Tags: Code of Ethics, Article 16 

Business relationships can sometimes be like the tides—they can ebb and flow. A landlord may work well with a particular property manager for years, but eventually the relationship may decline. On the other end of such a scenario is the opportunity for another property manager to form a new business relationship with a landlord.  

In this blog, we will cover some key factors to consider when entering into a property management agreement with a landlord who is terminating a relationship with a prior property manager.  

If a landlord contacts you to inquire about a property management agreement while already under such an agreement with another REALTOR®, you need to be cautious. Article 16 of the Code of Ethics prohibits REALTORS® from engaging in any practice or taking any action inconsistent with the exclusive brokerage agreement of another REALTOR®. You can discuss a new agreement to begin at the end of the current agreement, but you can do nothing to interfere with the current agreement. If a customer is asking you for advice to get out of an existing brokerage agreement, the most you may do is direct them to speak with an attorney.  

You should never advise customers to terminate or how they may terminate existing brokerage agreements with other REALTORS®, because you run the risk of violating the Code of Ethics and interfering with the other broker’s contract. You could also be engaging in the unauthorized practice of law. 

However, if a landlord is contacting you and no longer bound by an exclusive agreement with another REALTOR®, then you may discuss creating a new property management relationship to start immediately. If you are forming a new property management agreement with an active lease, make sure you review the lease terms because they may vary from the types of lease forms you regularly utilize.  

If a previous property manager is holding a tenant’s security deposit, the prior property manager should transfer the deposit to the landlord or to the landlord’s new manager at the landlord’s direction. Additionally, the previous property manager should notify the tenant in writing about who is holding the security deposit. Also, you, as the new property manager, should inform the tenant of who is in possession of the security deposit and how to submit rent payments under the new management of the property.  

Every situation is unique, and you may encounter other issues not addressed here. If you have questions, you can always contact us on our Legal Hotline.