My Former Property Manager STOLE My and Tenant's Money!

24 Replies

My former property manager, Davis Property Management South (managers and owners of the property management company are Sam Davis and Eddie Davis (his brother) whom I found here on BP) stole my money and my tenant's money and refuse to return.  Here is what happened (sorry for a long post).

I found Sam through BP recommended by @Curt Smith  to engage him for a rehab work on one of my properties (this post, http://www.biggerpockets.com/forums/86/topics/9930...).  (@Curt Smith , I could not find Curt's original post titled "two ATL contractors I really liked".  Was that post deleted?)

Anyway, after they finished the rehab work, they proposed to manage the property by themselves too, which after negotiations, I agreed.  After a couple of months, they found a tenant and took a security deposit with them.  I was supposed to receive my first rent the first week of September.  However, two weeks passed, I did not receive any money.  So, I sent an email inquiring about the status of the payment and did not get response for a couple of days.  Then, I tried to call them only to find that the phone number I was given was disconnected.  So, I tried to contact them with all other email addressees and phone numbers that I found from the Internet and through mutual acquaintances.   No responses.    

At that point, I was panic, thinking (and knowing) that I was duped and that they took advantage of the fact that I am an out of state (and out of country) investor (please do not start the whole discussions about people should not invest out of state etc.).

They finally contacted me two weeks later to tell me that they were "on emergency leave" and be back in three week.  I told them that I cannot wait for three more week and asked them to immediately disburse the rent to me to which they did not respond.  After several more futile attempts, I terminated the management contract.  

After I terminated the management contract , I asked for the transfer of a security deposit to my new management company and the September rent, they refused, saying that under the management contract they are entitled to keep the security deposit as their one time marketing and management fee. They also said that after the tenant moves out, I as an owner have to pay back the deposit.  I repeatedly told them that the contract does not say such things and that even if the contract says so (which it does not), it is a violation of Georgia Real Estate Law to use Escrow money for any purpose other than damages when a resident moves out of a rental space.  Sam Davis of Davis Property Management South has refused to communicate with me and to return the tenant's security deposit and disburse the September rent to me.

I, through my new property manager, filed a request for investigation at Georgia Real Estate Commission and filed a police report as a “theft by taking”.  Is there anything I can do to go after these guys?  

File a civil suit to go along side the criminal charges. Assuming they aren't broke, you may get a judgement against them.

@Kent Verge  Thanks.  I am thinking about it. 

My total loss is about $2000 ($1000 for a rent and $1000 for the tenant's security deposit).  Do you think it worths the cost and effort?

Hi @Naga A.  ,

Sorry you had such a terrible experience. Unfortunate cases like this give property management a bad reputation. 

I would suggest you contact an attorney in Georgia. As @Kent Verge  said, you may be able to obtain a judgement. Depending on the size of the deposits, you may be able to bring a case in small claims court. 

Your new manager should be able to give you a recommendation for an attorney in the area. 

Good luck.

I don't know what it's like in Georgia, but the costs for small claims court usually are pretty low. I found this in Google: http://www.dekalbcountymagistratecourt.com/civil/file-a-small-court-claim.asp  In DeKalb county, it's $51.50 + $15 per defendant served.  I'd do it for $2k...

@Dan DeMott   Thanks.   I do not think they are a real property manager and do not know if they are even licensed in GA (it is my understanding that you have to be a licensed agent to manage somebody else's property in GA).  They are contractors doing a property management as a side business.  I should have done more due diligence, visiting their office to check their business operation or checking a license number etc.

@Kent Verge  Thanks for the info.  Okay. I will file in a small claim court too. 

I too would file small claims suit. It is unfortunate that people like this give property management companies a bad reputation. If required by the state, always be sure that the agency is fully licensed. Also, like you've done, it is important to file complaints with the real estate commission for these type of situations. Hope you are able to recover the money and have a better experience down the road. 

Hi Naga,  It makes me mad with you when people do bad things like this!!!   How did the rehab turn out?   I'll PM you a recent phone number for Sam.  BTW I haven't used him since that first time myself.  No rehabs in his location mainly.  After hearing this I'll cross him off the list.   I'm very sorry to hear of your PM problems.

But I do hear stories about PMs like this.   For me, the take away is to use a larger PM that has good reasons to be above board and stay in business.

@Christopher Webb   Thanks!

@Curt Smith  Yes.  Please PM me for his phone number.   It is partially my fault too because I did not do a proper due diligence simply because he was recommended on BP.    I think he sees this opportunity to steal money as soon as he finds out that I am not local.  Please spread the words about him if you have a chance to avoid future victims. 

OK, I called the clerk at the small claim court.  They told me that my proper manager cannot bring a small claim on behalf of me, only attorney can.  Since I am an out of state (and country) investor, I cannot bring myself to a court.  So, I have to hire an attorney.  Has anybody hired an attorney for a small claim?

I also am thinking of asking my tenant to bring a small claim against my former property manager (Sam Davis of Davis Property Management South) because they stole their money, not mine when they kept the security deposit.  Does it make sense?

Also, when the tenant moves out, do I as a landlord have to give them a security deposit back even though I never receive it?

