Contractor did work that was not authorized be me - am I liable?

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Contractor did work that was not authorized be me - am I liable?

Howie W.
Member since 2019 · 15 posts · 4 votes

BLUF - a maintenance company my property manager uses approved the installation of an A/C unit to a third party vendor without our authorization. 

The installation was completed last September 2021 and I received the information from the PM last week (April 2022). When the request came last September, I declined the first vendor and wanted a second opinion/quote. The second vendor mentioned the A/C was working, but a part could fail and it was no longer in stock. I talked with the second vendor directly and told them directly that when the part fails, we'll begin to explore a new A/C system. 

Shortly after, the first vendor approved the work order and sent it to a third party. Fast forward to April of this year and my PM informs me of the invoice. I declined the full amount and asked for an itemized invoice to determine the cost of parts and to perhaps pay a portion of that. This is after discussing the matter with other owners, property managers, and A/C Companies. I have been getting several different numbers from my PM and the Maintenance company on the actual cost - from $7450 to $4750, but not an itemized list of parts - at least one I can feel comfortable with (cost of "parts", which was only one line and broken down specifically was approx. $4200 and not from the third party vendor who performed the installation. Note - the maintenance company is not a certified HVAC company. 

The PM came down to a $4750 cost total and would pay $1000 of the cost if I pay the remainder. My offer was $1500, which would be part of the parts, but I was never given a firm number that I am conformable with. This was sent via email, but during our phone conversation the PM mentioned a potential lawsuit/collection - apparently from the Maintenance Company. My reply was I never authorized a repair and would also inform the BBB and FTC. 

Thoughts? Advice? Am I liable for any maintenance cost that I did not authorize? My offer of $1500, IMO, was more than fair to help compensate the third party vendor. This is the short story, as there are other details I can fill in. 

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Drew SygitBusiness Member
Property Manager · Royal Oak, MI · Member since 2012 · 12k+ posts · 9k+ votes
4y

Nothing in this business is perfect.

Maintenance issues like this occur often unfortunately, as diferent people have different, often conflicting agendas. Someone in the chain may have thought they were making a good decision, or someone was trying to make more money. Either reason doesn't change the fact that your directions should NOT have been ignored.

Now that the error has been made, you have a choice to be cut-throat or reasonable.

Cut-throat: you should end the relationship with the PMC because even if you get them to eat the costs, they'll resent you and it'll affect their service going forward.

Reasonable: acknowledge even the best people/companies make mistakes and negotiate a fair penalty with them. You did benefit from the mistake as you acknowledged the A/C unit would have eventually needed replacement.

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  • Janet Behm
    Accountant · West Jordan, UT · Member since 2017 · 182 posts · 95 votes
    4y

    Howard,

    You probably know that it isn't a contract unless it is a legal contract and signed by everyone. 

    What does the contract say?

    2Reply
  • Howie W.
    OP
    Member since 2019 · 15 posts · 4 votes
    4y
    Quote from @Janet Behm:

    Howard,

    You probably know that it isn't a contract unless it is a legal contract and signed by everyone. 

    What does the contract say?

    Janet, 

    Thanks for the reply. I am assuming you mean the authorization from me to do the work, which I replied "no". They use a property management software that I reply to - I will have to find the actual email that I responded with "no". However, during the last week, I was forwarded an email from the Maintenance company apologizing for their mistake and admitting they did it without authorization.  

    If you mean the contract with my PM, they are authorized $250 of repairs without my consent. This amount exceeds that. 
    1Reply
  • Greg H.Pro Member
    Moderator
    Broker/Flipper · Austin, TX · Member since 2013 · 4k+ posts · 4k+ votes
    4y

    What state the property was in makes a difference. In Texas, the contractor could go the  mechanics lien route and win as you benefited from the repair. Saying that you might have a case against the property manager especially if you are located in a state where one has to be licensed 

    0Reply
  • Howie W.
    OP
    Member since 2019 · 15 posts · 4 votes
    4y
    Quote from @Greg H.:

    What state the property was in makes a difference. In Texas, the contractor could go the  mechanics lien route and win as you benefited from the repair. Saying that you might have a case against the property manager especially if you are located in a state where one has to be licensed 

    Greg, thanks for the reply. I researched mechanic's liens. Virginia - the timeframe for a mechanics lien has passed - it is 90 days from the time of the work being completed. Work was completed last September - over 200 days ago. Also, the company billing does not have a HVAC license, another requirement to file a mechanics lien. The third party contractor does have a license. Filing a false mechanic's lien in the state is a Class 5 Felony. 

