Shady property manager - Need advice on what to do

[Ashley Hughes]

I own a duplex and I have a property manager because I live out of state.  Last January I had a call with my tenant to ask her some questions about her unit.  We chatted about that and then she goes on to tell me that my property manager had been harassing her about  paying for a broken toilet.  She showed me a letter where the property manager was demanding that she pay a remaining balance of $400. She had already paid $200 according to the letter.  At this point I was confused because I wasn't aware that the toilet had been broken. In my contract with the property manager, any repair requests over $200 needed landlord approval or if it's an emergency, the property manager must let the landlord know within a reasonable amount of time. This particular letter that the tenant showed me, had me CCed as a recipient, but I never received a notification from the property manager that this incident took place.  This conversation with my tenant  took place in January 2021 and the property manager had sent the letter to the tenant in December 2020. I found out the actual incident (broken toilet and flooding) happened in June 2020 and that it costed $600 for the toilet replacement and whatever flooding happened. I told the property manager that since he made an agreement with the tenant--to pay--without notifying me about the incident that was over $200, it was up to them to work that out and none of the rental payments would go towards the money he put up front to pay for the incident. I told the  property manager that the tenant sent me picture of the letter. I asked him why he didn't tell me about the incident and CC'ed me in the letter without my knowledge.  His reply was "I wanted to scare her (the tenant) into paying and I knew if I put the landlord (my name) on the letter, she would do it." After some back and forth of discussing the wrong of this situation, the property manager said he would eat the cost.  Fast forward to December 2021.  The same tenant stopped paying her rent from May - December, so the property manager took upon himself to do a rental assistance application and we were able to get her missed payment and additional payment to February 2022.  The check came directly to his property management company.  Not only did he deduct the $400 the tenant owed him, but he also deducted his property management fees from December until February 2022 out of the rental assistance funds.

I want to cut ties with him immediately. Is this incident a true breach in the contract with grounds to fire him and terminate the contract?

See excerpt from contract around repairs.

Let me know how you think I could or should handle this.  

[Nathan Gesner]

Every story has two sides and it's difficult to give a complete answer when only hearing from you. Here's my thoughts:

1. Why are you talking to the Tenant directly? That always muddies the waters. Tenants are very good at playing you against the PM, ensuring the two of you start fighting while ignoring the Tenant. You hired a PM for a reason; let them handle the Tenant communication.

2. My agreement is like yours: if a repair is estimated to cost the owner more than $200, then I must notify the owner. If I understand you correctly, the PM determined this repair was a Tenant responsibility. There's no need to contact you because you're not the one paying for it. I do this all the time. When a Tenant moves out and I spend $600 from the security deposit for cleaning and repairs, I don't call the owner because (a) it's not coming out of the owner's pocket and (b) an owner will never reject improvements on someone else's dime.

3. In my agreement, I keep a percentage of "rent income collected" and that applies whether I collect the rent on the day it's due or six months after it's due. Did you expect the PM to work for free for eight months, successfully collect everything owed, and get no compensation for that?

4. I'm sure your agreement specifically authorizes him to collect rent payments, deduct his fee, and then send the remainder to you. This is the same process whether he's collecting it on the first day of May or eight months later.

Based on what you've shared, the PM did the right thing by holding the Tenant accountable for the plumbing bill. His hands are tied thanks to the b.s. COVID regulations in place the past two years, but he did the right thing and collected every dime you were owed. The only thing he did wrong was to apply the ERAP (Emergency Rental Assistance Program) payment to the $400 plumbing bill. The ERAP payment was supposed to be applied towards rent, utilities, or late fees; he is not authorized to spend it on anything he wants, whether the Tenant owes it or not. He should have continued pushing the Tenant to pay the $400 plumbing bill, especially after the Tenant has saved eight months of rent payments! If the tenant refuses, he could (a) deduct it from the next rent payment made by the Tenant and then evict for any unpaid rent, or (b) hold the charge until the tenant is out and deduct it from the deposit (not my recommendation).

I think your PM is doing a pretty good job based on what you've shared. I see no grounds for termination.