3 month fee for terminating Mgt Contract is that normal?

I don't see this as a termination fee. It is a charge for transferring your docs and records. If you still want to address it I would wait until the annual renewal period and have them change it at that time.

Exit fees are common.

The management company isn’t a party to your bylaws. They are not obligated to change their business practices to align with them.

Wendy,

It's almost always better for the sake of the HOA and its dues payers for the new board to honor an ongoing property management contract. If your board cannot do that, then exit fees can be expected in lieu of forcing you to honor the entire contract term. Breaking a manageement contract, mid-stream, is terribly disruptive to your community, maybe moreso than simply keeping the contract in force and finding a new manager on your own terms.

Early termination penalties are very common in many contracts, not just those used by community managers. Around here it's two months. And I'd be suspicious of any management company that under-charges for their services.

* Are they inexperienced? (Do you want to hire them?)

* Are they having trouble getting clients? (Do you want to hire them?)

* Are they understaffed or underpaying their employees? (Do you want to hire them?)

And so on.

I also hate bylaw provisions that sound good but tie the board's hands. Sometimes it's in the association's best interests to bite the bullet and cut ties. Suppose you found out that the manager was mishandling funds - does anyone think it's a good idea to stick with them to avoid paying the penalty?

You seem unhappy with all of the responses you’ve received. Why don’t you tell us what you want us to say, and save us all time?

yes it's a 1 year contract any tips on renegotiating are appreciated.

Re: negotiating the contract:

* Your ability to do so will depend in part on how badly they need your business. An in-demand company may be unwilling to negotiate much, if at all. You'll have to determine how much you're willing to pay for top quality service, or if you're willing to or must settle for good enough. A portfolio manager who handles many communities will not always be available whenever you need them, so decide if you can live with this.

* The easiest way to save money is reduce the number of services you expect out of them, so take a hard look at what you actually do need vs. what's a convenience. Obviously this depends on what the board members bring to the table, which unfortunately can change mid-contract. We had a management company that would charge more for evening and weekend board meetings, so a board that could meet during normal business hours could save a few bucks.

* If possible, talk to the owner of the company to see how responsive them seem. The owner of the best company we worked with would always talk to board members if we had concerns. In addition, In November each year we were asked for feedback about our manager, and this feedback was used in part to determine the manager's compensation for the coming year. (This was also the only company we worked with that does this, which is why it impressed me.)

* Watch out for the low cost providers. You usually get what you pay for. Many HOAs and especially condos think they can make do with minimal services, but in practice they can't. For example, condos may need after hours response to emergencies, where an HOA with detached homes and no amenities may not.

* Also watch out for the off-the-wall stuff. Our current low cost provider states on their website that their managers work out of their homes and only work four days a week. (These are selling points?!) These things may be OK if, for example, all your records are digitized and can be provided via email. But if you still rely on paper records, and your state law requires these be made available to owners within a certain time frame, this may not work for you. In addition, I question the liability issues involved, on both ends, if strangers go to strangers' homes.

I agree. Renegotiate this at contract renewal time. Ours say cancelable by either party with 90 days written notice.

Good luck finding a PM company that will agree to immediate termination - even at the end of the contract. In our area, 60 or 90 days is common. It's not a bad thing because it does take time to transfer. It also takes time to find the right PM. Most contracts do not allow you to keep their employee if you switch contracts, although some will allow you to "buy" the employee's contract out.

I would also argue that the 90-day period is a notice and transition period and not really a termination penalty. So if you want use the strict interpretation of your documents, are you willing to have a lawsuit if you refuse to give the PM company notice?

Before you go down this route and open up a can or worms, what is your backup plan? As others have stated you may have a hard time getting any management company to agree to your terms. If the current company won't bend, and you find out after the fact that other companies won't either, what will you do?

I never said that. My question was simply meant to suggest that you may want to examine the issue from all angles before you act. Do you always have a chip on your shoulder? If so is there someone else on the Board that can handle the renegotiation on this issue with the management company?

Has it occurred to you that portion of the bylaws was a silly thing to include from the start? Your board can hire any property manager it chooses, but as Barbara said, the company isn't obligated to comply with certain things in your bylaws. I don't know what happened when the previous board signed this contract, but it's too late to complain about it now. If you want to change companies, you'll know what to check for next time.

