Small Claims Court, Property Management Company won't take responsibility

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Small Claims Court, Property Management Company won't take responsibility

Curtis Harrison
Investor · UT · Member since 2014 · 11 posts · 2 votes

I hired a Property Management (PM) firm 5 years ago.  I've been paying them $135 per month for their 'services'.  Got an e-mail from zillow.com that my house was up for rent.  Contacted PM company and they tell me that the tenant has been gone for a week and they were going to start on the repair work.  I promptly fired the PM company for not telling me that the home was vacant, and for not finding me a new tenant before the home vacated.

So, 3 months later, I get served by the Tenants who are taking me and the PM to small claims court for $5000 to get their security deposit back.

0. Rental Agreement was signed by PM and Tenant, not by me.  Security deposit was held by the PM, not by me.

1.  PM said there was no move-in checklist, so all repairs could be taken out of the security deposit.

2. PM had their own people do all the repairs and charged tenants $2100 out of the $2700 security deposit.

3. PM did a walk through after the tenant vacated and did not involve me or the tenant in that walk through.

4. PM assured me that all these repairs would come out of the security deposit and would not be disputed since there was no move-in checklist from the tenant.

5. I FOUND THE Move-In checklist on the PM's website under my owner portal.  Told them where it was, and then when they looked, they found it too.  This is AFTER we got served for Small Claims court and after they completed all their repairs.

6. PM is willing to refund $300 in labor costs to the Tenant, but wants me to pay all the materials costs $375 for repairs I wouldn't have had done if I'd have known they weren't covered in the security deposit.

7. Tenants will settle for $2000, but PM will only pay $300 and they want me to pay the rest.

8. PM did not inform the tenant or me that the costs were going to be so high, and now they expect me to reimburse the tenant for the repairs that were done for pre-existing conditions that the PM fixed because the PM couldn't find the Move-In checklist.

Is the PM liable to the Tenant for a security deposit refund?

Do I (as the owner) have any liability towards the tenant or PM to pay for repairs done by the PM when they shouldn't have done the repairs in the first place?

Should I sue the PM for negligence, or wait for the outcome of the Small Claims court?

Should I encourage the Judge to hold the PM liable for all penalties in the Small Claims Court?

HELP !!!

Thanks for any and all advice,

Curtis

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Joel OwensBusiness Member
Moderator
Real Estate Broker · Canton, GA · Member since 2010 · 15k+ posts · 11k+ votes
11y

Generally in a small claims court case the first step is the plaintiff has to file a " statement of claim" outlining what the damages are for and why etc. A fee generally has to be paid and the amount depends on if they are naming one party or multiple parties as defendants in the case.

If you are named as a defendant then generally the Marshall will send personal service to you notifying of the filing with a case number established. You have a certain time to respond with an answer. You can also file a "counter claim" against the plaintiff. Once answers are received ( in the stated time) then the judge if they validate the case will give a court date. If the tenant (plaintiff) did not fill out the claim for the proper jurisdiction or other items that cannot be decided by the court the judge might invalidate the claim and not even give a case number and date. 

This is how it works in my area and yours may be different.

At this point you may want to confer with an attorney for at least looking over your items and giving you an idea of to settle with tenant and go after PM or not. It doesn't matter if you are right or wrong. The attorney will tell you how much time and money will be involved and the likely outcome and ask if you want to fight it or not. 

You do not just let the notice go by and do nothing. That will get a default judgment against you for damages in favor of the plaintiff.  

Have you actually received notice that the tenant HAS FILED and given you a copy?? The court will give you a copy with Marshall service to file an answer anyways.

The tenants might be bluffing to scare you into giving the security deposit back. CALL THEIR BLUFF. They might not even file. If they do file they might not be ready to go all the way through the court proceedings with the judge for the outcome. They might file to just show they are serious and get you to the table to negotiate a settlement before you go in front of the judge.

99% of the time people say they will sue and they don't. When someone does sue and file the papers they are generally serious on some level.

No legal advice.    

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  • Dawn AnastasiPro Member
    Rental Property Investor · Milwaukee, WI · Member since 2013 · 6k+ posts · 4k+ votes
    11y

    Ugh.  Yet another story of a PM/owner debate.  PMs get such a bad rap.

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    0Reply
  • Account Closed
    Contractor · Raleigh, NC · Member since 2014 · 651 posts · 510 votes
    11y

    @Curtis Harrison  I have no idea what the law says in this situation but as I read your post, I'm struck by how you try to completely distance yourself from this whole arrangement...yet you happily received the rent payments every month (minus $135.). 

    Why not pay the tenants what they are owed (it's your property and they were your tenants)?  Then deal with the PM yourself...or just move on. 

