Cancel property management - in three steps

Terminating property management: new law? WEG reform makes termination easier

The new WEG reform has significantly simplified the process of terminating a property management contract. The new law, which came into force on 01.01.2020, significantly strengthens the position of owners. With the modernization of the Condominium Act (WEMoG) on 01.01.2020, owners now have far-reaching options for terminating a contract and dismissing the manager.

• Good cause no longer necessary to terminate a property management company. Pursuant to Section 26 (3) sentence 1, (5) WEG, the property manager can now be removed from office at any time without the need for good cause. This makes it much easier for owners to decide on a new property manager. (However, in most cases there is good cause for the owners to decide against the current management and in favor of a new or different type of condominium management).
• Automatic end of contract: When the property manager is dismissed, the management contract ends automatically six months after the date of dismissal (section 26 (3) sentence 2 WEG) and no additional notice of termination is required. It is common for the term of management contracts to be linked to the appointment of the manager. The administrator contract therefore ends as soon as the decision to dismiss the administrator has been made.
• More flexible termination options: However, if the community of owners terminates the management contract before the end of the six-month period, it can do so prematurely in accordance with the notice periods agreed in the management contract or the statutory provisions. In cases where there is good cause, extraordinary termination without notice is even possible, which terminates the management contract immediately. If the administrator is dismissed as a result of an extraordinary termination, the administrator contract ends immediately.
• Simple majority is sufficient: A simple majority (more than 50 % of the votes) of the owners present at the meeting is sufficient to dismiss the current property management: inside.
• Meeting always has a quorum: Owners' meetings (ETVs) now always have a quorum, even if only a few owners are present. A simple majority at the owners' meeting is sufficient for dismissal. For example, if only three owners attend the owners' meeting, two votes are sufficient for dismissal. This means that the property management can be dismissed even if there is a low attendance at the meeting.

These changes give owners more flexibility and control over their choice of property management. They make it possible to react more quickly to dissatisfaction and initiate a change of contract without having to overcome lengthy legal hurdles.

We will be happy to advise you to ensure a smooth termination process and a successful switch to a new administrator.

Contact us for a personal consultation - we answer 100% of inquiries individually and support you at every step of the process.

Step 1: Obtain bids and convene meeting

Step 1 of our step-by-step guide to terminating property management. The first step in terminating your property management company begins with obtaining offers from alternative managers.

A Google search is often sufficient for this, but there are also comparison portals such as Hausverwalter-Vermittlung, Deutsche Hausverwalter or HausverwalterScout. These forward your request to various property managers so that you receive several offers within a few days.

In order to be able to optimally compare the offers of the managers, we recommend using a standardized catalog of services. This will help you to clearly compare all the services and costs of the potential new management company. As important details are often hidden in the small print, you should ask the applicants for precise information.

By carefully considering these criteria, you can make an informed decision on a competent and reliable property manager that best meets the needs of your community of owners.

As soon as you have received suitable manager offers, you can plan the termination of the current manager and the election of a new manager at the owners' meeting. If the annual meeting is still outstanding, ask the incumbent management to include the resolution on termination in the agenda. It is legally obliged to comply with this request.

This should be done before the invitation to the meeting is sent out, otherwise some property management companies even refuse to amend the agenda within three weeks! If your community of owners has already held an owners' meeting in the current calendar year or the current property management company refuses to include the resolution, you can convene an extraordinary owners' meeting yourself. This process is uncomplicated and we will be happy to support you.

If your owners' association has already held an owners' meeting in the current calendar year or the current property management company refuses to include the resolution, you can convene an extraordinary owners' meeting yourself. This is not complicated, but we will be happy to help you.

The agenda of the owners' meeting should include the following key proposed resolutions:

• Termination of the existing administrator contract and dismissal of the current administrator
• Acceptance of the new management contract and appointment of the new property management company

This structured approach ensures that the termination of your current management and the election of a new manager is carried out smoothly and in the interests of the entire community of owners.

Step 2: Conduct of the meeting and resolution

The decisive moment is approaching on the day of the owners' meeting: the resolution to terminate the current management and elect a new manager is put to the vote.

This step is of great importance for the future of the community of owners.

There is an important option for owners who are unable to attend the meeting in person but would still like to cast their vote: you can grant another owner a written proxy. This ensures that your vote as an owner is taken into account in the decision on the manager's dismissal despite your absence. 

Please note: The power of attorney must be in the original. A copy is not sufficient in an emergency and could result in your vote as owner not being counted. This is particularly important when it comes to a decision as far-reaching as the termination of the management contract.

