PM allowed lease to start after 1 month - Is this normal?

Question

Hello everyone I have a property management question. My SFH was listed for rent on 8/15. On 8/17 I received a notification saying that they found a tenant and the lease starts on 9/17 and ends 8/31 next year . Now I assumed this was a typo and I assumed the tenant was moving in quickly. Well today I found out that the tenant's lease really does start on 9/17.

Personally I am already upset with this PM because they took a month and a half to turn over a property that needed minor repairs. Long story short the contractor had a death in the family and it took longer. Now I am okay with this but I am unsure what to think about the PM allowing a 1 month gap before they move in.

Is this normal for property managers? Do a lot of leases start 1 month after? I am unsure if I should be upset or not. At this point my property will be vacant for 2.5 months.

Thanks for the help!

Taylor L. · Answer

This is not normal. They knew the place was going to be empty, they should have started marketing and gotten it leased before the last tenant moved out. That may or may not work in your property's market, but it should be the goal.

In theory you want the new tenant in the property and paying rent the day after the last tenant moves out.

Why doesn't the PM have another contractor that could have picked up the job? Does the PM have another business relationship with the contractor? Have you reviewed the cost of the job to make sure it's in line with market?

How many units do you have? If just one, it can be difficult for single-unit owners to get preferential treatment from PMs, since an individual unit represents such a small part of a PM company's income.

Kenny Dahill · Answer

I disagree with @Russell Brazil in this situation.  I get prospective tenants all the time looking for houses within the last few weeks.  They've already given their 30 or 60-day notice.  Especially in the middle of the month.

This is a case of your property manager taking the first qualified applicant and not caring about your financial interests.  And why should they, they're guaranteed a tenant placement regardless of when the tenants move in!  It's a shame that their incentives are counter-intuitive to your financial interests, anyways they have a fiduciary responsibility.

Plus they were incompetent to hire another contractor for 1.5 months.  Sorry to be harsh but they're taking complete advantage of you.  That's 3.5 months of loss income you now have this year (1.5 reno+1 vacancy+1 placement bonus).  Kudos to the PM, they lost $200 if their fees are based on 'collected' but put minimal effort into their placement bonus and have a guaranteed 1 month of no issues at that rental.

I would be very upset with my PM if they accepted 2 days after listing somebody moving in a month later.  I'd understand if the unit had been sitting vacant and listed for a while.  2 days though?!  I would argue their placement bonus since they just cost you another month of vacancy, that should be used as their placement bonus instead.

Kenny Dahill · Answer

@Ramon Flores,  I think it's important to first understand why they made their choices.  Understanding how someone thinks is important in conversations like these.

You keep referencing these as minor repairs and accepting it took 1.5 months.  I've single-handily renovated a 1,400sf home in 2.5 months and that was a major renovation.  That was me working after hours too.  On my townhouse renovations, my contractor completely renovated them in about 4 weeks.  Without knowing the scope, I would stop accepting that minor repairs took that long and use that for justification why the PM shouldn't earn their tenant placement bonus.

Ask your PM how many applicants they received within the first 2 days?  How many implied interest?  Have them explain fully why they choose this tenant when they knew you would be losing a month of rent.  Did the tenants provide any type of holding fee?  Also, why is it a 11.5 month rent and not 12.5 month rent?  Typically they would pro-rate Sept, or make it a calendar year.

Be prepared to explain your justification.  Minor repairs that probably took 3-5 weeks longer than they should have; that's 1 month of loss income.  Not listing a unit until all the repairs, were there not previous images you could have temporarily used?  And lastly, accepting a delayed move-in after only 2-days of active listing.

Make sure you read your Management Agreement.  They're generally written by the PM firm so they'll unfavor the landlord.  Although I would find anything that pertains to their Fiduciary Responsibilities.  Even if they aren't called out specifically, they typically are associated to your state's regulations.  If they've breached them, they could be liable for damages.  Regardless of what their agreement says, state regulations would proceed.

If they are unwilling to accept the blame for loss income, then I'd strongly consider reporting them for breach of Fiduciary Responsibilities.  That should hopefully cause them to be more accepting of a fair compensation upon your unfortunate loss.

I would encourage you not to fire them.  That'll cost you more money because Management Agreements typically require the landlord to A) provide 60-day termination notice and B) pay all their expected dues up front.  It'll cost you to fire them.

Instead, if you do make the decision to fire them then I would wait until the end of their current contract.  Make sure you meet all the terms and give your termination notice as detailed in the agreement!  Or else it rolls over into another year agreement; fair, right?!

Russell Brazil · Answer

Most tenants need to give 30 days notice to move right? Dont yours? So doesnt it stand to reason that someone moving is likely to be moving 30 days out?

If someone needs to move quicker than that, like in 1 week.....isnt that a red flag that maybe they are being evicted or the such?

Maya Roberts · Answer

I never felt comfortable with a property manager, we tried a few.  I always felt like our listings went up exactly at the last moment of the previous tenant.  We even sent emails requesting them to start listing our units as soon as we got the tenants notice.

Taylor L. · Answer

@Russell Brazil it sounds to me like the notice wasn't factored in. The PM didn't start advertising until after the old tenant had already moved out, notice notwithstanding.

Where is this property?

What exactly did they need to do to turn the unit? The complexity/difficulty of the work is important. If it's a difficult job in a tight market, there might not be other options for contractors.

Next time, you could call around and see if you can find another contractor. Or tell the property manager directly to find another contractor, not give you reasons they want to stick with their guy who can't get the job done.

Ramon Flores · Answer

@Russell Brazil You bring a good point. Thanks Russell!

@Taylor L. Hi Taylor I have just one SFH unit with the PM. I requested another contractor when I heard that they had a death in the family. The PM said it would take longer because they would have to get a new quote, etc etc. I didn't review the cost but it was in line with rent ready repairs for my other unit. I am not sure why the PM didn't advertise the unit before it was empty. The unit needed minor repairs. Not sure what I could do next time to ensure the unit didn't sit for so long.

Ramon Flores · Answer

@Kenny Dahill I appreciate your input. How do you recommend I proceed with this?

I wouldn't be so upset if the minor repairs took 1.5 months. I do understand the PM have the right to place a tenant later on but I also feel that they could've waited a few more days and looked after my best interest.

Theresa Harris · Answer

I agree with Taylor.  It was vacant for 2.5 months (1.5 for repairs and 1 month until the new tenant moves in).  The PM should have advertized it sooner.  If they were able to find someone to rent it within a couple of days of the ad going up, clearly there isn't a shortage of applicants.

PM allowed lease to start after 1 month - Is this normal?

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