Lease validity if I fire property management

Investor · Denver CO · Member since 2020 · 63 posts · 37 votes

I'm contemplating a management change on two SFHs in Missouri. We are three months into the agreement and they found renters for both. But the problems with overcharging for maintenance, poor communication, and bad record-keeping are overwhelming. I'm very much regretting my decision to select this group. If I terminate the contract early and select another PM, I believe the lease signed between them and the tenant is still valid, correct? Has anyone had problems enforcing lease terms if the owner changed management companies during a lease? The lease is signed in the name of the management company with the word- Owner - in parenthesis next to it.

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Bjorn AhlbladPro Member
Investor · Shelton, WA · Member since 2017 · 6k+ posts · 6k+ votes
5y
The leases are still valid. The new management company will take over the leases. Insert their name or yours on the leases. Tenant and new lessor will sign the docs and give the tenant new payment information. This is done every day.
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Michael King
Rental Property Investor · Navarre, FL · Member since 2019 · 913 posts · 640 votes
5y
If you are in the STL area and looking for a PM, I have an awesome PM.
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Drew SygitBusiness Member
Property Manager · Royal Oak, MI · Member since 2012 · 12k+ posts · 9k+ votes
5y
A lease is a contract and thus is still valid unless it has a termination clause triggered by PMC termination (unlikely).
Please understand you cannot FORCE tenants to sign a new lease contract with a new PMC or yourself. They have an existing contract which you have to honor if they will not sign a new one. If you politely ask, most tenants will though:)
Sorry you selected a PMC that's obviously not up to your standards.
We don’t know anyone in the area, but you might want to read our series about “How to Screen a PMC Better than a Tenant”, since selecting the wrong PMC is usually more harmful than selecting a bad tenant:

https://www.biggerpockets.com/member-blogs/3094/91877-how-to-screen-a-pmc-better-than-a-tenant-part-1-services-and-processes
[email protected]248-209-6824
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Nathan GesnerBusiness Member
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Real Estate Broker · Cody, WY · Member since 2010 · 28k+ posts · 41k+ votes
5y
The lease is still valid. You should require the current PM to send the tenants written notice of the pending change so they are aware of what's happening. The new PM should send a letter of introduction reminding the tenants that the lease is still in effect, where to send payments, how to report maintenance, etc.
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Peter MacKercherBusiness Member
Residential Real Estate Broker · Saint Louis, MO · Member since 2014 · 1k+ posts · 567 votes
5y
@Melissa Robbins The lease is binding and stays in place even if you change management companys or sell the building.
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Scott M.
Real Estate Broker · Rochester Hills, MI · Member since 2009 · 2k+ posts · 2k+ votes
5y
As everyone has said the lease is valid through the end of the term. That doesn't mean you can't ask the tenants to sign a new lease though. You can always ask, they can say yes or no but never hurts to ask. Generally speaking if you are fed up with the PM so is the tenant.

We take over management for bad companies all the time. Just today we are visiting 4 homes we are taking over management for, last week we had 1. Either you (if you self manage) or your new PM should know what to do. as @Nathan Gesner said your exsisting should send a letter to the tenants (or call/text) and inform them of who is taking over and the new company will then step in. Not the end of the day if the old company doesn't corporate. Its makes it a lot easier when they do that is for sure but if they don't, don't fret, the new company should know what to do. I would say about 30% of the time or less the old company corporates.
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Melissa RobbinsPro Member
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Investor · Denver CO · Member since 2020 · 63 posts · 37 votes
5y
Thank you @Nathan Gesner, @Peter MacKercher, @Bjorn Ahlblad. Your feedback has been very helpful. @Michael King - I'm in the KC area. @Drew Sygit - Thanks for sharing the blog, I will check this out.
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Melissa RobbinsPro Member
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Investor · Denver CO · Member since 2020 · 63 posts · 37 votes
5y
@Scott M. - Thanks for your comments. I think the tenants will be ok overall. I am concerned about one because the relationship seems strong. But I work in multi-family and I can find a way to communicate the change so it doesn't come across as accusatory. The current management leans heavily on fees throughout the lease for ancillary income so they may be happy that I don't charge these. They charge $10 per month for a/c filters, $75 for inspections twice yearly and $300 for pet inspections once per year, none of which I receive. They were supposed to charge $20 pet rent for me but they missed this so the PM is crediting this to me each month but even that is not worth the headaches they cause in other areas. Thanks again!
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Joe SplitrockPro Member
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Rental Property Investor · Sioux Falls, SD · Member since 2015 · 9k+ posts · 18k+ votes
5y
Leases travel with the property, not the owner or management company. That being said, look closely at the management agreement to see how termination works. Some PM are not so friendly if you terminate.
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Melissa RobbinsPro Member
OP
Investor · Denver CO · Member since 2020 · 63 posts · 37 votes
5y
@Joe Splitrock Thanks for your feedback. This company charges a $400 termination fee if I term before 12 months but I think my case is big enough that they would let me out. I'd pay the $400 though, it's worth it due to the additional stress and headaches the company causes.
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