Are you ready to put your community of owners in safe hands? Find out now how we can save you time and effort.

Contact us for a free, no-obligation quote. We will be happy to provide you with advice and assistance to ensure a smooth transition.

Step 3: Handover 

As soon as the change is complete, the newly appointed property manager takes care of the handover. Funds, accounts and documents are handed over. This step is crucial for a smooth transition and can take 1-2 months, depending on the complexity of the community of owners. It is often only then that the new property management company can really get to work.

Unlike most other management companies, there are no costs for your condominium when you switch to Ralph. Ralph takes care of all the details.

What steps happen in the first 2-3 weeks after the meeting?

• Contract signing: The advisory board signs the new management contract as representatives of the condominium owners.
• Handover of the opening of the accounts: The WEG accounts of the previous property manager can be taken over with the resolution protocol for termination. If the incumbent property manager works with a bank with which we do not cooperate, we will open the WEG accounts for house money and reserves with DKB on behalf of the WEG.
• Handover of documents: We coordinate the collection of all documents with the previous administration. You do not have to worry about anything.
• Digitization of documents: We digitize important documents and make them accessible to the condominium owners.
• Welcome letter: We will send an initial welcome letter to all owners and, if applicable, inform the owners of the new IBAN of the new WEG account.
• Invoices: We subsequently take care of the final accounts of the previous year
• Online portal: We sort, check and label the digitized documents and then activate our portal so that you have access to all important documents, resolutions and upcoming issues.
• Certification of the minutes of the resolution: Depending on the declaration of division, we may require your certified signature of the minutes of the resolution in order to be able to issue administrator approvals in the future. We may contact you separately in this regard after we have checked the TE. You could then have the minutes briefly certified by our notary, or a notary of your choice.

‍It is important to note that there are no additional costs for the COA when switching to a modern manager like us. We take over the complete coordination of all the details so that the owners do not have to worry about the technical aspects of the handover.

There can be many reasons for a change of administrator, but whatever the reason, we make sure that the transition is as smooth as possible.

Our aim is for us as property managers to start work as quickly as possible so that you as the owner can benefit from improved support.

Contract termination: What is the difference between ordinary and extraordinary termination?

The management contract can be terminated in two ways: by ordinary termination and by extraordinary termination without notice. 

• Ordinary termination of the administrator contract can take place without stating a special reason, but must comply with the contractually agreed conditions. By default, the notice period following the dismissal of the administrator is six months, unless otherwise stipulated in the contract.‍
• Extraordinary termination without notice However, termination without notice requires an important reason that significantly impairs the relationship of trust between the owners and the manager and makes further cooperation impossible. Typical reasons for termination without notice can be
  • Misappropriation of WEG funds,
  • Gross neglect of the administrator's duties
  • other important reasons listed in the contract or by law

If there is good cause, the administrator contract must be terminated within two weeks of becoming aware of it. Although the reason for termination without notice does not necessarily have to be stated, the administrator has the right to know it.

In summary, it can be said that extraordinary termination without notice is only possible if there is good cause. Without good cause, the contractual relationship ends within 6 months of the administrator's dismissal, unless otherwise contractually agreed.

We will be happy to provide you with non-binding and free advice on terminating the administrator contract. We will help you to find the best course of action for your situation and to take all legal aspects into account correctly.

How does the ordinary termination within 6 months?

Thanks to the latest WEG reform (2020), notice periods from management contracts are no longer valid. Instead, a maximum notice period of 6 months applies without exception. The condominium owners have two options for termination.

Option 1: Cancellation of the property management via an owners' meeting:

A majority resolution is required at an owners' meeting to change the condominium management. This is because the management contract was concluded with the condominium owners' association itself, not with individual owners.

If an owners' meeting is planned in the near future, the condominium owners can include the resolution in the agenda. Ideally, it is advisable to send the items to the property manager by email and registered letter. This puts you on the safe side, even if the management refuses to include the items. The acting property manager is legally obliged to include this resolution. 

Important tip: Ideally, this should be done before the invitation to the meeting is sent out, otherwise some administrations may even refuse to adjust the agenda within three weeks! 

If your condominium has already held an owners' meeting in the current calendar year or the current property management company refuses to include the resolution, the condominium can independently convene an extraordinary owners' meeting. This is not complicated, but we will be happy to help you. 

The agenda of the owners' meeting should include the following proposed resolutions.

• Termination of the administrator's contract and dismissal of the administrator
• Acceptance of the new administrator contract and appointment of the new administrator

Option 2: Cancellation of the property management by circular resolution:

For you as a condominium owner, the circular resolution pursuant to Section 23 (3) WEG offers an efficient "shortcut" for deciding on the termination of the property manager without an owners' meeting. This method is particularly attractive if a quick decision is required.

