Switching Managers Mid-Lease: Deposits, Unpaid Rent and Open Repair Bills

Every management change comes down to three balances: the security deposit, any rent the tenant still owes from before the switch, and vendor invoices that have been done but not paid. Get all three settled in writing during the handover and the tenant never notices the change. Leave one open and it surfaces months later as a deposit dispute, an unexplained charge on your statement or a plumber who stops answering calls.

This guide walks through each balance in the order it usually comes up. For the overall sequence of notices and timelines, see the guide to switching property managers; this one is only about the money.

Start with a written statement of all three balances

Before any deposit moves or any invoice gets paid, ask the departing manager for a single closing statement. It should show the deposit held for each tenant, the tenant's rent ledger with the current balance and any late fees, every vendor invoice received but unpaid, and the owner reserve they still hold. That document is your reconciliation point. Everything the new manager does starts from it.

Most management agreements oblige the manager to account for the money they hold when the agreement ends, and Texas licensing rules require license holders to account for funds held for others. If the statement does not arrive, ask again in writing, with a date. Do not let the deposit move before you have seen the ledger; the two have to agree.

How the security deposit transfers between managers

The deposit belongs to the tenant, and under Texas law the landlord is responsible for returning it or itemizing deductions within the statutory period after the tenant surrenders the property. A manager holds it as your agent in a trust account. When management changes, the deposit does one of two things:

• Old manager to owner, owner to new manager. The departing manager refunds the deposit to you with a written accounting, and you fund the new manager's trust account for the same amount. Simple, but the money passes through your hands, and the tenant should be told in writing where it now sits.
• Old manager directly to new manager. Cleaner, with no gap. The transfer letter states the tenant name, the amount, any pet deposit held separately and any deductions already agreed with the tenant. Both managers keep a copy.

Either way, the amount that lands in the new trust account must match the lease. If the lease says the tenant paid a certain deposit and the old manager sends less, the shortfall is yours to make up, because the tenant is entitled to the full amount at move-out. Check it line by line. The guide to Texas security deposit rules covers what happens at the end of the tenancy.

Telling the tenant where the deposit went

Tenants worry about their deposit more than anything else in a management change. A short written notice, sent by the new manager and copied to you, settles it: the deposit in the amount stated in your lease is now held by the new company, the lease terms are unchanged, and here is where to pay rent and report repairs from the first of next month.

Keep that notice with the lease. If the tenant ever claims the deposit was lost in the switch, the notice and the transfer letter answer the question in two pages. The new manager should also note any condition items the old manager documented at move-in, because those photos decide what can be deducted later. If the old manager never did a move-in report, say so now; the new manager cannot invent one.

Can the new manager collect rent owed from before the switch?

Yes, as long as the lease and the ledger come with the house. The tenant's debt is to you, the landlord, not to the manager who happened to be collecting at the time. The new manager steps into the collection role under the same lease, so rent, late fees and any charges the lease allows remain due and collectible.

What the new manager needs to do that well:

• The signed lease with its late fee terms, so every charge pursued is one the lease actually allows.
• The full rent ledger from the old manager, not a summary, showing each charge and payment with dates.
• Copies of any late notices already served, so the sequence is not restarted from zero.
• A written statement of the balance as of the handover date, agreed by both managers.

The practical risk is a tenant who treats the switch as a reset. A firm, polite first letter from the new manager that states the balance, cites the lease and gives a date closes that door. If the arrears are large enough that a notice to vacate is on the table, the new manager should be told before they send the welcome letter, not after. Perpetual's approach to rent collection starts with that reconciled ledger on day one.

Who keeps the old rent once it is collected

Collected rent is yours, less whatever your agreements say. Here is where owners get surprised. The old manager may be entitled to their management fee on rent that was due during their term, even if it arrives after they leave, depending on how the agreement is worded. The new manager may charge a fee on rent they collect, including arrears. Read both agreements before the switch so the same dollar is not charged twice.

Late fees are a separate line. Some agreements let the manager keep part or all of the late fees as compensation for the collection work. If the old manager served the notices and the new one collects the money, agree in writing who gets what. An hour spent on this before the switch saves an argument that nobody wins.

Open repair bills: who pays the vendors

Work that was ordered and completed under the old manager is still your bill. The vendor did the job on your house at your agent's instruction, and the obligation does not disappear because the agent changed. What has to be decided is the mechanics of payment.

Usually the departing manager pays open invoices from the owner reserve they hold, lists them on the closing statement and refunds whatever remains. If the reserve is short, they invoice you for the difference or hand the unpaid invoices to you with the vendor's contact details. The new manager can then pay them from your new reserve, but only with the paperwork: a written quote or work order, an invoice and, ideally, a photo of the completed work.

Three things to watch:

• Work that was started but not finished. Get the vendor's name, the scope and what has been paid so the new manager can decide whether to let the same vendor finish or re-bid it.
• Invoices that appear after the switch for work you never approved. Ask for the approval trail before paying.
• Warranty work. If the old manager's vendor installed a water heater last spring, note who holds the warranty, because the new manager's vendor will not honor it.

The guide on how property managers handle vendors explains what a clean approval trail looks like.

The owner reserve and the final disbursement

The last balance is the one most owners forget: the reserve the old manager holds against repairs. The closing statement should show the opening reserve, every invoice paid from it since the last statement and the amount being refunded. Match it against your prior monthly statements. If a month is missing, ask for it.

Expect the final disbursement to arrive after the agreement's notice period ends, because the manager needs time to receive straggling invoices. A reasonable window is set in the agreement; an open-ended one is a problem. If the refund does not arrive, your first call is to the broker who holds the license, and your second is to the state licensing agency. Read how reserves move in the guide to owner reserves and disbursements.

A one-page checklist for the money side of a switch

Use this before you sign with the new company, so the first statement from them starts from a clean position.

• Closing statement from the old manager: deposits, rent ledger, open invoices, reserve.
• Deposit transfer letter, amount matching the lease, pet deposit shown separately.
• Written notice to the tenant stating who holds the deposit and where rent is now paid.
• Agreed arrears balance as of the handover date, with copies of notices already served.
• Written agreement on which manager earns fees on old rent and late fees.
• List of open and in-progress work orders with vendor contacts and warranty details.
• Final reserve refund date, in writing.

If the old manager will not produce these, the new manager can still take over, but it will take longer and the gaps will show up at the next move-out. If you are weighing a switch and want to know what the first month would look like, talk to us before you give notice; the order of steps matters.

This is general information, not legal advice. Confirm deposit and fee questions against your agreements or with an attorney.

How Perpetual handles this

When we take over a house mid-lease, the first thing I ask for is the old manager's closing statement, and I do not fund the deposit in our trust account until it matches the lease. We send the tenant a written notice the same week saying where the deposit sits, that the lease is unchanged, and where rent is paid from the first of the month. Arrears are reconciled to the handover date and pursued under the lease's own terms, with the ledger visible to you in the owner portal.

Open vendor invoices are paid only with a work order, an invoice and the approval trail. Anything started but unfinished is re-walked by us before we decide who finishes it. We are broker-owned and local to Keller, North Richland Hills and Fort Worth, so a vendor who did your water heater is probably one we already know. Every fee, including how fees apply to rent collected after a switch, is in the written quote before you sign. See how our full-service management is set up for takeovers.

The takeaway: Settle the deposit, the arrears and the open invoices on one closing statement before the switch, and the only thing your tenant will notice is a new phone number.

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