Property management company selection errors are expensive and slow to correct — management agreements with long notice periods and termination penalties can trap a corporation in a poor relationship for months or years. The warning signs that predict underperformance and governance failures are almost always visible before the agreement is signed.
“The red flag that tells me the most about a management company’s priorities is how they respond to questions about the termination clause. A company that’s confident in their service delivery welcomes a reasonable termination provision — they don’t need a long notice period to keep clients because they’re not worried about clients wanting to leave. A company that resists reasonable termination terms is telling you something important about what they expect the relationship to be like.”
— Jeri Dyrmishi, CEO of Synapse Property Management
Table of Contents
Red Flags Before You Sign
Unable to confirm CMRAO licensing immediately. The CMRAO licence number for both the company (Provider Licence) and the assigned manager should be immediately available and verifiable. A company that hedges on this question, or whose manager holds only a Limited Licence without a clear explanation of why that’s appropriate for your corporation, is a red flag.
The assigned manager is not named during the evaluation. If a company presents polished senior staff during the evaluation but won’t name the actual manager who will be assigned to your property, you are evaluating people you won’t work with. The manager doing day-to-day work is what you’re actually buying.
Resistance to providing the management agreement before presentations. Companies that want to build a relationship before you’ve seen the contractual terms are sequencing the process to their advantage. Get the agreement first, always.
Excessively long notice periods or significant early termination penalties. Termination provisions that make it functionally impossible or financially prohibitive to change management companies are a major red flag. A 90-day notice period is reasonable. A 6-month notice period plus financial penalties is designed to trap the corporation.
Unusually low management fee without a clear explanation. Below-market fees are typically funded by: excessive portfolio size (less attention per property), long lists of additional fees that apply to most services, or contractor markups that the company doesn’t disclose. Ask what’s behind the low number.
No references from comparable corporations willing to be contacted. Ask for references and call them. A company unwilling to provide references — or whose references all speak in generalities without specifics — has limited verifiable history.
Contractor relationships that create undisclosed conflicts of interest. If the management company recommends contractors who provide the company with referral fees, rebates, or kickbacks without disclosing this, they are recommending contractors based on what benefits them, not what’s best for the corporation. Ask directly whether the company has any financial relationships with contractors they recommend.
Red Flags in the Agreement
No defined service scope. An agreement that describes services in vague terms (“full property management services”) without a specific list of included and excluded services is an agreement that means whatever the management company says it means when a dispute arises.
Corporation records not confirmed as the corporation’s property. All records relating to the corporation — owner files, financial records, correspondence, meeting minutes — belong to the corporation. An agreement that doesn’t explicitly confirm this and require prompt transfer at termination creates leverage for the management company.
No emergency spending authority defined. If the agreement doesn’t define the management company’s authority to make emergency expenditures without board pre-approval, you have no agreed limit on unilateral spending in emergency situations.
Indemnification provisions that are one-sided. Some agreements require the corporation to indemnify the management company even for the company’s own negligence. Have a condominium lawyer review indemnification provisions before signing.
Red Flags During the Relationship
Slow or inconsistent response to board inquiries. The manager is your primary operational contact. A manager who routinely takes days to respond to board emails or misses scheduled calls is not delivering adequate service.
Financial reports consistently late or incomplete. The monthly financial package should be delivered consistently. Persistent delays or missing reports indicate operational problems.
Contractors recommended without competitive quotes for significant work. For any significant capital expenditure, competitive quotes should be standard. A management company that consistently awards significant contracts to the same contractor without competitive quotes may have an undisclosed financial relationship.
Board decisions being made without board authorization. Expenditures above the defined threshold, contractor hiring decisions, or policy changes made without board approval represent a governance failure.
Related Questions
- Questions to Ask a Property Management Company Before You Hire One
- What to Do If Your Property Management Company Isn’t Performing
- How to Switch Property Management Companies
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