Disagreement with my Property Manager

General Landlording & Rental Properties
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Disagreement with my Property Manager

Chad Wallace
San Francisco, CA · Member since 2013 · 3 posts · 1 vote

I recently changed property management companies and they want to move forward with evicting a tenant who has not made their sewer and trash payments. The tenant owes $180 for these missed payments but the cost of evicting and finding a new tenant would exceed that by a long shot. Moreover, the tenant pays above market rent. Although, I shouldn't allow the tenant to break the rental agreement, it just doesn't make financial sense to evict this person over $180.

I have asked that, instead of posting a pay or quit notice, the pm inform the tenant that when the lease is up I intend to raise her rent by at least the amount of her sewer and trash payment.

How would you handle this? Can the pm evict without my consent?

The property management agreement I signed "grants the pm the sole right to institute legal and collection actions on behalf and at owners expense, to perform evictions, recover possession of the premises, and to settle and release such actions." Do you interpret this wording to mean that the pm can compel me to evict even if I really don't want to?

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Michael Seeker
Investor · Louisville, KY · Member since 2011 · 1k+ posts · 1k+ votes
12y

I would probably side with the PM on this. If the tenant isn't paying something now, it will only get worse in the future. It may only be $180 today, but it can quickly escalate. Do you want to wait until they owe more money than what it would cost to evict before doing so?

That being said, you employ the PM...if they don't do what you want, then you can fire them. If I were a PM company, I wouldn't work with owners that wanted to micromanage me though. As a PM, why would I want to bust my butt to deal with a crappy tenant because that's what the owner wants when I could find a good tenant and not have half the headaches but make the same amount of money.

At the end of the day, if you're not happy, let them know - you are the decision maker. If you don't want the tenant evicted, let them know you'll find a new PM if that's the approach they take.

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  • Michael Seeker
    Investor · Louisville, KY · Member since 2011 · 1k+ posts · 1k+ votes
    12y

    I would probably side with the PM on this. If the tenant isn't paying something now, it will only get worse in the future. It may only be $180 today, but it can quickly escalate. Do you want to wait until they owe more money than what it would cost to evict before doing so?

    That being said, you employ the PM...if they don't do what you want, then you can fire them. If I were a PM company, I wouldn't work with owners that wanted to micromanage me though. As a PM, why would I want to bust my butt to deal with a crappy tenant because that's what the owner wants when I could find a good tenant and not have half the headaches but make the same amount of money.

    At the end of the day, if you're not happy, let them know - you are the decision maker. If you don't want the tenant evicted, let them know you'll find a new PM if that's the approach they take.

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  • Rhett TullisBusiness Member
    Property Manager · Oklahoma City, OK · Member since 2013 · 1k+ posts · 617 votes
    12y

    sounds like they have the right to although does not sound like the wise path in this circumstance in my opinion. I would also consider changing companies if they go against your wishes. you are after all the owner of the property and you carry most of the risk (you paid for the home after all.)

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  • Dawn AnastasiPro Member
    Rental Property Investor · Milwaukee, WI · Member since 2013 · 6k+ posts · 4k+ votes
    12y

    @Chad Wallace

    welcome to the forums. You can see if you can work out a way with the tenant to pay the water/sewer in parts instead of all at once. (Example: $180 instead of all in one month, $60 extra per month.) The other approach is to build the cost of the water/sewer into the rent itself when you renew (which I think is what you were getting at in your post).

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  • Robert G.
    Residential Real Estate Agent · Miami, FL · Member since 2013 · 195 posts · 138 votes
    12y

    I'm not a landlord, so I'm not familiar with the standard PM agreements, but no way would I have signed that.

    I absolutely interpret that as you've given the PM company the right to move forward with the eviction. Unless there is some other clause in the agreement indicating that they can't make decisions against your express instructions....you've basically given up the decision making authority via the contract. Now, I'm not sure such a contract is legal or enforceable in Cali, but either way I don't think you want the expense of finding out. If I was in your shoes, I'd try to amend that agreement asap, or dissolve it and find a PM that doesn't require you empower them in such a way.