    0Reply
  • Account Closed
    Investor · Baltimore, MD · Member since 2014 · 1k+ posts · 688 votes
    11y
    Lawyer.....but i will tell you that tenant vs you/pm is a separate matter from you vs pm.
    0Reply
  • Joel OwensBusiness Member
    Moderator
    Real Estate Broker · Canton, GA · Member since 2010 · 15k+ posts · 11k+ votes
    11y

    Generally in a small claims court case the first step is the plaintiff has to file a " statement of claim" outlining what the damages are for and why etc. A fee generally has to be paid and the amount depends on if they are naming one party or multiple parties as defendants in the case.

    If you are named as a defendant then generally the Marshall will send personal service to you notifying of the filing with a case number established. You have a certain time to respond with an answer. You can also file a "counter claim" against the plaintiff. Once answers are received ( in the stated time) then the judge if they validate the case will give a court date. If the tenant (plaintiff) did not fill out the claim for the proper jurisdiction or other items that cannot be decided by the court the judge might invalidate the claim and not even give a case number and date. 

    This is how it works in my area and yours may be different.

    At this point you may want to confer with an attorney for at least looking over your items and giving you an idea of to settle with tenant and go after PM or not. It doesn't matter if you are right or wrong. The attorney will tell you how much time and money will be involved and the likely outcome and ask if you want to fight it or not. 

    You do not just let the notice go by and do nothing. That will get a default judgment against you for damages in favor of the plaintiff.  

    Have you actually received notice that the tenant HAS FILED and given you a copy?? The court will give you a copy with Marshall service to file an answer anyways.

    The tenants might be bluffing to scare you into giving the security deposit back. CALL THEIR BLUFF. They might not even file. If they do file they might not be ready to go all the way through the court proceedings with the judge for the outcome. They might file to just show they are serious and get you to the table to negotiate a settlement before you go in front of the judge.

    99% of the time people say they will sue and they don't. When someone does sue and file the papers they are generally serious on some level.

    No legal advice.    

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    NNN Invest53 Reviews
    WebsiteView Page
    1Reply
  • Sean O'Gorman
    Investor · Menomonee Falls, WI · Member since 2014 · 54 posts · 16 votes
    11y

    Look at your state statutes and administrative code for the definition of landlord. I can't say for sure but that might be able to provide you with some help. Also, find your PM contract and examine it for what happens for loses. Worst case you may have to pay tenant and then sue PM company. PMs negligence in charging for pre-existing damage won't get you off the hook from tenant but should allow you to recover from PM. You should probably make this claim in the current suit to prevent a claim preclusion type situation later. 

    All that said it might be worth hiring an attorney who can walk through some potential problems.

    Please note this is not legal advice nor should it be construed as such. You should consult and retain the services of a local attorney if you would like to obtain specific advice regarding your specific situation. Nothing in this should be perceived as creating an attorney-client relationship.

    0Reply
  • Kevin Page
    Commercial Real Estate Broker · Cape Coral, FL · Member since 2014 · 86 posts · 46 votes
    11y

    The PM managed your property for 5 years and this is the first problem? Was it the same tenant? Seems like you were happy with them until now. Now the tenant wants $2,000 to settle and the PM will only pay $300.

    @Joel Owens  As Joel says it doesn't matter if you are right or wrong when you go to court. I would try to get the pm to split the $2,000 50/50 and move on. Maybe you can negotiate with the tenant to take a little less but I would try to settle. It's not worth your time to start paying lawyers and go to court. Make a settlement and the problem goes away.

    0Reply
  • Bob E.
    Queen Creek, AZ · Member since 2014 · 2k+ posts · 1k+ votes
    11y

    Your contract should state an amount above which you have to approve repairs.  If they did repairs without approval then they have a problem, if you approved the pairs then it sounds more like a question of the move in checklist and I would just split the repairs.

    How much did this rent for 1350 a month?  Sounds like you are better off focusing on getting it rented and cash flowing again.

    0Reply
  • Curtis Harrison
    OP
    Investor · UT · Member since 2014 · 11 posts · 2 votes
    4y

    So, this is an old thread, but I realized that I never told anybody what ended up happening.  The tenant named me and the PM in a small claims court lawsuit.  We both showed up to the trial.  The judge questioned the tenant and then myself.  I told him that I had hired the PM to take care of this sort of thing because they were supposed to know the laws around being a landlord and that they seem to have dropped the ball in this case.  The judge agreed and dismissed me from the case and ordered the PM to refund the entire security deposit less $350 for carpet cleaning back to the tenant.  

    As we were leaving, the PM told me that I needed to pay back the tenant and that they (the PM) were going to sue me if I didn't.  I told them that the judge had just ruled against the PM and that they would have a tough time convincing that same judge to change his mind.

    They refunded the tenant and I now use a different PM company.

    0Reply
  • Long Dang
    Boston, MA · Member since 2021 · 31 posts · 37 votes
    4y

    What a saga. I'm glad you sorted it out! Hopefully, the new company does better due diligence on move in & move out. 

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