    Also, I don't live in the state where the property is located.

    0Reply
  • Howie W.
    OP
    Member since 2019 · 15 posts · 4 votes
    4y
    0Reply
  • Drew SygitBusiness Member
    Property Manager · Royal Oak, MI · Member since 2012 · 12k+ posts · 9k+ votes
    4y

    Nothing in this business is perfect.

    Maintenance issues like this occur often unfortunately, as diferent people have different, often conflicting agendas. Someone in the chain may have thought they were making a good decision, or someone was trying to make more money. Either reason doesn't change the fact that your directions should NOT have been ignored.

    Now that the error has been made, you have a choice to be cut-throat or reasonable.

    Cut-throat: you should end the relationship with the PMC because even if you get them to eat the costs, they'll resent you and it'll affect their service going forward.

    Reasonable: acknowledge even the best people/companies make mistakes and negotiate a fair penalty with them. You did benefit from the mistake as you acknowledged the A/C unit would have eventually needed replacement.

    [email protected]248-209-6824
    Logical Property Management4.9460 Reviews
    WebsiteView Page
    8Reply
  • Tom GimerBusiness Member
    DMV · Member since 2017 · 3k+ posts · 3k+ votes
    4y

    The vendor relied upon someone with the apparent authority to authorize the work... and goods and services have been provided yet have not been paid for. If the matter is not settled, the owner should be prepared to defend a lawsuit by the vendor for the original amount claimed and/or have the equipment removed from the property. As a vendor I'd rather have a 20 year judgment than a mechanics lien.

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    0Reply
  • Howie W.
    OP
    Member since 2019 · 15 posts · 4 votes
    4y

    Drew, thank you. I have already given the PM notice to terminate our business. This is one of several mistakes, miscommunications, etc. over the last 10 years. The way the PM contract is set up made things difficult to cut ties. Discussing the situation with my other property manager (different state), friends who own and manage properties, and several other vendors who are install A/C (including a personal friend who owns an A/C company), they all felt was offer was more than fair. 

    Tom, thank you. Yes, I have a lawyer. The vendor didn't rely on someone's authority, but their own.  - it was rejected by me and the PM company, but they did the work anyways.  

    Let me add - after receiving the initial A/C quote, I rejected it, and told the PM to no longer use that Maintenance Company for anything. The A/C fiasco confirmed my suspicion, the Maintenance Company was finding other licensed companies to do the work and then "up charge" me. My Bill from the Maintenance Company was $7450, the bill from the actual vendor to the Maintenance Company was $6200. My PM should be going to the third party vendor directly. However, during our "negotiations" the PM told me the actual cost was $4750 (Note - after the fact I received a today quote for $4200 - this was from a previous vendor who had worked on the A/C and was familiar with it).  

    0Reply
  • Bruce WoodruffPro Member
    Contractor/Investor/Consultant · San Diego / Phoenix · Member since 2021 · 12k+ posts · 15k+ votes
    4y

    You are not obligated to pay if you did not authorize the work. However, as was mentioned, you can be 'fair' and pay something for the addition of materials to your property. But if you do not have the money, you can set up payments to whoever is out the money...

    1Reply
  • Scott Mac
    Austin, TX · Member since 2019 · 5k+ posts · 5k+ votes
    4y

     How something like this happens is beyond me. Did they explain how it happened? 

    0Reply
  • Howie W.
    OP
    Member since 2019 · 15 posts · 4 votes
    4y
    Quote from @Scott Mac:

     How something like this happens is beyond me. Did they explain how it happened? 

    Part of my frustration is conflicting stories or inaccurate assumptions from my PM. Al back and forth emails/calls - according to the Maintenance Company, a former employee approved the work order and sent it to a third party vendor - no details on how. This was in September of last year - why I received the notice last week, I haven't asked. 

    There are a lot of numbers coming from the Maintenance Company and my PM, along with inaccurate or incomplete information. I want to note, according the Maintenance Company, they fined their employee $512.50 for the mistake. How they came to that number, I don't know. 

    Personally, if the actual cost was $4750, which was told to me but no receipt and the PM stated he would take $1000, the employee paid $512.50, and I pay $1500, that remains -  $1737.50 to the MC who stated they would take $2000. Of course, this is working from the 3rd amount I was given.  

