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Please HELP!! Property Management Nightmare

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Mark Douglas

Jan 06 '09, 11:23 AM


Happy New Year eveyone...I hope that someone can help me with a nightmare I'm dealing with. I have a Property Management co for a rental that I have in Arizona. The tenant skipped in Sept with 3 mos left on the lease and the place in a horrible mess. It has sat vacent since, but I've been sent receipts from the PM claiming the place has been reconditioned, but during a surprise visit, I am learning that NOTHING has been done. It's a pigsty. I've inquired with vendors and there are major discrepencies both on price quotes and that any work was even actually done by them on my property.

Here are my questions:

Is a property management company required to charge the property owner only what a hired vendor charged for the work completed, or can the PM create their own invoice for what was hired out?

If a PM fabricates, adjusts or fakes a vendors receipt to show that work was completed when it was not, or changes the price, what legal ramifications could they be facing?

Can the PM lose their RE Brokers license if it is proven these allegations are true?

What other resources should I seek as a recourse for being screwed?


Edited Jun 26 2010, 06:51


Jon Holdman Moderator

SFR Investor from Wheat Ridge, Colorado

Jan 06 '09, 11:25 AM


Sounds like you need a good lawyer.


Edited Jun 26 2010, 06:51


Jon Holdman, Flying Phoenix LLC


Mark Douglas

Jan 06 '09, 11:33 AM


Originally posted by Jon Holdman:
Sounds like you need a good lawyer.

Since a lawyer may cost more than I am out, I am hoping they have seriously broken the law and can be charged. I'm still investigating, but it appears that my evidence is solid and compelling.


Edited Jun 26 2010, 06:51 by Mark Douglas


Jon Holdman Moderator

SFR Investor from Wheat Ridge, Colorado

Jan 06 '09, 11:47 AM


Your only real shot would be with the real estate licensing board. Those don't tend to be too tough on their own members.

Its almost certainly not a criminal matter, so the police will blow you off.

Seriously, if you want any real action, you're going to have to hire a lawyer and file suit against this guy.


Edited Jun 26 2010, 06:51


Jon Holdman, Flying Phoenix LLC


Account Closed

Manhattan, New York

Jan 06 '09, 11:49 AM


Originally posted by Mark Douglas:
Here are my questions:

Is a property management company required to charge the property owner only what a hired vendor charged for the work completed, or can the PM create their own invoice for what was hired out?
It depends on what is in the contract you signed with the PM. I would never sign a contract allowing a PM to markup contracted work, but that type of clause is used by some lower quality PMs.

If a PM fabricates, adjusts or fakes a vendors receipt to show that work was completed when it was not, or changes the price, what legal ramifications could they be facing?
That is fraud but your remedy is most likely civil, not criminal charges. It is possible you might get a prosecutor interested in some form of theft charges but unless it is widespread I suspect you are going to referred to the clerk to file a civil lawsuit.

Can the PM lose their RE Brokers license if it is proven these allegations are true?
Yes, talk to the state licensing board and file a complaint with the supporting evidence.

What other resources should I seek as a recourse for being screwed?
You really need to sit down with a lawyer. Many times fraud allows you to seek multipliers of the actual damages you suffer, it is usually treble, meaning 3x. So, if they fraudulently billed you for say, $10k you might be able to seek $30k in compensatory damages. Depending on the statutes you might also be able to get punitive damages. Bottom line, get a good lawyer.


Edited Jun 26 2010, 06:51


Michael Rossi

Real Estate Investor from Ohio

Jan 06 '09, 04:25 PM


I hate to ask the obvious, but have you fired the management company? That should be your first step.

Mike


Edited Jun 26 2010, 06:51


Diane Menke

Contractor from Philadelphia, Pennsylvania

Jan 06 '09, 05:50 PM


Can someone tell me why so many small business owners are reluctant to hire professionals like lawyers and CPA's?

You want these people in place BEFORE you need them.

Hire a lawyer.

Diane


Edited Jun 26 2010, 06:51


Mark Douglas

Jan 06 '09, 08:19 PM


These are all excellent comments and suggestions. I really appreciate the input.

