How to collect back rent increases and pet fees

Question

HI everyone, I decided to self-manage my property due to a lot of problems I have had with the current property management who I hired two years ago the day I closed on my property. Today is Feb 12 and I will officially manage my property on March 1. My PM had all leases in their custody till I picked them up a few days ago.

Now when going through the leases that the tenants signed with the previous owner or with this PM, I realized that PM never enforced rent increase clauses in those leases or collected annual pet fee ($150/tenant with pets) over the last 2 years. The total back rent increase and pet fee amount is over $2300, of which PM is entitled 8%.

I do not know how long the PM will take to collect such amount from my tenants, but PM should subtract this amount from their PM fee for February (about $1500, plus tenant finder fee of $800). Is that the right way to go? My property is in Maryland, but outside of any rent control cities.

Thank you in advance for sharing your wisdom on this matter!

Nathan Gesner · Answer

Your PM failed to charge the Tenant. The Tenant apparently paid what they were told to pay, so you can't go after them for something they weren't aware of and didn't agree to.

Your beef is with the PM. You could go after them, but are unlikely to collect anything.

If they are a Maryland REALTOR, then you can file a complaint with the commission. When they open the investigation, they will notify the property manager and ask for a response. That may be enough heat that the PM will reach out to you and negotiate a settlement to make the investigation go away. If not, then you'll have to decide to push forward with the complaint. If found guilty, they can be punished but it won't put any money in your pocket. If you want financial compensation then you need to take them to Small Claims Court.

If they are not a REALTOR, then your only recourse is to take them to court.

I can't speak for a judge and don't know all the details, but I suspect it could be a waste of time. The judge may decide you were partly to blame for letting it go on this long.

Knowing what I know, I would suggest walking away and dropping the issue.

Nathan Grabau · Answer

This is a situation where you see it as a win that you can collect that rent now, and that you caught it as a 2300 issue, vs 23k or even 230k.

Drew Sygit · Answer

Did they communicate at all with you about the increases and fee? Perhaps asking you about increases and you ignored message or replied to keep the same?

Corby Goade · Answer

It's not worth the effort- the chances of you seeing a dime are low and it will take lots of time and effort to find out. And you'll probably lose your tenants in the meantime- maybe that's not a big deal, but it's likely if you go down this road.

There are excellent property managers out there, sounds like you had a lazy one. If you go that route again, I'd make sure I start by looking at NARPM memeber PMs, they have a code of conduct and education requirements that typically put them in a position to be much better at their jobs.

Best of luck!

Joe Norman · Answer

This 100%. It is beyond frustrating that Maryland refuses to require PMs to hold any kind of license - it enables so many fly-by-night operators who aren't looking out for the landlords best interest. However, even though there isn't a specific Property Management license, PMs may still opt to obtain a real estate sales person license and submit themselves to MREC scrutiny. PMs who opt to obtain this license are signaling that they are professional operators and have nothing to hide.

To your original question, you're probably best off just cutting your losses on the back rent/pet fees, and making sure the current tenants are aware of what they owe going forward.

Tim Miller · Answer

No. That boat has already sailed. The tenants were never notified about any rent increase or about the pet fees. You're SOL on this one.

The only thing you can do now is move forward. If your tenants are now on M2M, you can send them notice of a rent increase going forward. Everything now is going forward, so forget about the past issues. Chalk it up to a hard lesson learned.

Tim Jacob · Answer

for pet fees their is  good chance their is no recourse.  If you were the owner before the tent increases which the tenant signed the lease with the rent increases with suffice notice per the local standards you can collect it.  Keep in mind during covid rent increases were voided in places like Baltimore and Montgomery county.  You also would need to prove your rental was licensed during the time the rent was due.  If you can prove all that you should be good on just the past due rent portion. If they are delinquent it could be grounds for eviction.  Keep in mind the lease would need to state something like if there is no rent increase options given for the end of the lease the lease will default to a certain price at the end of it.

Huong T Nguyen · Answer

Thanks, Cody.

The 4 leases set different dates for rent increases over the past two years, all 4 were signed by the tenants.

3 more leases require respective tenants to pay an annual pet fee.

Obviously this is the PM's failure to act. This PM is not a realtor. But I also failed to keep a copy of all the leases from the beginning to keep track of any increase/pet fee that these leases allow for.

Jay Thomas · Answer

It's great that you caught the discrepancy in rent collection as a relatively small issue - it could have been much bigger if not caught! Real estate can be an unpredictable game, but with careful monitoring and attention to detail, you can make sure your investments stay in the black.  Good work on catching this one!

How to collect back rent increases and pet fees

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