If you are the least bit concerned about the management of your investment property remember the old adage, “Where there is smoke, there is fire!” Nine times out of ten when there is a significant lack of communication, if the results in your monthly statements continue to disappoint, and if your property manager has overpromised and under-delivered it is time to say good-bye.
Read the Contract – It has Important Information
A famous lawyer once said to his client who called asking for an answer to a question about a contract, “[R]ead the bleeping contract.” Rental property management contracts are not that complicated. Hopefully you read and understood the rental property management contract you signed in the first place. You need to review that document for a couple of important clauses (if they exist). Take some time and review the agreement or contract you have executed with the rental property management company and look closely for any termination clause language, and any “for cause” clause language. Moreover, it’s important to know if the initial term of the contract was set forth, or if it is truly a month-to-month type of agreement.
Understand the Clauses or Hire an Attorney to Help You Understand
Typically, the initial period of the contract will be some determined amount of time, like one to three years. Once this initial period has expired you may or may not have signed a new contract which will determine how long it will take to rid yourself of the rental property management company. If the initial term has expired you are on a basic month-to-month agreement with your manager or company.
Some contracts have a 30-day to 90-day termination clauses which requires the terminating party to give written notice of termination for some set period of time to the other party.
Other clauses require “for cause” for the contract to be terminated during the initial contract period. If you terminate a property manager or a rental property management company without cause and a “for cause” clause was included then the property management company could potentially have a cause of action against you for breach of contract. Thus, it is important to be mindful of all of the clauses in the agreement or contract before making any rash decisions. Again, read the contract.
Follow Termination Procedures Accurately
It is paramount that any and all termination procedures are followed accurately. For example, make sure to follow the writing, notice and mailing requirements that are dictated in the contract for termination.
In the event that you resort to this procedure you must realize there may be costs involved including a termination fee in the contract, or paying the property manager all of the fees they have earned to that point. Some contracts will even have a clause which requires full payment of the entire contract period fees. Thus, again it is important to read the contract and understand it before you execute it or terminate it.
An exception to this would be if a property manager or rental property management company was stealing money or materially breaching the contract in some way and there was a 90-day termination period in the contract. As an owner you would have the right to immediately terminate that contract due to the property manager’s conduct and you wouldn’t have to wait 90-days in that situation.
Tenants Need Notification
Once the decision to terminate has been made and a change has occurred the quicker the tenants are informed the better everyone will be. Read the contractual obligations imposed upon the property manager in this situation. If the contract is silent about this procedure then take it upon yourself to contact the tenants and notify them of the change in management whether it is a new manager or yourself.
Make sure that your outgoing property manager has agreed to provide you with all of the tenant and property paperwork. Make arrangements to have this information communicated to your new manager or to yourself with expediency. If trust funds are to be transferred make sure that your new manager is with you during those conversations involving transferring monies including the all-important security deposits.
You Are in Charge – You Call the Shots
Remember that as the property owner and hirer of the rental property management company you are the Boss and you call the shots just as if they were your employee. If you lack confidence in your manager, even for one moment, it is probably time to start paying close attention to how your manager is treating your property. If repair bills are larger than normal, if information about tenants are being communicated to you on an untimely basis, or if no communication is occurring it is time to make a change. Do not hesitate to take charge and help prevent your return on investment from being hijacked.