In the meantime, switching management companies doesn't happen on a dime. As John noted, you have to make arrangements for the records to be handed over, the bank needs to be notified if there will be a new company paying bills or making deposits on your behalf, you may have to make changes regarding your community's webmaster and the homeowners need to be contacted and told effective X date, assessments should be sent there instead of the current bunch and after Y date, send all questions and requests to so and so at this new address. Why do you think all this should happen for free?

Oh, by the the way, have YOU and your colleagues prepared a transition plan so you'll know what's supposed to happen and when? No? Maybe you should start on that so you'll know what that final fee should cover.

It's good that you're asking questions, but remember things are not as simple in HOA land as you think. Instead of assuming your predecessors were dumber than a bag of hammers, try to find out how things work first. You may be correct in that they should have paid more attention, but no one knows everything, including you and that's why you learn by doing.

Bye bye Wendy.

All you are doing is yelling at long time posters here who are trying to offer their support.

Shelia's one of the best here. She has tons of good advice, and has taken the time to painstakingly answer my numerous questions. I have incorporated her thoughts into how we operate as a Board in my community, and we are far better run as a result of her advice.

I'm not sure what your issue is with the contract, but it's typical that there are fees when changing property managers. I can't recall if we have to pay any fees to depart ours, but have heard about this before.

All the long time posters can't seem to read. They just rant about crap I didn't write the bylaws but she's attacking me as if I did.
Bye bye indeed seems like this forum has just become an echo chamber

Cathy's the only one with an answer. Seriously read all the bs none answers above

I would get proposals from other companies, and at least 120 days before your current contract expires ask your current PMC to write a new proposed contract with termination clauses that are satisfactory to you.

The verbiage from our contract:

"Either party may terminate this Agreement at any time in writing with
or without cause with at least ninety (90) days notice prior to 1st of the calendar month;
provided however, if the Association elects to terminate this Agreement, Agent shall be
entitled to be paid a closing fee equivalent to one current monthly base fee to defray costs
in the orderly turnover of all books and records."

Thus, we would have to paya $3,500 termination fee to our property manager if we terminated the agreement.

yes my contract has an automatic renewal clause, stupid to have that. MGT companies should not automaticlly get business.
there are ways to write auto renewal caluses (i assuem that is what evergreen clause is) so the board must be notified and only if board ignores the notice the agreement will auto renew.

After reading your post more closely, I have to agree with others who suggest your contract does not have a termination fee. You must give 90 days notice, and upon notifications you must pre-pay the 90 days worth of contract. When you negotiate the next contract you might be able to get that lowered to 60 days, but I don’t think any PMC will be willing to agree to termination with no print notice.

Our contract, and I suspect most, does include a clause that allows for immediate termination if the PMC is found to be in default on their responsibilities.

not ours, I guess that might be a good thing to put into the next one, can you copy the clause and post please?

Your contract with the current property manager calls for your HOA to pay three months of fees to support the transfer of documentation to your new property management company. I'm very unclear why your by-laws would meddle in service contracts or demand the HOA pay a vendor a "termination fee" that's not called for in the management contract. Two different issues here and I - if a board president - would not unilaterally pay a three month exit fee to a vendor that's not part of the service agreement, period.

we shall see. I'll let you know. one thing I've learned is it never hurts to ask and you never get anything by being quiet. the issue is not about me liking or disliking it, it is simply the rules that I was given and were made decades before me.

your assumptions about my HOA are also something I won't loose sleep over.

lol nope tellign people to read the post and stay on topic is not the same as raging. bye bye whatever you've said that before. none of your replies addressed how to negotiate a change in a contract, just BS. hopefully admins will toss your crybaby posts out.

We've really strayed into parsing legalese. If Wendy's board is considering amending their bylaws, they'll have to consult with an attorney anyway for the actual writing. And the attorney can answer questions about what a "termination fee" actually is.

One of the most helpful things our attorney did for us was answering questions about the meaning of certain parts of our governing docs that were confusing. Legalese doesn't always say what non-lawyer types think it does.