My property manager passed away

11 Replies

Very unique situation here. We own a property in TN that was managed by a property manager who had been in real estate for 30 years. He knew the business and was a one man show for his property management company. Well, he passed away a few weeks ago and we found out yesterday. His children went in and shut down his business. They shut off his phones and the whole situation is a mess. There will be a lot of stuff coming from this. But, we signed a contract with him that we have been informed is null and void at the time of his death. The problem is our tenant has their deposit sitting with his company in an escrow account. It will be a while before that money will be dispersed back to them. The man's three businesses were in a mess and there are lawyers involved. In the mean time we need a new property manager. The tenants will be moving out about June 2016. So the question is: do we charge them another deposit (I would rather not). Just wondering if anyone has any creative ideas for the deposit. Thanks!

@Sarah Bookout , what grounds do you have for charging another deposit? I would absolutely not ask the tenant for any additional money, but rather send them a note explaining the situation and letting them know where the rent checks should now be sent. 

If you cannot cover returning their deposit, you should start saving up to be able to do so. You have a specific amount of time to return the deposit after they move out, per state law.

I would also contact the attorneys involved and let them know the property manager was holding $XXX for a tenant's security deposit, and see how they are proceeding with claims. The manager should be holding the deposit in a special account and it doesn't belong to him or you, but rather the tenants. If his businesses are in a mess, it is entirely possible that it is gone, but that doesn't absolve you of the responsibility of returning it to your tenant upon termination of the contract, no matter what happened to it.

Mindy is exactly correct.  You will owe that tenant their deposit back, one way or the other.

As for charging them an additional deposit?  Absolutely not.  Seriously, do not even for one second consider it.

There is one party here who has done everything exactly right.  That is the tenant.  They will be owed their deposit.  This sentence, "It will be a while before that money will be dispersed back to them" alarms me.  

 YOU are responsible for ensuring the tenant gets their deposit back.

We (the owners) don't have a contract with the tenant. The property manager did. So I think that is why we feel it is not our responsibility. But I get what you all are saying. 

Shouldn't the corporation that holds their money be responsible and the tenant and corporation work it out? And not us? 

Originally posted by @Sarah Bookout :

We (the owners) don't have a contract with the tenant. The property manager did. So I think that is why we feel it is not our responsibility. But I get what you all are saying. 

 It is your responsibility. You are the landlord. This is your business. The property manager is simply a contractor who worked for your business. 

Also, I don't know about your leases, but all of mine have my name listed and state that the property manager is working on my behalf.

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Not sure how they do things in Tennessee but in most states you're on the hook for the security deposit regardless of any negligence on the part of the PM company.

The PM is your agent working on your behalf. Any claim you have is against the PM company or the owner's estate.

Originally posted by @Sarah Bookout :

Shouldn't the corporation that holds their money be responsible and the tenant and corporation work it out? And not us? 

 No.  You have a contract with the property manager.  That person acts on your behalf, per the terms of that contract.  They perform certain functions so that you do not have to do them yourself.  But you retain obligations to the tenant, regardless of what the property manager does or does not do.

You are going to be liable for ensuring the tenant gets their security deposit back within the time  period (usually 30 days) required by law in your state.  Get used to that thought, it is very important that you understand and accept it if you want to stay out of legal trouble.

The only exception I could see to the above is if you had a master lease agreement with the PM, where he leased the property from you and then re-leased it to others.  One good way to know if this is true is to think about what happened if there was a vacancy.  If you have a master lease agreement, it would have made no difference, you would have been paid by the PM regardless.

Please consult a local attorney.  

But in the meantime, prepare yourself mentally for the fact that you are almost certainly going to have to write the tenant a check.

Ok. That helps! Thanks everyone!

You are the owner the contract is with you!!!!! As far as their deposit why would they owe you anything? They have keep up with their rent and taking care of your property. I am actually shocked that you feel entitled to more of their hard earned money. It is not their fault YOUR PM died and should not feel the effects of it at all other than to send their rent checks to you or another PM. If this is actually what you feel you are entitled to then maybe you should rethink being a landlord because you can and will be sued. Think of it this way your utilities company requires a deposit to turn on lights or water. The admin stole money and the utility company "no" longer has your money. They call you and say hey we lost your money you have to give us more or we will shut off your utilities. How well would that go over?

I do not feel entitled. I am just trying to understand this better and how it works in our unique situation. We are trying to be fair and understand completely. I know the tenant did nothing wrong. I am just trying to cover everything and make sure we handle it the right way. If I was concerned about MY entitlement I wouldn't have posted on here in the first place asking for advise on the right thing to do. Thanks for the clarification though that we are responsible. We'll definitely take that info and do the right thing  

Actually I for one and really happy that you posted on this subject because I would venture to say the majority of landlord would not have a contingency plan to deal with this possible situation occurring to them. Now this gives everyone who has not thought of this possible situation a reason to plan for it or something with similar consequences.