Should I File a Complaint?

[Al D.]

I would like to get some opinions on whether to file a TnREC complaint against a Memphis PM.

First, the law, as I imagine it applied to my issue:

“62-13-312. Discipline Refusal, revocation or suspension of license. Downgrading of licenses. Automatic revocation.

(a)  The commission may, upon its own motion, and shall, upon the verified complaint in writing of any person setting forth a cause of action under this section, ascertain the facts and, if warranted, hold a hearing for reprimand or for the suspension or revocation of a license.

(b)  The commission shall have the power to refuse a license for cause or to suspend or revoke a license where it has been obtained by false representation or by fraudulent act or conduct, or where a licensee, in performing or attempting to perform any of the acts mentioned herein, is found guilty of:

     (1)  Making any substantial and willful misrepresentation;

     ....

     (5)  Failing, within a reasonable time, to account for or to remit any moneys coming into the licensee's possession that belong to others;

     (6)  Failing to preserve for three (3) years following its consummation records relating to any real estate transaction;...”

https://law.justia.com/codes/tennessee/2010/title-62/chapter-13/part-3/62-13-312/

The issue is with the PM’s failure to account for and remit rent payments to me on four occasions. If I should file a complaint for this particular issue - which I consider to be the key issue - I would also be mentioning smaller issues of concern I experienced with this PM.

I no longer use this PM, whose customer-facing person - who is the owner of the PM company - is not a licensed real estate anything. The firm operates under the broker’s license of another person at the firm, which is totally ok in Tennessee.

While still their client in 2019, I found three missing rent payments for one of a number of my properties under their management from 2018. Upon pointing this out, they (the owner) immediately admitted the oversight and paid me (less their PM fee.) A couple of months later - due to a number of other issues between us - I switched to a new PM.

Of note here is that the old PM actually wanted to end the relationship with me: besides my pointing out general negligence concerns in the month leading up to that, I also began to ask for any/all contractor invoices to be forwarded to me, as I started to suspect issues with being overcharged for repairs. (I have no proof of such wrongdoing - only suspicion.)

The old PM does/did not have an online portal for me to keep myself up to date until they’d send me a monthly statement by email. As my suspicions rose, and I requested the then-latest invoice from an electrician, I was emailed a pic of a form that was called “Invoice,” but looked like it was from the PM firm itself, and alleged $150 paid in cash to the electrician for changing 4 sockets in a room. [I suspected that the “invoice” did not come from the contractor, because the only reference to the contractor in it was his handwritten name. Even “his” address had my property’s address. (If you are invoicing someone, you can reference the job address, but you probably should list your own contact info somewhere in the invoice, too, no?) And the handwritten description of work appeared to be in the same handwriting as the part that said it was paid in cash and signed with a name of one of the PM firm’s employees. So, I’d say that, at best, this “invoice” was a receipt. And since it was for cash...] When I questioned the validity of the invoice, I got an unexpected call from the electrician. I learned that the electrician did not have his own license or insurance, but claimed to me that he worked for a person who did not mind him using his. The man sounded elderly, and I did not want to interrogate him. I did not appreciate that the PM put the man on the spot... But I digress.

When preparing my taxes for 2019 in 2020, I discovered that I was not paid for another property during the month of the PM companies’ switch in 2019. That missing payment was for a Section 8 tenant.

Upon this discovery, I contacted the old PM’s broker - since the owner told me to deal with the broker directly when we were parting our ways. (Note again: the old PM does not have an online portal. And I already checked my current PM’s portal, which did not show this rent received by them or paid to me.) I asked the broker to check their records. Here is the most concerning (to me) part of her reply:

“...Im sorry but we don't have any payments from over a year and and a half ago.”

(Note: see subsection 6 of the quoted law above.)

I then re-verified with the new PM that they did not get this payment, and contacted the broker/old PM again. This time, I reminded her about the prior three missing payments (which took place before I knew of her existence - perhaps she was not aware of them,) sprinkled something about “fiduciary responsibility,” and also asked her to clarify whether she actually checked her records before replying to me, and whether she even still had my records to check - since her reply hinted that she did not. She told me she’d get back to me “next week.”

Eighteen days later, I reached out to her - since she had not got back to me as promised. Part of that reply:

"... I thought I responded. At this time, We have no record of payment. If you would like further information/verification please contact HUD/MHA and their contact information is below."

