Can property manager waive tenants rent without asking landlord?

Question

Hi folks, new to investment property. I hired a Property Manager (PM) for a SFH.

Background: The tenants complained about back up water in the basement (basement didnt flood). PM sent plumber for repair (unclogging etc) but also moved the tenant to a hotel for few days (I still dont know exactly how many days after asking multiple times). I did approve couple of days of hotel stay and agreed to pay the bill. PM then went ahead and waived the entire months rent without consulting me.

PM also waived few plumber visit charges all by himself saying there was mis communication between the PM and tenants. Overall he has waived more than $3K so far and Im not happy about this as the PM takes the decision without consulting us. I dont think I should be paying the plumber/technician charges if there is mis communication between PM and tenant - I had done my due diligence of giving 72 hours notice (about $250 in charges).

Question: Is it legal for PM to waive off charges for tenants without consulting landlord/property owner first?

Location of property is Michigan

Theresa Harris · Answer

By waiving the fees for the plumber's visit, do you mean what YOU would pay (ie you are paying less)?  I'd have a talk with the owner of the PM, not one of the people who works in the office.  They need to get their act together.  You are paying them to manage your property and they do not have free reign on what they can do.  They can't hand out a free month's rent without your permission. Most contracts have a max dollar amount, barring an emergency and even then, how hard is it to pick up the phone and let you know?

If the tenants have been there for 5 months, you should have received rent for at least 3 or 4 of those months depending on when payments are transferred.  My PM sends them around the middle of the month.  Definitely time to talk to the owner.

Nathan Gesner · Answer

Does the PM Agreement authorize the PM to do this? Unlikely. Most agreements authorize the manager to spend a certain dollar amount without permission, usually around $500. Just because you authorized the PM to spend $X on a plumber doesn't give them the right to waive rent or anything else.

The tenants were already put up in a hotel for a few days, which is only a minor inconvenience. It's the same inconvenience that a homeowner might experience. The flooding is not your fault, so you shouldn't be held liable for it. You paid for the plumber and the hotel. Where's the justification for waiving an entire month of rent when the tenant had full use of the house for 27 days of the month?

I would contact the PM and demand payment of rent from the tenants for the ENTIRE month. Don't even waive three days worth because you spent far more than that by putting them up in a hotel.

If the PM refuses to pay you, I would file a complaint with the state board immediately.

James Wise · Answer

You'd have to read through your property management agreement to see what type of authority you have granted the management company.

Drew Sygit · Answer

@Himanshu Paretkar it's difficult to say without hearing both sides of the story, but it appears the PMC is taking the path of least resistance instead of looking out for your best interests.

Did this PMC also place this tenant?

They may be related to them or otherwise know them.

Suggest you find a new PMC if they can't give you good reasons for doing all this.

In our experience, the #1 mistake owners make when selecting a Property Management Company (PMC) is ASSUMING instead of CONFIRMING.

It's often a case of not doing enough research, as they don't know what they don't know!

Owners mistakenly ASSUME all PMCs offer the exact SAME SERVICES and PERFORM those services EXACTLY THE SAME WAY, so price is the only differentiator.

So, the first question they usually ask a PMC is about fees - instead of asking about services and HOW those services are executed.

EXAMPLE: PMC states they will handle tenant screening – what does that specifically mean? What documents do they require, what credit scores do they allow, how do they verify previous rental history, etc.? You’d be shocked by how little actual screening many PMC’s do!

This also leads owners to ASSUME simpler is better when it comes to management contracts.

The reality is the opposite - if it's not in writing then the PMC doesn't have to provide the service or can charge extra for it!

We have a 14-page management contract that we've added our real experiences to over the years, with the intent of protecting both us AND the landlord. Beyond the Monthly Management, Placement & Maintenance fees, all other fees in our contract are IF EVENT -> THEN fees.

We don’t know any PMCs to recommend in the area mentioned, but since selecting the wrong PMC is usually more harmful than selecting a bad tenant, you might want to read our series about “How to Screen a PMC Better than a Tenant”:

https://www.biggerpockets.com/member-blogs/3094/91877-how-to-screen-a-pmc-better-than-a-tenant-part-1-services-and-processes

We recommend you get management contracts from several PMCs and compare the services they cover and, more importantly, what they each DO NOT cover.

EDUCATE YOURSELF - yes, it will take time, but will lead to a selection that better meets your expectations & avoids potentially costly surprises!

P.S. If you just hire the cheapest or first PMC you speak with and it turns into a bad experience, please don’t assume ALL PMC’s are bad and start trashing PMC’s in general. Take ownership of your mistake and learn to do the proper due diligence recommended above😊

Jeff Copeland · Answer

It depends 100% on what your property management agreement states.

That being said, you may not be seeing the big picture and there may be valid reasons for waiving the rent and avoiding charging the tenant for things that you can't prove to be their fault. Especially if the property isn't/wasn't habitable.

One call from the tenant to code enforcement can cause you month's of red tape, bureaucracy, hearings, and expenses.

And in many jurisdictions, the tenant has the right to withhold rent, pay in into court registry, and force you to convince a judge that the property was safe and habitable and you are entitled to the rent, and it could take months just to get on the docket.

I obviously know nothing about your property or your tenants, so this may not be the case.

But you seem very focused on what they did and whether they were allowed to do it, rather than why they did it. Have you asked them why?

They could have been using their experience and expertise to save you $10,000 in lost rent and legal fees.

(On the other had, they could just be terrible PMs. I'm just playing devil's advocate)

Himanshu Paretkar · Answer

Thanks! I can work with the poor communication but not comfortable with them waving off charges without consulting me first. The property has been rented for 5 months and I havent received a single cent. I will review the contract again

Sergey A. Petrov · Answer

That greatly depends on the nature of your contractual relationship with the property manage. Check the contract what they are or are not authorized to do. Generally speaking, you hired them to manage. They are managing. If you don’t like the way they are managing, sit down with them and make sure everyone is on the same page. If you then still don’t like the way they manage, find a new manager.

Can property manager waive tenants rent without asking landlord?

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