In a perfect world, a property management company would provide exceptional service indefinitely. Sometimes, however, rental property owners might consider switching. Handing over control to a new manager takes some planning and effort on the landlord's part. It should not be done on a whim. Knowing why, how, and when to make a switch can help an owner recognize whether or not it is worth the hassle.
Why: Reasons to Switch Property Managers
If there are problems with a management company, the landlord should take the time to discuss them with the property manager before making any decisions. If things don’t improve, it is often clear that a change is necessary. Other times, the choice is not so obvious. Here are some red flags that lead sway landlords:
- Increasing or unexpected costs. Property management fees, and what services they include, should be outlined clearly in the contract. (For example,
Select Leasing & Management charges 10% of monthly rent.) If up-charges or “special” fees start to pop up without a valid explanation,
or beyond what is reasonable, it might be time to shop for a new management company. But a company trying to convince a landlord to sign on with a super low introductory price might be too good to be true. Be sure to look for
value rather than simply price.
- Run-down property. A management company’s job is to protect the owner’s investment by maintaining the property. Maintenance issues can pile up, turning minor inconveniences into major problems. These will cost more money to fix, make rental units less desirable for tenants, and affect property values.
- Tenant move-outs. High turnover is expected if the neighborhood has deteriorated or if the economy is bad. But if these have not changed, the problem is probably with the building. If people, especially long-time tenants are moving out, it might be a signal that changes are in order.
- Renter complaints. An uptick in tenants complaining about the condition of the property, other residents, or the management company, should be taken seriously. An unhappy tenant who’s concerns are ignored will look for another place to live.
- Sketchy situations. If illegal or dangerous activity such as vandalism, theft, or harm to other tenants occurs on the premises, something needs to be done. It could be a failure to
perform adequate background checks, or to enforce the rules in regards to behavior or visitors. If the property management can not provide a safe environment, it needs to be replaced.
- Outdated operations. Today’s landlords and tenants expert property management companies to provide up-to-date services. This includes things like being able to make maintenance requests online or set up auto-payment of rent. Many offer online portals where owners can view their financial statements and keep tabs on their property. It might be time to find a new company if they are still requiring written checks and using snail mail for reports that are already out of date.
- Lack of communication. Landlords need regular updates about what is happening with their property. If a property manager does not offer routine status reports, or worse, can not be reached when needed, it is time to switch to a company that is more responsive.
How: Follow These Steps to Switch Management Companies
Once the decision has been made to switch management companies, there are some things owners need to do to prepare.
- Unless the situation is urgent, for example a management company that is going out of business or breaking the law, it is a good idea to research new providers
before cutting ties with the old one. It is important to
interview and vet managers to get all questions answered before committing to a new contract. The process can take some time, so start shopping around as soon as possible.
- Review the contract with the current management company. The wording should spell out the owner’s rights and obligations. It may dictate how much notice is needed, or have a clause allowing for immediate termination of the contract in certain situations.
- Notify the outgoing property management company in writing. Include the date when the contract will end and make all expectations known. For example, when will the company’s employees vacate the rental office, what equipment will they take and what belongs to the owner, etc.
- Notify any state and local agencies with an interest in the transfer. For example, insurance companies, taxing authorities, banks, and vendors—anyone the prior company dealt with on the owner’s behalf.
- Notify the tenants of the change. Provide them with new contact information for maintenance and repairs.
If leases were
written with the property owner’s information, they can remain as is. If they were written using the property management company’s information, they will need to be modified or an addendum attached. The new property management company should be able to help with this task.
- Arrange for the transfer of all accounts, records, master keys and codes from the old company to the new one. Again, the new company can usually help facilitate these changes.
When: Timing the Transition
It is time to switch management companies when the pros of doing so outweigh the cons. On a more practical note, an owner can be strategic about the actual transition.
First, both parties will need to abide by the contract. It may require a specific number of weeks’ or months’ notice.
It is also important to find out how quickly the new company will be ready to take control of the property. Ideally this should be determined before giving notice to the old company so there is no lapse in services for the tenants.
If the owner can choose the time to terminate the contract, immediately after a rent cycle is a good time. Right after the grace period for rent payments passes, it can be assumed that there is no unpaid rent to complicate the transfer of money and accounting records.
Finding and Keeping the Best Property Management Company
Whether picking a property management for the first time, or switching to a new one, there are some things that rental owners can do to find and keep one that will work well for them. After all, avoiding problems in the first place can maintain stability for the owner and the tenants.
Owners must check in on their property and their property managers on a regular basis. The best property management companies work and communicate in such a way that the landlord is always kept apprised of the situation. Still, periodic check-ins either in person or by phone are never a bad idea.
It is also essential to address issues as they come up. An unexpected charge, the loss of a long-time renter, or the need for an eviction are all examples of things that warrant a conversation with the property manager. Allowing the management company a chance to explain or to correct things they are doing wrong might resolve things. It might even avoid the need to switch companies at all.
Owners hire someone to manage their rental units so they can eliminate the day-to-day work while protecting their investment. While the goal is to find a company that can provide the best possible service for the long term, there are times when it makes sense to switch.
The transition can be challenging and should be well thought out. But it is often worth it when it means a better managed property and peace of mind.
Cover image by Monkey Business by Canva.com