    0Reply
  • Tom GimerBusiness Member
    DMV · Member since 2017 · 3k+ posts · 3k+ votes
    4y

    @Howie W. I said apparent authority. The maintenance company could be reasonably found to have been acting as your agent from the vendor’s perspective. The fact that the maintenance company exceeded their actual authority would be irrelevant in that analysis. Anyway, your dispute is with your PM and your maintenance company, not the vendor.

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    0Reply
  • Joe SplitrockPro Member
    Moderator
    Rental Property Investor · Sioux Falls, SD · Member since 2015 · 9k+ posts · 18k+ votes
    4y

    @Howie W. even though you didn't authorize the work, you are benefitting from it. Your AC unit had limited life left, so you were going to have this expense in the near future. If I am understanding correctly, the company who performed the work was given authorization. I realize you didn't authorize the work, but they acted in good faith believing they had authorization from the correct party and believing they would get paid. Someone needs to pay the company that did the work. And paying that company isn't just for the parts, but also the labor. Obviously paying the marked up ridiculous price of $7450 would be insane, but offering $1500 for a $4000 job isn't fair in my opinion either. 

    It sounds as though there was a mistake/miscommunication at the property management company. I am not sure that means you should get a brand new AC unit for $1500. You could call a local wholesale shop that sells the model of AC unit you have installed and find out what the actual cost is of the hardware. Offer to pay that full cost and tell your PM they need to pay the labor / profit or other padded fees on top of the hardware. 

    Either way, I would open a discussion with the 3rd party and explain to them that you agree they need to get paid, but you didn't authorize the work. That means you need to get the PM or whomever made the mistake to pay up.

    In a perfect world this should have never happened, but it did and you did benefit from the mistake. Try to be reasonable and pay a fair portion. In the end (for example) if you get a $4200 AC job for $2200, that is an amazing deal. Focus on that instead of feeling you are wronged and should owe nothing. 

    5Reply
  • Howie W.
    OP
    Member since 2019 · 15 posts · 4 votes
    4y

    Joe, as stated above, the numbers and information is conflicting and inaccurate/changing. This makes any decision difficult. At this point, I sent them my offer, I'll wait for a counter-offer and hopefully get a true and accurate number in writing. Discussing with my friend who owns an AC company, his opinion was pay for parts only - you are doing the labor. Then pay a portion of the parts, no more than 50%. I haven't received an accurate cost of the parts and/or one that seems truthful. 

    0Reply
  • Scott Mac
    Austin, TX · Member since 2019 · 5k+ posts · 5k+ votes
    4y
    Quote from @Joe Splitrock:

    @Howie W. even though you didn't authorize the work, you are benefitting from it. Your AC unit had limited life left, so you were going to have this expense in the near future. If I am understanding correctly, the company who performed the work was given authorization. I realize you didn't authorize the work, but they acted in good faith believing they had authorization from the correct party and believing they would get paid. Someone needs to pay the company that did the work. And paying that company isn't just for the parts, but also the labor. Obviously paying the marked up ridiculous price of $7450 would be insane, but offering $1500 for a $4000 job isn't fair in my opinion either. 

    It sounds as though there was a mistake/miscommunication at the property management company. I am not sure that means you should get a brand new AC unit for $1500. You could call a local wholesale shop that sells the model of AC unit you have installed and find out what the actual cost is of the hardware. Offer to pay that full cost and tell your PM they need to pay the labor / profit or other padded fees on top of the hardware. 

    Either way, I would open a discussion with the 3rd party and explain to them that you agree they need to get paid, but you didn't authorize the work. That means you need to get the PM or whomever made the mistake to pay up.

    In a perfect world this should have never happened, but it did and you did benefit from the mistake. Try to be reasonable and pay a fair portion. In the end (for example) if you get a $4200 AC job for $2200, that is an amazing deal. Focus on that instead of feeling you are wronged and should owe nothing. 


     What Joe said seems like a VERY fair way to handle this.

    1Reply
  • Steve Vaughan
    Rental Property Investor · East Wenatchee, WA · Member since 2014 · 10k+ posts · 16k+ votes
    4y

    I wonder what it says in the book 'Buying rentals OOS in your underwear while sipping tea'?   Does it cover things like this? LOL

    If I benefited from the error, I would try to compensate for the actual work done minus a reasonable penalty for the mix-up.  Sounds like you're offering close to that. 

    1Reply
  • Howie W.
    OP
    Member since 2019 · 15 posts · 4 votes
    4y

    Joe and Scott, thanks for the advice. I can move to the right a little - I'll let it lie a day or so and see what the PM says. I only sent my offer yesterday and I also want to terminate my relationship with the PM. If I agree to pay more, than I would want to be released from my contract early. 