I've heard that these sort of issues are common with PMs, but we shouldn't stand for it. What has happened to me is really a small matter overall. If I'm not reimbursed, I will be out about $2,400 when all is said and done, but it's the principle that this mom and pop company is blatently ripping off owners of the 135 houses and apartment buildings they manage. They handled three houses for me and in addition to this reconditioning situation, I've noticed that in the last several months I've been nickeled and dimed for leaky toilets, cielings, mailbox repairs, etc. Now I am investigating to find out if the repairs are legit.

So far, on the move out issue, I have two vendors who have confirmed that at the least, I've been overcharged. They are to confirm with me today that they were never actually hired to work on my property to begin with.

The contract with the PM does not mention anything regarding thier right to create vendor invoices or change prices. Only that they have the authorization to hire, supervise and discharge services and independent contractors for repairs/maintenance necessary.

I'm relatively new to rental ownership (3 years) so I suppose this goes with the learning curve. In the end, I will be talking to a lawyer, but instead of passing it off to someone who will charge me up the wazoo to investigate, I'm doing as much legwork myself so that in addition to saving money, I may also learn some ideas that will prevent me from getting ripped off in the future.

Thanks again. Any other ideas or comments are welcome, especially if they involve statutes or laws regarding fraud.


Edited Jun 26 2010, 06:51


Joshua Dorkin Verified Donor

BiggerPockets Founder from Denver, Colorado

Jan 06 '09, 08:42 PM


Mark -
I've been there before. In addition to contacting your attorney, I'd make efforts to get in touch with other landlords whose properties are being managed by this company (I was lucky enough to be included in a mass email to all owners when I was in a similar situation and emailed them all). This will prove to be helpful in uncovering if this company is acting improperly across the board.

I'd IMMEDIATELY find a new company, get an attorney, and then start contacting every agency that might be involved. If you really want to make a stink, contact the local press and put the pressure on them.

Here's a thread regarding the company I was dealing with. Perhaps you could start one here at BP and find others in your situation. Our posts tend to rank well in the search engines.


Edited Jun 26 2010, 06:51


Medium_bp-squareJoshua Dorkin, BiggerPockets
E-Mail: [email protected]
Telephone: 877-831-4704
Website: http://www.biggerpockets.com
Get your logo in your signature too! Upgrade to PRO Today at http://www.biggerpockets.com/pro


Mark Douglas

Jan 06 '09, 11:15 PM


Thanks Joshua,

Some very good ideas. It was just confirmed by the carpet cleaning company that they have never done any work on my property. My next step....I have the PM's vacency list and will track down the property owners to see if they have gotten bogus bills as well.


Edited Jun 26 2010, 06:52


Joshua Dorkin Verified Donor

BiggerPockets Founder from Denver, Colorado

Jan 06 '09, 11:22 PM


There you go. The more research and evidence you can gather, the stronger your case is going to be here.

Good luck!

BTW - Get the carpet cleaning company to put in writing that they never worked on your property.

You could probably use that alone to get all your money back . . . I'd still talk to an atty for legal advice in this situation.


Edited Jun 26 2010, 06:52


Medium_bp-squareJoshua Dorkin, BiggerPockets
E-Mail: [email protected]
Telephone: 877-831-4704
Website: http://www.biggerpockets.com
Get your logo in your signature too! Upgrade to PRO Today at http://www.biggerpockets.com/pro


Will Barnard Verified Moderator Donor

Real Estate Investor from Santa Clarita, California

Jan 07 '09, 12:55 AM


The advice to get a lwyer is sound and you should follow it. You should have had that in place prior, but as they say, water under the bridge now.

Secondly, learn from this mistake. I have said time and again that contracts are one of the single most important aspects of this business, including purchase, PM, contractors, etc. You must have an adequate knowledge of what you shoudl and should not have in contracts. Before hiring anyone else, make sure you have an iron clad contract in place that protects YOU.


Edited Jun 26 2010, 06:52


Medium_be_logoWill Barnard, Barnard Enterprises, Inc.
Website: http://www.barnardenterprises.com
http://www.InvestorExperts.com - For all Southern California House Flippers, Agents, and Wholesalers


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