 

You may need to do more damage control because the property manager had access to the tenant's social security number. I would pay for a service to monitor your tenant's credit for awhile. And yes, you will be held accountable for the tenant's security deposit when the tenant moves out.

@Marcia Maynard  What do I need to do to do damage control to the tenant?  I already reported to the state RE Commission and filed a request for investigation with them.  

Originally posted by @Naga A. :

@Marcia Maynard What do I need to do to do damage control to the tenant?  I already reported to the state RE Commission and filed a request for investigation with them.  

As a landlord, you have the responsibility to protect the personal information of tenants, as well as that of applicants. Identity theft is a crime that is rampant in our society. If you hire a rogue property manager and they take off, you need to think about what other information they could access while you entrusted them in that position. How secure are your tenant files? Tenant files contain social security numbers and driver's license information. These can be used for identity theft. At a minimum, the tenant needs to know there was a breach so they can keep an eye out for anything suspicious. To be proactive and to show good faith, you could pay for credit monitoring for awhile for your tenant. When this fellow took off with the money, did he also keep the tenant file? If he did, your risk is higher because that tenant file could get into the hands of criminals who make identity theft their business.

Find a GA broker / agent.

Find a GA real estate company.

The RE commission will handle violations of license laws but do not handle monetary issues as that is what the courts are for. Now that doesn't mean they will not investigate criminal activity and move to prosecute against it with other agencies help.

The deposit WAS COLLECTED on behalf of the property manager whether they were licensed or not acting on behalf of you in a PM capacity. So you can't tell the tenant " Hey I hired someone that duped me and took the money you paid in a deposit so you need to pay it to me again ." You would get laughed out of court on that one as the judge would say your recourse is against the claimed PM and not the tenant. The tenant complied by paying the deposit to a PM you were using.

All I can say is there are a lot of people  out there who are not as what they appear. Please folks just because someone comes on here and does a few posts does not mean they are all that is promised. You need to trust but verify.

I know nothing of this situation or the individuals involved. There are always two sides to every series of events.

No legal advice.  

@Marcia Maynard  Sound advice.  Thanks.  I will tell the tenant what happened.  

@Joel Owens  Thanks Joel.  As I suspected, my former PM was not licensed (fortunately, my current PM is). It was my fault not to do more a strict due diligence on them.

My current property manager went down to the police and was told that this is a civil case because a Judge would have to determine legality of the contract before any charges could be filed.  I expected that much.  

Now, I am thinking of bring a small claim either myself or by hiring a lawyer.  Has anybody had experience of suing a former property manager?

@Joel Owens  Joel nailed it.

For the money your talking about... I'd have to say you really need to consider if your time and effort is worth the bother. I can speak from experience, although in NC and not GA. My case is NCREC D13-0168 and I am out a lot more than you and decided to channel my energy into business development and not extensive litigation and civil dealings. But that is just my opinion. People get screwed all the time in this business. Unfortunately, most of the time they get away with it. You've done the right things so far (GA REC is aware... etc.) so get a case started with the REC and let them do their job. My 2 cents

@Joel Owens  and 

@Chris Martin  undefined

Your advice makes all make sense.  Emotionally, it is hard to let it go, but I agree that I should channel my energy and time into something more productive than chasing these crooks.   Thank you for talking some sense into me.  

Sorry Naga, I'm not sure where in the world you are from...but this is an utter waste of time.  The best thing you can do is what you already have....let folks here know of the experience and call it a day.  You will waste a ton of time, energy and money and more than likely never get a dime back.  

How do you know the tenant actually paid the deposit?  Ask for a copy of the money order or a receipt.  Just let the tenant know that they prior management left with the records and you are trying to confirm what has been paid.  If this is a hood property, the rent & deposit may have been paid in cash.  From experience over the years, tenants will often say they paid something to someone but not be able to SHOW it....this is especially true in inner city properties.  Can't tell you how many times I picked up a property with an existing tenant who said his rent was paid in advance....yeah right!

It isn't a bad thing to use unlicensed property managers....just know who you are dealing with...some of the best ones around the country are not licensed and I have used some of them with good results.  We now manage our own so I don't contend with outside PMs much anymore.

My home repair company is available for repairs in metro atlanta and we've been doing it for years......all the best!  Andy

@Andy Luick  undefined

Yes, the tenant said he paid in cash and does not have a receipt.  I suspected he was somehow associated with the prior PM.   So, the new PM ran a background check on him and he passed.   

I will keep your name on my contractors list and will let you know if I need your help.

@Naga A.  

  I don't know about GA  but I ran into a similar circumstance in Mississippi.. The unlicensed PM had stolen from more than a few owners.. the DRE filed criminal charges and went after them pretty hard.. they got jail time.

A complaint to the DRE should be made in this instance.. any type of law suit is not going to happen the amount your owed would be eaten up in attornies fees in a few billing cycles.

If the tenant doesn't have a receipt for the payment, I doubt very much that it was ever paid.  I'd give him a "credit" for now for the deposit and leave him in place as long as he pays the rent.  Keeping single family rentals in atlanta filled....at least inner city atlanta is a challenge.  Good tenants are hard to come by so I hope this one works out for you.  Keeping the fingers crossed.  If it should go empty, you may wish to consider changing to shared housing, getting it rented and selling out of it......

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