Property Management Question

Hello all. Quick question for all the experienced landlords out there.

Around a year ago I found out that my current job was being moved overseas for two years time essentially leaving the option of having family members look after my 3 unit rental or hiring a property management company to look after my building.

Due to all the problems that can arise with rentals I decided to hire a property management company which has turned into the property management company from hell. I have stuck with them as being across waters had made landlording quite difficult.

Changes have arisen in my life and Im now heading back to the states and able to look after my property once again. I have given my property management company 60-days notice and upon giving notice the management company said " I believe that you owe me the remaining months left to go for the two apartment I rented out and got lease agreements for"

My jaw dropped. I asked where this was listed in the contract and she directed me to look at section 3 which states. “Owner covenants and agrees to pay as compensation for the property management services of the agent a fee of 10% of all gross rentals collected by agent per month. If owner terminated this agreement prior to the expiration of any tenancy created hereunder, the owner is responsible for all outstanding management fees that were earned during the contact period.”

Yes I have signed this agreement is this stating that I will owe for the remaining months left on leases after the property management comapny leaves, or that I will pay remaining months until the end of the year?

Is this common practice for property management companies to do? I guess Im a bit frustrated because a. I didnt clear this before signing and b. the service was absolutely atrocious.

It took ages to rent out the final apartment, the company usually never answers the phone due to threat of disgruntled people cursing them out. It got to the point while trying to let out the final apartment they actually had tenants calling one of the tenants living in the building to give them the tour, repairs took longer than expected…It basically has been a nightmare.

What can you suggest in this situation?


This falls within the “read the contract and understand it before you sign it” department.

However, having been a licensed real estate agent in the past, and a long time landlord, it pays to understand what the contract is saying. The clause is a fairly standard clause that many real estate agents use. It is basically intended to to keep unscrupulous owners from benefiting from the agency getting a long term tenant, then canceling the contract so they don’t have to pay the management fees. The problem is when you have inept or unscrupulous companies who use the clause to collect fees even after having horrible service.

Now, as I understand the way it is written, it means that you are legally liable under the contract to pay the agent a management fee on the current leasees until the contract is completed. Note - you don’t hve to pay them now, only as the income comes in.

A few things I would consider -

  1. If you have documented all the problems of the poor service, then you may consider a softball/hardball approach. Bring in a file with all of your documentation (throw in some extraneous stuff to make it seem thicker, but don’t go overboard). march into the office and tell the agent you have been thinking about what she said. Tell her that during the time of the service you were extremely unhappy with her work. Afterall, the agent has a legal requirement to act in the clients best interest at all times (then pull out a couple of the most egregious examples, comment on them and let the agent know there is lots more).

Tell them that you have paid extremely good fees for service that was, in your opinion, not to the standards that are legally required of an agent. You are willing to let things go, but not if the agent is going to insist on getting paid for the remainder of the contract. If the agent will simply cancel the contract, you won’t take it farther. But if the agent insists on getting paid for the inadequate service, you will lodge a complaint with the state real estate board and the local mls (if applicable).

  1. Otherwise say you will pay for the rents earned, which means the rents paid - ie month-to-month. This way if one of the tenants becomes deficient or violates their contract you can jump on it, which will close out the agent from receiving any more money on that renter.

  2. In all cases, it probably would be a good idea to check with an attorney - one who is familiar with real estate law in your area. This is a good idea anyway. The attorney can also give you a solid rundown on tenant/landlord law in your area - which is really good to know if you are going to be managing the property yourself. Learning the laws now will save you lots down the road, as this current situation is a perfect example. it is well worth a consult fee.

Good luck, and let the board know how it works out for you.

Thanks for that if anyone else has any words of advice please do let me know. The one response that I’ve read so far has been helpful. Will let everyone know how it all pans out.