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  • Chris K.Pro Member
    Investor · Baltimore, MD · Member since 2012 · 1k+ posts · 655 votes
    12y

    I'd need a little more info before knowing how I'd handle it. Is the tenant refusing to pay or is it something they didn't pay attention to and plan on paying it?

    I agree with you that executing an eviction for $180 that someone is planning on paying isn't a good idea, but I'd agree with the PM company to "get the process started" as the tenant receiving paperwork will usually encourage them to pay up.

    I'd go the pay or quit route over raising the rents to collect but if they didn't do as you requested then I'd have to get rid of them. They work for you.

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  • Joel OwensBusiness Member
    Moderator
    Real Estate Broker · Canton, GA · Member since 2010 · 15k+ posts · 11k+ votes
    12y

    Property managers do not make squat as it is. If they had to go to the owner every time for permission to do anything then they might as well just get out of this business.

    I am not a PM but know how the business works. It's a very low use of time, the money made is low, and the owners most of the time think the PM is not doing a good job.

    You can set certain control on key important decisions that a PM must contact you for. If you go to court, evictions, file papers etc. you have to show you are an authorized representative to perform such actions on behalf of the owner. This is why permissions are spelled out in agreements.

    The poster Chad is from California with what I hear is a very tenant friendly state and it can take a long time to get them out. Chad is this property a single family house or do you own a 4 plex etc. or something larger??

    The reason I ask is if you do a workout and there are multiple tenants at your property they all talk. If you do one workout for the tenant then all of the sudden others start bringing their sob stories.

    Chad I understand not wanting to evict. Explain to the tenant that you incur extra bookkeeping costs if all items are not paid on time. You might want to simply start eviction so they see you are serious. This will make them cough up the 180 plus your filing fees IF they have the cash. You know you will not push the eviction all the way through but they might not know that. You condition them to not be late again.

    Of course there is always the chance the bluff doesn't work but it's worth a shot.

    No legal advice.

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  • Chad Wallace
    OP
    San Francisco, CA · Member since 2013 · 3 posts · 1 vote
    12y

    Thanks everyone. Many valid points. I wouldn't call the decision to evict micro management. With the cost of eviction, vacancy, and turn around, I could very well suffer negative cash-flow for the year. The PM, on the other hand, earns a commission on placing a new tenant. I lose money, the PM makes money. Not that the PM would be so devious, but our divergent incentives can't be ignored.

    I do understand the dangerous rabbit-hole in letting the tenant get away with not paying. Tricky decision. Hopefully, the tenant will pay and that will be that. If not, I will probably try to manage the rental myself.

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  • Account Closed
    Chicago, IL · Member since 2013 · 136 posts · 32 votes
    12y
    Originally posted by @Michael Seeker:
    If the tenant isn't paying something now, it will only get worse in the future. It may only be $180 today, but it can quickly escalate. Do you want to wait until they owe more money than what it would cost to evict before doing so?

    BOOM. Done in 1 right here. People who don't pay their bills today don't pay their bills tomorrow. Don't wait until they owe more than it costs to evict them, because then you are out double the money. Let the PM do their job here.

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  • Account Closed
    Chicago, IL · Member since 2013 · 136 posts · 32 votes
    12y
    Originally posted by @Chad Wallace:
    Thanks everyone. Many valid points. I wouldn't call the decision to evict micro management. With the cost of eviction, vacancy, and turn around, I could very well suffer negative cash-flow for the year. The PM, on the other hand, earns a commission on placing a new tenant. I lose money, the PM makes money. Not that the PM would be so devious, but our divergent incentives can't be ignored.

    I do understand the dangerous rabbit-hole in letting the tenant get away with not paying. Tricky decision. Hopefully, the tenant will pay and that will be that. If not, I will probably try to manage the rental myself.

    These are very good points. At the end of the day, the decision is deferred to you. You have to make a character judgement on the tenant and see if you think this was a one off type of event or if you think it will become a trend. Maybe even ask them why they aren't paying etc.

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  • Elizabeth Colegrove
    Hanford, CA · Member since 2013 · 5k+ posts · 1k+ votes
    12y

    @Chad Wallace

    I would call the tenants to see what is going on and why they are not paying. That amount of money might simply be because they forgot.

