid enough to sign it. At least I've learned something.

I think I will just call the Texas commission to see if there is anything that I can do about it. But I guess if I want to terminate early, then I will have to pay them anyways.