Termination of Property Management Agreement
How do brokers and owners terminate a property management agreement and bid adieu to each other when the time has come to do so?
For an answer, an employment concept needs to be reviewed. On entering into a property management agreement, an at-will employment is created between the owner and broker as a property manager. Being at-will, the employment may be terminated at any time and without prior notice. [See first tuesday Form 590 §10.1]
Documentation of significant events contributing to the termination is most prudent. Regardless of who initiates the termination, the termination is to be documented. Accordingly, the employment of a property manager is severed by use of a Termination of Property Management Agreement. [See first tuesday Form 590-2]
Editor’s note – Prior to an owner terminating a property manager, the owner needs to review the termination language in the property management agreement. Depending on the conditions agreed to, compensation for early termination may apply.
If the first tuesday’s property management agreement was used and the employment is terminated by the owner during the initial one-year term, an additional fee is due the property manager. [See first tuesday Form 590-2 §8]
On termination, the property manager returns all keys and entry codes to the property to the owner. The property manager also hands the owner all the files necessary in the management of the property and its tenants, including copies of rental and lease agreements with the existing tenants. [See first tuesday Form 590-2 §4]
The property manager also delivers up copies of all outstanding service, maintenance and utility contracts entered into by the property manager or in the manager’s possession. [See first tuesday Form 590-2 §7]
Once terminated, the owner assumes the obligation of all contracts entered into by the property manager under their employment. The broker must also keep copies of everything handed to the owner, and retains them for a minimum of three years.
Editor’s note – Current first tuesday students and purchasers of first tuesday Forms-on-CD 4.3 may download a FREE copy of the Termination of Property Management Agreement. Log in to your student homepage at www.firsttuesday.us using your eight-digit Department of Real Estate (DRE) license number or T-number and click, “first tuesday Forms Downloads and Updates.”