    I totally understand where everyone is coming from but I do agree with you. The goal is to not lose money at the same time make sure you are going to be paid. I know my last company did do evictions for anything less than $500.

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  • Joel OwensBusiness Member
    Moderator
    Real Estate Broker · Canton, GA · Member since 2010 · 15k+ posts · 11k+ votes
    12y

    "The PM, on the other hand, earns a commission on placing a new tenant."

    If you put a limit yearly on the number of commissions paid then it aligns your interest with the PM.

    If they know after 1 turn in a year they will not get more commission but just ongoing rents they will pay attention very closely on enforcing the tenant screening procedures and wanting to figure out how to get them to pay in full versus evicting.

    It's all about structuring things where it's not in the PM's best interest to do the easiest thing in the moment that might hurt your cash flow. You want it where if you suffer they feel the loss just as bad to their income.

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  • Colleen F.Pro Member
    Investor · Narragansett, RI · Member since 2013 · 8k+ posts · 4k+ votes
    12y

    Look the PM wants to deliver a pay or quit. I would do it. That may be enough to get the tenant to be back on track. You aren't evicting them yet. PM is taking the view that you get tough right away. They miss a payment they know you care that it happened. You can work with the tenant if you like their song and dance about why they didn't pay but you can't easily go back once you have gotten soft. I would take the PMs advise and see if you can bring the tenant into compliance there are many good suggestions about how above. You are not taking the tenant to court yet. As for the PM you may not agree but he may be anticipating future non-payment based on his experience and you pay him to do this.

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  • Joel OwensBusiness Member
    Moderator
    Real Estate Broker · Canton, GA · Member since 2010 · 15k+ posts · 11k+ votes
    12y

    Colleen I agree with your thinking.

    If Chad files it doesn't mean he has to go through with eviction. In Cali I have heard it takes a long time to get someone out. Tenants do not know all the processes of eviction in many cases.

    So the filing is getting tough and conditioning the tenant to not ever do it again.

    I can tell you we filed a bunch of times and sometimes the tenant would pay up and sometimes we still evicted them. The times before when I was newer I would work with a tenant etc. and all that would happen is I would delay the inevitable by a month or two.

    Especially with the buildings with multiple tenants the " word on the street " needs to be the landlord is fair with fixing repairs and taking care of things but will not tolerate late rent no matter the excuse. The bums won't be attracted to a complex where the landlord has a zero tolerance policy.

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  • Chad Wallace
    OP
    San Francisco, CA · Member since 2013 · 3 posts · 1 vote
    12y

    Thanks guys. I guess I feel that if I post a pay or quit notice I need to be committed to evicting if that's what it comes to. If the tenant still doesn't pay (and calls my bluff), I have no choice then but to evict. The consequence of not following through is clear to everyone on this forum.

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  • Account Closed
    Investor · Baltimore, MD · Member since 2014 · 1k+ posts · 688 votes
    12y

    evict the property manager if they proceed, now the decision is yours. or fire them now, PMs are a dime a dozen, and don't discount that they would evict someone to get a new placement fee. they exist to make money, not serve your interests...though serving your interests makes them money, which is where your power lies....hence the first statement

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  • Daren H.
    Real Estate Investor · Desoto, TX · Member since 2013 · 560 posts · 528 votes
    12y

    I currently use a PM. I have never been an active landlord nor do I have a desire to. I read about being a landlord a lot so I can understand what needs to be done :) My PM has been in the game for many years as a PM and investor herself. On occasion I interject my thoughts, opinions, and feelings about how things should go. I have the right to because at the end of the day it is my property and my financial future. At the same time, my PM has performed great and has proven that she knows what she is doing. I like overseeing and being involved, but I also believe in letting skilled practitioners do what they do best. Isn't that the reason you hire them? I have heard about bad PMs. You mentioned that you just changed PMs. Make sure you are not fighting the very people who are trying to do the best thing to protect you based on their hands on experience in the game.

    I do find it quite interesting that the PM would get fired for enforcing provisions of the lease but the tenant would get catered to for violating the terms of the lease : )

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