Termination of Property Management Agreement: A Landlord’s Guide

One of the questions I occasionally receive from clients in the Oklahoma City metropolitan area is how to terminate a property manager. The process of terminating a contract with a property management company is very tough if not done in the right way. So this blog post will guide you on how to do just that in a super easy way.

Perhaps you’re frustrated with the service that you’re getting from your current property manager, and you want to move to another property management company. There are certain procedures that you must follow. Additionally, if you are considering hiring a new property management company, you must communicate with your tenants in a timely manner to ensure a smooth transition.

In this article, I’m going to go through the steps that are necessary whenever you send out a property management contract termination letter. You want to do that in a way that protects your interests and is legal. These are good guidelines for what to do in the market of Oklahoma City but should be applicable to other states as well. 

Let’s Start with the property management contract and the reasons for terminating it.

What is a Property Management Agreement (PMA)?

A Property Management Agreement (PMA) is a contract between a property owner and a property management company that legally binds both parties. The contract consists of terms and conditions that lay out the responsibilities of both parties for property management services. This service contract will allow the property manager to take over the control from the property owner to offer management services such as rent collection, tenant placement, leasing, maintenance, repairs, etc. The agreement also includes details like the length of the agreement, payment, and procedures for terminating the agreement.

Reasons To Terminate a Property Management Agreement

Generally, there are some reasons why a property manager or a property owner wishes to cancel the agreement. You can’t just terminate without cause; there must be proper legal reasons to terminate property management contracts. This might cause a breach of contract from the terminating party.

Each property management contract may also differ in its own clauses on why an owner can cancel. It is important that you read the contract before sending out a termination notice. Here are some common reasons to send out a notice to terminate a property management agreement:

• If the property manager isn’t meeting the expectations mentioned in the agreement. Then, the landlord can terminate the contract.
• If the property manager violates the Fair Housing Laws, it can expose the owner to potential legal action.
• If the owner loses trust in the management company, then may choose to terminate the contract.
• If the owner feels like they are not getting enough updates or communication from the management company, then they might cancel the contract.
• If the owner decides to sell the property then they may choose to terminate the contract.

In some situations, property managers will send a property management termination letter to owner. So, as a property owner, you should have to be aware of these reasons.

• If the property owner frequently fails to pay management fees on time. 
• If property owners violate the terms outlined in the property management contract, such as by failing to maintain the property or not adhering to financial responsibilities.
• If there is constant difficulty in communication with the owner, it will lead to misunderstanding and delays in decision-making.
• If the owners are not complying with local laws, ordinances, or homeowner association rules.
• If the owner consistently makes unreasonable demands or has unrealistic expectations that the property management company cannot meet.
• If the owner fails to address necessary repairs or maintenance issues despite repeated requests from the property management company.

Recommended Article: Termination of Lease Agreement Early By Landlord or Tenant

What is the Process of Property Management Termination Letter?

No matter your reasons, as a property owner, you must follow the proper process for a property management cancellation letter, including understanding how much notice you need to provide. Here are the steps to better understand the process.

• Check Your Agreement
• Send a Cancelation Notice
• Anticipate Cost
• Make Sure That the Property Management Company Notifies the Tenant
• Allow Time for the Transfer of Funds
• Ensure You Receive a Copy of the Important Paperwork

Check Your Agreement

It is likely possible that the condition for contract termination (termination clause) is mentioned in the agreement.

If you are working with a legitimate property management company, then you must have signed a contract prior to going into business with them. In that contract paper, you can find a clause on property management contract termination and the process for it. Make sure that you abide by what it says and follow the exact steps needed to do so.

That means if any of the parties i.e the landlord and the management company who has been managing the rental property violates the terms of the contract, the other party can take legal actions, holding the violator accountable.

That being said, if the landlord intends to cancel the services of the property management firm, the first thing the landlord must take into consideration is to check the agreement. Most contracts will contain a cancelation policy mentioned them.

It is always important to review the terms of the cancelation and follow them accordingly to carry out the termination process. You can find out if there are any fees involved. Check for language relating to how and when you will get your asset balance (if any).

Recommendation: How to Switch Property Management Companies

Send a Cancelation Notice

Landlord property management termination letter requires written notice before certain days of quitting. The termination clause of your management contract should specify how many days should the notice be given to the property management company. Most contracts require a time period of between 30-90 days to terminate the contract. If you are not able to give the notice within this time period, your termination request will not be honored or your request for termination could be considered a breach of contract. In this situation, you may find yourself in a lawsuit situation.

The landlord should provide a termination notice in written form to the property management company. The landlord should not make the mistake of sending the notice through an online medium such as email.

Verbal notice to the management company is not enough for terminating the property management agreement. The landlord must provide the notification to terminate the management contract in writing and then send it to the management firm via certified mail with a request for a return receipt.

When writing a PMA termination letter, make sure to include the effective date of the contract termination and stick to something formal fonts such as Arial or Times New Roman.

Also Read: Oklahoma Lease Termination Notice

Anticipate Cost

Even if the property management company is willing to let the landlord go, they might have some cancellation fee.

There is no fixed charge for this. The charge may vary from contract to contract. Some companies charge only a few dollars whereas some might charge for anything from a month or management fee or the rest of their management fees for the duration of the contract. There might be other costs such as work orders or bills that have not been accounted for yet. Be prepared to roll in after the contract is terminated.

Make Sure That the Property Management Company Notifies the Tenant

As the property managers are involved in managing the rental units, they are likely in communicating with the tenants. So as a landlord, you should make sure that the property manager has notified the tenant about the change in the property management company.

Make sure that the property manager notifies the tenant in written form, not in verbal form. The letter sent to the tenants should also include who will manage them, to whom to pay their next rent payment, and when the new management will take place. They should also be informed of the transfer of their security deposit. Also, be sure to ask for a copy of the text.

Allow Time For The Transfer Of Funds

It will take some time to move all the funds from one trust account to another. Depending on the present state of your accounts, expect all landlord funds owing to you to take one to two months to collect. This is to ensure that all previous invoices have been charged by the current entity before moving the balance. However, tenant rental deposits should be set up in order to be deposited on the transition date into the new management account.

Ensure You Receive a Copy of the Important paperwork

Always ensure that copies of the current contract, condition/inspection reports, rental bond deposits, and a statement of all profits and expenditures from your former agency for the current financial year are obtained by you or your new agent. These documents should be submitted directly to you or your new agent after taking over the management of the property and maintaining your records.

Final Thoughts on Property Management Contract Termination

Termination of a property management agreement involves careful planning and adherence to contractual terms. By following some of the steps such as checking the agreement, sending the proper notice, anticipating costs, ensuring tenant notification, facilitating fund transfers, and obtaining necessary paperwork. So those are the steps you can take to terminate your property manager if the need should ever arise for you. You can navigate the termination process effectively while protecting your interests.

Recommended Article: How to avoid property management embezzlement and overpriced fees.

Remember, while this guide provides general advice, consulting with legal professionals or real estate experts for specific guidance tailored to your situation and jurisdiction is essential.

If you have questions about property management Services, then call OKC Home Realty Services Today.