Expert: Connie Wildasinn-Broker,GRI,Realtor® - 5/19/2011

Question
I signed an exclusive right to sell/rent my property with an agent in Arizona, she is also my property manager for a few of my properties.  She did get the premises rented and was paid her 6% commission on the lease.  I did not read the agreement carefully (my bad) and did not realizae that she also charges 6% to renew the lease with the tenant.  I have checked around and this is not the norm, everyone else has a flat fee for renewal.  I not happy with her as a property manager and want to pull my properties and go else where.  She is telling my that as long as these tenants are renting the premises even if I go with another rental company she will still be entitles to 6% of any leases we sign with them int he future.  Is there no expiry?  The way I read it, she has put 90 days in the "After Expiration" portion of the agreement and I would think that I can be free from her 90 days after the expiration of the listing agreement?  Am I wrong?  Am I tied to her as long as I keep these tenants?

Answer
Hi Tammy,

I have had a little dealings with AZ contracts, and unfortunately for most principles they are very iron clad with a lot of buyer beware of what you sign.

But no matter the state - a contract is a contract.

I don't think the 6% renewal is out of line if that is the contract you signed, here in Long Beach, CA where I work it is typical that a property management company makes 8-10% of the gross rents each month, in addition to one month of rent at the time of lease.  You didn't mention if the 6% is higher or lower than the typical flat fee... 6% on $1,000 rent is only $60 for getting you a great tenant that wants to stay an additional year... that is well worth it... to be down a month to re-rent is much much worse... and since she secured that tenant I don't see an issue with that... if you change out management companies, she will no longer receive the monthly management fees.

The 90 days after comment, is that if the unit rents to someone she had previously placed, or brought to your building to show, she is due monitory compensation, after the 90 days if the old tenant or prospect comes back and wants to rent, she will be due nothing.  These clauses are in because owners try to work around the agent, and tell the tenant "come back tomorrow after I expire with the agent and I'll split the difference with you" or better yet, "I don't pay compensation is what they think"... even though the agent secured the prospect. It is an agency protection clause against shady principles.... Not saying you are that is just the clause intent.

Have your new management company cut her the yearly check and be happy you have the same tenants happy in your unit! You don't have to speak with the old manager, have your new manager speak with her...

Good luck