The process is simple: a motion to dismiss the administrator is sent to the members of the condominium owners' association in text form. In well-organized communities of owners with a lively exchange, this circular resolution can completely replace a meeting. However, it is important that all co-owners agree to the resolution. A brief confirmation by email or messenger service is sufficient for this.

However, circular resolutions often fail due to a lack of contact details for the condominium owners. Therefore, the owners' meeting - whether self-organized or convened by the incumbent property manager - often remains the preferred way to dismiss a manager.

Important:

1. After successful dismissal of the property manager, whether by circular resolution or owners' meeting, the management contract ends automatically after a period of 6 months in accordance with Section 26 (2) sentence 2 WEG.
2. Many administrator contracts contain a clause that links the termination of the contract directly to the dismissal. In such cases, no additional notice of termination is required and the contract ends automatically with the legally effective dismissal.

Please always observe the specific contractual provisions and legal requirements to ensure a smooth change of your property management company.

When is it possibleto terminate the property management contract prematurely without notice?

In situations of extreme dissatisfaction with the manager's performance, there are options for early termination of the cooperation - even before the end of the regular contract term. You can consider early termination without notice in accordance with Section 626 BGB if the continuation of the contractual relationship has become unreasonable for one of the parties.

However, mere dissatisfaction with the administrator's performance is generally not enough. Rather, there must be specific, serious reasons such as breaches of duty or even criminal acts that justify immediate termination of the cooperation. In this case, the resignation must take place within two weeks of becoming aware of the reason for termination. Accordingly, the appointment of a new administrator can also be carried out quickly.  

The relevant legal text for the dismissal of a property management company

Pursuant to Section 626 of the German Civil Code (BGB), termination without notice is subject to certain conditions: that "the continuation of the employment relationship" has becomeunreasonable . 

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Terminate WEG management: What are the valid reasons for terminating a contract without notice?

Do you intend to terminate the management contract without notice and want to end the cooperation with your property management company? Do the check: The following are the most common reasons for termination without notice in practice: 

• Resolutions are disregarded: The administrator does not implement the resolutions of the WEG.
• Neglect of the owners' meeting: Despite requests, the property management no longer convenes meetings over a long period of time.
• Inadequate document management: Condominium ownership documents are kept incorrectly or access is denied.
• Unauthorized awarding of contracts: The management awards contracts without a resolution or instruction from the condominium owners' association.
• Hardly any support with business planning: The business plan is prepared late or not at all.
• Financial irregularities: COA funds are embezzled or not properly managed. COA funds are misappropriated or the management has not kept a COA's own account and has mixed its private assets with those of the homeowners' association.

‍If such reasons exist, the term of the management contract can be terminated prematurely. However, termination without notice should be carefully considered. It is advisable to seek professional support in order to correctly assess the situation.

Administrator contract & annual statement: Which administrator prepares outstanding annual statements?

In the event of a termination of contract or resignation of the administrator, the question often arises as to who is responsible for preparing outstanding annual accounts (operating costs, ancillary costs, house charges accounts) - the new administrator or the old administrator? The answer depends on the time of the change of manager within the financial year.

Scenarios of responsibility:

1. Change in the first half of the year:
   If the administrator contract is terminated and the transfer takes place within the first 6 months of the year, the outgoing administrator is no longer obliged to prepare the previous year's accounts. The term of the new administrator contract begins early enough for the new administrator to take over this task. The outgoing administrator is obliged to prepare the accounts in an orderly manner and to hand over all invoices in a well-organized manner. 
2. Change in the second half of the year:
   In the event of a transfer after the first 6 months of the year, the outgoing administrator is no longer obliged to prepare the accounts for the current year. Responsibility is transferred to the new administrator.
3. Overdue accounts:
   If the outgoing condominium administrator has not prepared accounts for the previous year, the new administrator usually takes over this task. However, the costs for this backlog can be charged to the former administrator.

The duties of the outgoing administrator:

Irrespective of the date of resignation or termination of the contract, the outgoing administrator must fulfill the following obligations:

• All documents handed over in an orderly and complete manner.
• Provide essential information about the condition of the property and the assets of the WEG.
• Provide all relevant data that is not clear from the documents.

The term of the management contract and the time of the change are decisive for the responsibility for outstanding accounts. Clear communication between the old and new property managers and the condominium owners is essential to ensure a smooth transition and that all necessary accounts are prepared correctly and promptly.