Updated August 16, 2026
It does not automatically transfer, and it does not automatically end either — it terminates according to whatever the agreement says, which is why you should read it before you list rather than during escrow. Most property management agreements contain a notice period, and some contain a termination fee or a provision entitling the manager to a commission if the property sells to a party they introduced. That last clause is the one that surprises sellers, because it can create a claim for a fee on a transaction the manager had nothing to do with. Buyers, meanwhile, generally want the option to bring in their own management, so an agreement the buyer cannot exit is a negative in diligence.
The termination provision and notice period. Thirty days is common; longer periods exist. The notice clock has to be started early enough that it expires around closing rather than months afterward.
Termination for sale. Many agreements address a sale specifically, sometimes allowing termination on shorter notice.
Any termination fee. Some agreements provide for a payment on early termination.
A commission or procuring-cause clause. Language entitling the manager to a fee if the property is sold, or sold to someone they introduced. This exists more often than owners realize and it should be identified before you engage a broker, not after an offer arrives.
Exclusivity on leasing or renewals. Whether the manager has continuing rights on tenancies after termination.
Records and funds on termination. How and when tenant files, leases, deposits, and the operating account balance are turned over. This one matters practically — a slow or uncooperative handover creates real problems at closing.
The option to replace the manager. Most buyers of LA multifamily have their own management, or intend to select their own. An agreement that binds the buyer is a diligence item they will ask to be resolved.
The option to keep them, occasionally. On an older building with a long-tenured manager who knows the tenants, the compliance history, and the systems, continuity has genuine value. Some buyers want it.
Clean records. The manager holds much of what the buyer needs: leases, tenant files, maintenance history, LAHD correspondence, and the registry records. A cooperative manager makes diligence smooth; an uncooperative one makes it slow.
Confirmation of the deposit accounting. Security deposits are a liability that transfers to the buyer, credited at closing. The manager's records establish what is actually held.
There is a genuine tension here worth naming. Your property manager is losing a client when you sell, and they are simultaneously the person who controls the records you need and the tenant relationships that keep the building running through escrow.
Tell them early and directly. A manager who learns about the sale from a tenant or a buyer's inspector is not going to be helpful.
Ask for the document package up front. Leases, files, maintenance records, deposit accounting, and compliance correspondence — assembled before you list, while the relationship is still good.
Confirm who communicates with tenants. Notices of entry, showing coordination, and the message tenants receive about the sale should all be consistent and accurate. Most tenant anti-harassment problems on LA buildings start with an offhand remark from someone on site.
Do not let deferred maintenance drift during escrow. A manager who assumes the new owner will handle it is creating a habitability exposure that is still yours.
Does not transfer: the management agreement itself, absent an assignment the buyer accepts.
Transfers: security deposit liability, tenancies and leases, service and vendor contracts depending on their own terms, and the compliance obligations attached to the building.
Prorated at closing: rents collected, prepaid amounts, utilities, and management fees through the closing date.
Needs explicit handling: the operating account balance, any reserve the manager holds, and outstanding vendor invoices for work already performed.
Read the management agreement before you list, specifically for the notice period, any termination fee, and any commission or procuring-cause clause — that last one can create a fee claim on your sale. Then give notice on a timeline that lines up with closing, get the full document package assembled while the relationship is still cooperative, and keep the manager informed and accurate in what they tell tenants. A manager who is brought into the process early is an asset through escrow. One who finds out late is a risk.
Can my property manager claim a commission on the sale?
If the agreement contains a commission or procuring-cause provision, potentially yes — this appears in management agreements more often than owners expect. Read the clause before you engage a broker so the issue is identified and resolved up front rather than becoming a dispute at closing.
Does the buyer have to keep my manager?
No, unless they agree to assume the agreement. Most buyers want the freedom to choose their own management, which is why an agreement with a long non-cancelable term becomes a diligence item.
What happens to the security deposits?
Deposit liability transfers to the buyer and is credited to them at closing. The manager's accounting establishes the amount, so reconciling deposits held against the rent roll before you list prevents a late dispute over a number that should never be in question.
Michael Sterman is Senior Managing Director Investments at Marcus & Millichap.
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