Are you working with a property management company but aren’t satisfied with the quality of services provided? Are you thinking about managing your property on your own? Before moving forward, read the cancellation clause in your existing contract. Ours can be canceled anytime, but that is not true of other companies! Property management agreements usually run for a year and are automatically renewable. If you want to terminate a contract before the term is up, you may have to pay a hefty fee, resulting in management companies charging while they no longer manage a property. However, some companies don’t charge a penalty for early termination. Let’s take a closer look at how you can terminate your property management agreement and the most important elements of the contract. What is a Property Management Contract? If you want to cut ties with your current property manager, it is necessary to terminate your agreement. Of course, you need to understand the terms and your legal rights for ending a contract. Let’s start by explaining what this contract is. Property management contracts are often referred to as property management agreements or real estate management agreements. A property management contract is a legal agreement between the owner of the property and a property manager. It outlines the terms and conditions of their relationship. If you decide to work with a property manager, you are legally required to sign a property management agreement. The agreement should contain information about the price and fees, property inspection, conditions for termination, and cover all of the responsibilities that a management company is taking on for you. Both parties must be clear on what is covered within the contract. Once you sign the contract, it means that you agree to all the terms and conditions presented to you. This gives both sides legal protection if something happens. Also, it gives the manager the green light to lease and manage your property. Keep in mind that the contract supersedes anything you and your manager have agreed to verbally. Term of the Contract The term of the contract is also called the duration of the agreement. In most cases, property management contracts last 1 or 2 years, but some management companies may even offer month-to-month services. You should be aware that the contract becomes legally binding immediately after you sign it, even if the contract’s start date is later. After the contract’s initial duration is over, it may automatically renew for another term, and this process may repeat at the end of each term. Before signing the contract, check if you are committing to the auto-renewal term and how long this term is. If you don’t want the contract to renew for another period, you may need to provide cancellation notice at least 15-30 days earlier, before the contract expiration date. Termination Policy Most property management contracts contain a termination policy. This policy dictates the circumstances under which the relationship can be ended by either party and contains fees and penalties that will incur due to the termination. Some managers don’t charge a fee, while some charge a flat fee or something conditional. The termination policy may also specify if there’s a waiting period once you inform the property managers of termination. Most companies require 30 to 90 days notice. In case a manager violates the terms of your contract, you may want to terminate the deal. That’s where the termination policy steps in. Some contracts don’t require a cause to terminate them, while others can be canceled only for specific reasons stated in the contract. If the latter is true, and you try to end an agreement without proper cause, you may be taken to court for breach of contract. It is crucial to check the termination policy before signing a contract so you know what to expect if you decide to cancel the agreement at some point. Cancellation Notice As we already mentioned, terminating a property management contract often requires advance notice. How much notice must be given depends on what both sides agreed to in the contract, within the termination policy section. New Paragraph Most contracts require between 30 and 90 days notice, and if you fail to give notice within the specified period, your termination may be considered a breach of contract, or it may not be honored. If you decide to terminate a contract with your property management company, you must inform them about the cancellation in advance, and it is best to do so in writing. That way, both parties will be protected from false accusations and confusion about the closeout process. Also, make sure to include the effective date of the contract termination in the notice. After the cancellation notice is provided, either you or the property manager should contact the tenants and inform them about the change. Possible Costs We’ve already explained that terminating a contract with your property manager may carry certain costs, depending on the contract you signed and the conditions you agreed to. Some property management companies don’t charge a penalty for terminating the contract. They simply want to ensure their clients are satisfied. If the client wants to cut ties, they’ll agree to it without any fees. On the other hand, some termination clauses include a fee for ending the contract early, before the expiration period. These fees can vary a lot and go anywhere from a few hundred dollars to the management fee for the remainder of the contract, which means you’ll be paying these companies even though they no longer manage your property. Even if you provide proper notice, you may still encounter a cancellation fee and other potential costs, such as work orders or bills that haven’t been paid yet. It is crucial to be aware that these costs may occur after the contract is terminated. Paperwork Before deciding to cut ties with your property management agency, you should ensure you have the necessary paperwork and other items lined up. You should be given records of security deposits, copies of all leases, and a statement that contains the list of all income and expenses. Also, you should have a property condition report and photos, tenant applications, contact information and ledger, and the keys to your property. There’s no reason for a lag of no more than a couple of days, so make sure you receive all of these documents and items almost immediately upon termination. Conclusion If you want to terminate a contract with your property management company, it is crucial to know how you can terminate it, under what conditions, and what you can expect from the entire process. Terminating an agreement is an option if you are not satisfied with the quality of services provided or simply want to manage the property independently. Either way, you need to be ready for what you may encounter. When signing a contract, you should have a potential termination in mind and think everything through before agreeing to the terms and conditions of the contract.