How to fire a property manager?

Question

Used the listing agent as my purchase agent and then as the property manager. Thought I would keep it simple but...

Here are the facts:

Closed a triplex in NW Indiana late October 2019. 2 units are already rented out and one vacant.

Seller had rent back for 15 days

Here are some of my issues

1) After closing the seller had 15 days of free rent back and in contract for $100 per day after that. Seller stayed an additional 15 days and he told me I was out of luck because we did not hold back money in escrow. No help (more of a buyer agent issue)

2) We closed in October and signed property management agreement at that time but he did not engage with the tenants until after the seller collected and kept (stole) November rents $1465. He told me he could go to small clams court but has not done anything about it. He takes no responsibility.

3) Seller left a gigantic mess in the property. I had to orchestrate the clean out and painting of the property but still needs a deep cleaning. I is January and I still have a vacant property.

4)I have not seen any money or account balance or anything dealing with finances. He said he just switched to an online platform and should have us on an account soon.

5) He is a busy salesman and I have a hard time reaching him through text, phone or email

I am sure I made some mistakes but come on. There are some other things but this is getting long

We have a contract but I have lost confidence. What advice do you have for me? So far with expenses and delays I am out almost $6k.

Thanks,

Charles

Also, I live in California otherwise I would have done everything myself.

Nathan Gesner · Answer

There's plenty to this but I'll keep it short. You had a signed management agreement so the realtor should be taking responsibility for failing to collect November rent. I would fire the property manager immediately and in writing along with a demand for compensation for the unpaid November rent. I would give them a deadline of 30 days to make it right or take them to small claims court and file a complaint with the State board.

I would also go after the previous owner in small claims court, demanding compensation for 15 days of rent, reimbursement of the November rent, as well as the cost of cleaning and repairs after his move out.

Theresa Harris · Answer

Nathan is right. Separate the issues from the previous seller vs the PM.  Take both to small claims court.  Yes hindsight is great and you should have kept money in escrow, but that doesn't mean he doesn't owe you for the extra 15 days.  What was the PM's rationale for keeping the Nov rent?

Charles Simon · Answer

Ok. Deed is done. He is going to reconcile accounts and I can move forward with another PM. No problem. Has anyone worked with a good PM in the NW Indiana area (east chicago)? Looking at Property Boss.

Thanks for your advice

Joe Splitrock · Answer

@Charles Simon there were mistakes made here. Not to beat you up, but for others to understand:

1. You should have waited 15 days to close and required the seller to be out of the property.

2. Immediately after closing, you or your property manager should have contacted the tenants and given them new contact number and rent payment instructions.

As far as what you can do now, contact the tenants today. Let them know you are taking over management of the property immediately. They are to have no communications with the previous owner or PM. Ask them some questions. First ask them if they paid November, December and January rent. If they did, ask them who they paid, day they paid, method they paid and amount they paid. Get it in writing.

Since you have seen no money, there is a good possibility the property manager is lying about November rent. You should have at least December rent in your account by now. It looks to me like you are being scammed.

I would book a flight ASAP and meet with the tenants and property manager in person to sort this out. At the same time, interview for new property managers and even be prepared to file a claim in small claims court against the seller, property manager or tenants. You can't file any lawsuit until you figure out who took your money.

If the tenants paid by check, you can have them stop pay the check. All they need to do is go to their bank and explain that someone fraudulently took their money. They can stop pay and rewrite a check to you. If they used other payment methods, I would still request proof of payment. Receipts for money orders or cash receipts from whomever they gave the money to. A professional PM should give receipts, but obviously in this case they are not professional.

Ian Walsh · Answer

Every management company is different. Some are well structured and some are not.  You would just want to ask them how the termination process would go.  Make sure you get a hold of your tenants and hopefully the management company has nice exit process.

Alan Dunlap · Answer

@Charles Simon

Why did you post if you didn’t intend to fire realtor/PM?

They are big in NW Indiana=what data are you using to come to that conclusion?  Maybe it is a big time agent, but completely wrong fit for you as an investor.

Isaac S. · Answer

Are you sure you want to do business in the future with someone that did this to you in a transaction? The agent does not seem like a very ethical business person, even if is he is a big shot.

Caleb Heimsoth · Answer

@Charles Simon your first issue is buying something long distance.  Have you seen this property? Why would you allow a seller to rent back without holding money in escrow? How did you find this property manager? Most likely you will need to fire this manager and evict your current tenants.

This is going to get uglier before it gets better

Tracy Streich · Answer

First off just because someone is an agent does not mean they will be a good property manager.   Secondly,  not sure how much of this is the fault of the PM vs you just got screwed by the seller.   Never let them stay after closing.   Just wait the 15 days.   You lose all your leverage. Lesson learned for next time.

Mike McCarthy · Answer

@Charles Simon I would separate the closing issues and the PM issues. Have you contacted your closing attorney or title company about the closing issues? They might be able to help with some of it through their E&O clauses.

I would immediately provide termination to the PM. Request whatever money they owe you including security deposits and contact the tenants about rent payments. It might even be worth a trip out to meet them, explain what’s happening, and meet and interview another PM to take over.

Good luck!

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