Management company and use of funds

[Joseph Ben-Avi]

Hello all,

Recently I was notified by our manager that a certain component in an appliance in one of my rentals needs repair. After reviewing the monthly statement I realized that the expense was well above the dollar limit that requires a prior approval by me.

When asking the manager for explanation as to why was the expense so high and why it was approved without my consent, she replied that the they had purchased a whole new appliance, rather then repairing it (without much info as to why it couldn't be fixed) and that I was notified of the need to repair/replace. However, I was never notified that the expense was above my set limit $ amount requiring my approval.

Is that a common practice by managers? If I was aware of the $ amount they were about to spend I could have furnished the need in a fraction of the cost myself. Is me knowing that an item needs repair/replace wave the need for approval by me when it exceeds the set $ amount?

I understand that part of hiring a manager is to reduce my day to day involvement with the rental, but $ limit on expenses is there for reasons exactly like this one.

I haven't discussed the issue further with my manager as I want to get some insight from more experienced investors on the forum.

Thanks!

[Joseph Ben-Avi]

Originally posted by @Joe Funari:

@Joseph Ben-Avi On the surface you are correct. The PM should have obtained pre-approval first to replace versus repairs. But I suggest you read the fine print of your PM agreement. This scenario may be considered an "emergency" repair. For example, a burned out electrical box (happened to me a couple of weeks ago on one of my rentals), or leaking water lines (also recently in a different rental) constitute "emergency" repairs where the PM doesn't need my approval. Also, certain repairs require the PM to put the tenant up in a hotel while the repairs are made. But this usually involves electrical or HVAC issues. So may not necessarily involve replacing an appliance. One more thing, depending on the age of the appliance (especially water heaters and ovens) if its +8 years old it is way cheaper for the PM to replace then to try and have their maintenance people repair it again and again. I have learned it is much cheaper to just replace with new in the long run. So the PM may have done you a favor and went ahead and replaced. But agree they should have obtained approval first. 

Thanks Joe. 

The appliance was a dishwasher, it was probably around 5-7 years old if I had to guess, but regardless wouldn’t fall under an emergency.

It’s not a problem that they replaced the dishwasher, it’s the issue that if I was notified of the cost I could have easily go to Best Buy myself and buy one for less then half of what was spent, including labor involved.

I’m not a lawyer, but the wording in our agreement are pretty straight forward, including what you said about an emergency. 
It just seemed to me that there was very little worry about landlord funds in that case. I’m was curious if other investors feel the same way with their managers, but willing to accept that for the benefit of minimizing direct involvement.