    Currently, we have a tenant whose lease ends 31 July, however, the contract between the PM and I is up 31 October. Releasing 3 months early would be something I could live with as I want to sell it. In my offer, I mentioned given the tenant 60 days notice and as much flexibility she needs to find a new place. It's unfortunate for her, but discussing the whole history of this rental, my PM, and the current market, it's probably better to cash in my chips and take the profit. 

    0Reply
  • Michael Deering
    Rental Property Investor · Lehigh Valley, PA · Member since 2017 · 200 posts · 191 votes
    4y

    In PA any work over $500 requires a contract.  Although, most PM companies in their contract have the owner delegate and authorize the PM do serve as a proxy for the owner.  If this is in your contract you should ask for an addendum that states any repair above $500 requires owner approval.

    Keep close eye on repair and material costs. Some PMs could run you up with their contractor friends.  Good luck

    1Reply
  • Howie W.
    OP
    Member since 2019 · 15 posts · 4 votes
    4y

    ^Michael, thank you. Our contract is $250 without owner approval. The MC and PM and are in the same building, a few offices away, so I know there is a relationship there that isn't always beneficial to me. 

    Just as an FYI, as I was trying to determine a fair price I asked for an itemized list of parts and labor, the MC came to me with two lines, one for parts and one for Labor - Parts $4,378 and Labor $3,072 for a total of $7450. Know that the invoice the MC received from the third party vendor was $6200 and the amount given to me via phone was $4750 - I rejected the breakdown of parts and labor. They did offer to reduce the amount of $7450 to $5075 (stating a 20% discount and a $512.50 fee they charged their own employee who made the mistake). 

    0Reply
  • Karen MargraveBusiness Member
    Moderator
    Realtor, General Contractor, and Developer · Redding, CA · Member since 2009 · 7k+ posts · 4k+ votes
    4y

    @Howie W. Who allowed access for installation? Did you know it was installed? Did you think it was free? Pay for it and get a property manager that knows how to handle maintenance. If you don't pay the contractor can sue you and lien the property.

    0Reply
  • Howie W.
    OP
    Member since 2019 · 15 posts · 4 votes
    4y

    Karen, thanks for the reply. Most of those answers are above. 

    I don't know who allowed access for installation - I am assuming the tenant. It's not an answer my PM as given, but a question I have asked. Considering how difficult it has been to get information to make an informed decision, this is probably a question not worth fighting. Honestly, my assumption is the PM didn't know until last week either otherwise they would have addressed the funds in Sept. 

    As I stated above, I did not know it was installed until last week and the work was complete in September 2021. I live on the opposite coast. 

    I did think it was "free", but not approving the work and not knowing for 6 months - I am not paying the mark up bill that was proposed. 

    Working on a amical amount that is fair for all and removing the PM. 

    That's my question - can the contractor sue and I be held liable for unauthorized maintenance to the property. I addressed the mechanics lien above. 

    0Reply
  • James Wise
    Real Estate Broker · Cleveland Dayton Cincinnati Toledo Columbus & Akron, OH · Member since 2013 · 31k+ posts · 20k+ votes
    4y

    Bruhhhhhhhhhhhhh........This is impossible to follow. I'm so lost. So many numbers.

    1Reply
  • Matthew Paul
    Severna Park, MD · Member since 2013 · 7k+ posts · 7k+ votes
    4y

    Installed Sept 2021 , and you are just NOW getting a bill .  No it doesnt work that way , something doesnt smell right with this .  I would have the tenant send pictures of the unit including model number 

    1Reply
  • Howie W.
    OP
    Member since 2019 · 15 posts · 4 votes
    4y
    Quote from @James Wise:

    Bruhhhhhhhhhhhhh........This is impossible to follow. I'm so lost. So many numbers.


    Exactly, and try to make sense of those numbers from MY PERSPECTIVE to make a fair offer. Every answer leads to another question. 

    0Reply
  • Howie W.
    OP
    Member since 2019 · 15 posts · 4 votes
    4y
    Quote from @Matthew Paul:

    Installed Sept 2021 , and you are just NOW getting a bill .  No it doesnt work that way , something doesnt smell right with this .  I would have the tenant send pictures of the unit including model number 


    I saw the pictures from the invoice and just got model numbers today. They work at a snail's pace but want me to offer something right away. 

    0Reply
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