I should probably admit here that I was a criminal investigator in my past life. I live for ambiguities. And I am also patient. I was well aware that I could contact MHA, having mentioned that to the broker in my second email. It’s just that, somehow, I did not think it was my job to do that in this case. I still don’t.

So, instead of doing her job for her (again,) I decided to ask (again) for clarification of the ambiguities, chiefly: her “no record” of receiving the payment from MHA, or “no record” of making the payment to me.

With no reply to that email - sixteen days after sending it - I sent another. I got a reply that day, in part:

"... I thought I responded to this. We have no records of receiving this payment from MHA for the referenced property. We have no record of payment if you would like further information/verification please contact HUD/MHA. Their contact information is below."

This reply finally left little ambiguity. Actually, I had already contacted MHA - and confirmed that the (electronic) payment was sent to the old PM firm on the first of the month in question, which was before the PM firms’ switch. So, this time, having - finally - been told that the old firm did not get the payment by the person whose license was at stake, I fired back, in part:

“.... While you still did not answer whether you still have my records, you did state that you did not receive the payment in question from MHA. Please see attached as evidence that MHA direct-deposited that payment into (your firm’s) account.  Do you know what happened to my money in your possession after that?”

The prompt reply I got to that language was refreshing:

“... Let me check on that.  we should still have those records.  Let me find out what happened immediately.”

And find out they did - they dropped off a check for the full amount at the new PM’s office the next day (without first checking with me whether that PM was still my PM.) The broker also sent me another email, explaining that the MHA system was somehow at fault.

Feeling that she entirely missed the point (Why is the customer - even a former one - the one who should be looking into where their money is? And how it took me over a month to get paid after first asking her to check her records,) I poured my heart out to her in another email, reminding her of other concerns I had had with her firm, and ending with:

“.... I don’t know where I will go with my (her firm name) issues from here - I don’t take the possibility of messing with/taking someone’s livelihood from them lightly.  But that should not be my concern, as I also don’t know the full extent of the issues from my vantage point - it is not my job.  Yet, my experience is absolutely a troubling sign of potential larger issues, potentially affecting an unknown number of other clients, former, current, and future...  I won’t be doing anything tomorrow.  But I thought you should know my thoughts - I owe you that on the human level.”

Unfortunately, the reply I got to that was not comforting if I should give a damn about other potential victims:

“... I apologize if you felt my response was inadequate.  Our office has been and is presently dealing with being short staffed due to a number of covid related issues.”

This PM firm - the owner, actually - was highly recommended to me by two local agents through whom I bought a bunch of properties. I did not do my due diligence until I started having obvious problems - and suspecting other (invoice-related, for which I have no evidence) issues.

While I am done with this PM, should the “professional me” be done with them for the sake of others? I am torn on this because - if the complaint sticks - I would be messing with someone’s livelihood, as I expressed to the broker. However, not filing a complaint is likely to produce another victim, perhaps one who - unlike me - won’t know that their money was not forwarded to them.

The total of the four payments amounted to $3,541 before the PM fee. Of six other PMs I’ve used since first starting to invest OOS almost five years ago, this is the only time (x4) I am aware of that my money was not forwarded to me. But maybe this is not unusual in the industry, and I am just overreacting. After all, I got my money in the end.

I also have other issues I would raise to the TREC that have to do with subsection 1 of the law - if I file.

I am in a position here where I am the victim, unlike a typical situation for myself where I take the report and file with the prosecutor - on behalf of “The People.” I’ve been told numerous times in my life that I take the law too seriously. What if I am taking the above law too literally?

So, opine, please. Specifically:

Has your PM - past or present - failed to account for/remit one or more rent payments to you?

If you are a PM, is an overlooked payment a normal part of the business, and I shouldn’t get my panties in a bunch, even if I had to put in additional effort to get my money?

If you are a (licensed) PM, is paying contractors for work on your clients’ properties with cash normal? (I do that all the time with my self-managed properties, especially when a trade license is not required - and I know I am getting a deal on the cost. I am not aware of my other PMs doing this.)

Thank you.

[Nathan Gesner]

Sorry, but I couldn't even read the entire post. Multiple missed payments is negligence. A contractor invoice with no contact information for the contractor is questionable. I would write a formal, non-emotional complaint to the Broker and demand a complete, written response within 15 days. If the response is unsatisfactory, then file a complaint.