Fall of a Property Manager – Part III

by | BiggerPockets.com

Striking Back

In Part I of this story I outlined problems that I was having with a small town property manger and in Part II I told of my discovery that others were having problems as well. To recap it quickly: The PM was collecting rents but not forwarding them to the owners and he was charging for repairs that never happened or padding the bills for repairs that did take place. The pattern that emerged indicated that he was doing this primarily to those that lived outside of the area.

This article details the steps taken after I discovered that the PM had no intention of giving me the money he had collected on my behalf. He had placed a tenant in one of my rentals, collected rent and security deposits, but did not send me any money nor did he return numerous phone calls or emails.

Steps Taken

The first step was to stop the bleeding. I met with my attorney who drafted a letter to the PM informing him that he had breached the contract and was no longer managing the property. The letter included a demand for immediate payment of all money collected. As expected, that letter was ignored. The tenant was notified that all future payments were to be made directly to me.

Next a complaint was filed with the Nevada Real Estate Division. As it turned out there were already a number of complaints against him. Though I had checked with the RE Division before hiring him there were no violations on his record. The state does not give out information on pending complaints, only violations. With the collapse of the real estate market there is a huge backlog of cases. Had I known of the pending violations I never would have hired him.

The next step was to initiate a small-claims action. It was easy to file and I was given a hearing date of August 5th. I assembled my case with the help of my attorney but represented myself since this was essentially a slam-dunk. The case was called but the PM didn’t show to defend himself. I merely had to establish that a contract did exist and that rent was collected. Since no defense was provided by the PM, I won by default. Fortunately for me the State of Nevada has a Real Estate Recovery Fund that is meant to reimburse victims of theft and fraud by real estate agents. This fund uses a portion of agent license fees to provide money to repay victims. I am currently in the process of seeking reimbursement.

Not Stopping There

Had I been the only victim this would have been a civil matter. The PM could have made any number of excuses and malicious intent would have been difficult to prove. However, my local real estate agent had connected me with a half-dozen other victims. This made it a criminal matter.

I went to the Sheriff’s Office and filed a complaint. I also contacted each of the other victims and suggested that they do the same. What really surprised me was that a number of them “didn’t want to get involved.”  Would they have felt that way the PM had robbed them at gun point? Fortunately a number of people stepped up to the plate and did the right thing. In a town with very little crime this case has become a big deal.

I have been acting as a liaison between the victims, sheriff, and the investigator for the real estate division. This coordinated effort has kept everyone working together to stop this guy. It’s a given that the PM is going to lose his real estate license and be subjected to substantial fines. The detective handling the case for the Sheriff’s Office is preparing to bring the PM in shortly.

What most likely started as a case of a property manager “robbing Peter to pay Paul” had spiraled out of control. The PM will not only lose his license and be out of business; he will probably land in jail or at least be placed on probation and have a criminal record. The state will likely seek restitution of the funds they pay to the victims. If he’s not already at bankruptcy’s door, this will surely push him over the edge.

There are two morals to this story: 1) Some people shouldn’t be in business. 2) Don’t mess with a BiggerPockets member!

Revenge is sweet and not fattening. – Alfred Hitchcock

Photo Credit: Richard Warren

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  1. Well done! It’s good to see the legal system working and to know this guy will be out of business and paying for his transgressions soon. In the old days, he’d be flogged and ridden out of town on a rail. It’s a shame we’ve become to “civilized” to mete out real justice.

    On a side note, I notice my profile image isn’t posting with my blog comments. How do I comment on a blog using my BP profile pic?

  2. Great post. This is a good lesson to those who might be in a similar situation and are completely oblivious to it. Sometimes with the busy lives we live, we don’t pay much attention to our rental payments because we usually have faith in the people taking our money. A good reminder always helps.

  3. fantastic! as an out of town landlord, you can usually file a small claim case through the mail, and only really have to show up for the court date. You can also hire services to properly serve documentation for a fee of ~$25, AND, if you don’t have an attorney, you can get prepaid legal services. I they usually have a set up where they cover many aspects of real estate legal matters. You may only get free representation on certain kinds of cases, but you get unlimited consultation and advice, and sometimes all you really need is for someone to tell you what is illegal, how its illegal, and can do the rest yourself. Great article, very dramatic and well written 🙂

  4. I am having trouble with a PM in Texas where I use to live. I suspect that they are over charging me for maintenance and repair fees every month in an effort to pocket my money. I sent an email requesting copies of the actual bills from the licensed professionals that supposedly did the repairs but ten days later have not received a reply. Also, In my contract with them it says any repair over $200 dollars they are required to notify me before the repair takes place and on three separate charges this was not done. Please help!

  5. Contact them immediately and demand copies of the invoices. I retain originals but always provide a copy of every invoice an owner pays so they know exactly where their money is going (and it proves that I don’t mark up the price). If your manager is unwilling/unable to provide the actual invoices, fire him immediately and find someone else.

    If your contract requires notice for anything over $200, make them pay it. Now if they authorized work over $200 because of a maintenance issue that required immediate attention and they couldn’t get in touch with you quick enough, that is fine. But if this is a routine job and they simply forgot or failed to contact you, fire them.

    The PM works for you. If they fail to perform, stand up to them and find someone that will provide you quality, honest service.

    • Lisa Duke

      Whether it is in business matters or personal matters, honesty is always the best policy.
      The common thief gives no consideration to those he harms while in the process of pursuing ill gotten gains, nor does he consider the possibility he will be found out.
      The rewards are greater for a truthful person, but a liar has no understanding of this elementary concept.

  6. Adeline Ramirez

    I noticed the post is an old one, but I am curious if anyone could recommend an attorney to help draft a letter to the PM informing them that they have breached the contract and that I no longer want him to manage the property?

  7. Nathan G.

    You shouldn’t really need an attorney except under unique circumstances. If your property manager failed to uphold their end of the contract, you can terminate “with cause” and there should be no penalty. Even if they did not violate the contract but you just don’t like the way they do business, you can usually terminate without penalty. But some property managers do impose a penalty for early termination. It’s important you review your contract and know your rights and responsibilities.

    Here’s a good guide for termination: http://landlords.about.com/od/BasicsOfPropertyInvesting/a/What-To-Look-For-In-A-Management-Agreement.htm

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