Is it worth it to sue?

32 Replies

Hi BP,

I am seriously considering suing my PM, and would like to hear what other landlords would do in this situation.

Recently one of my Dallas rentals became vacant. It was originally rented to an elderly couple and the husband had passed away in his sleep. The wife's family was originally from a different state so she decided to move in with her son and I agreed to release her from her lease.

Upon confirming her move out date, the manager should've gone over and do the final walk through with her. Later that night, I received an e mail from the PM saying that he is leaving the house keys with a neighbor across the street, who is not part of the lease agreement and not an emergency contact, because she will be taking a couch left over by the tenant in the garage and cleaning the house for them. Essentially, the manager decided it is alright to risk having unrelated 3rd parties go in and out of my property and potentially causing huge liability risks. I have also never met this neighbor and it's questionable if she will believe that I am the home owner and actually hand the keys to me. I am flying to Dallas to look at the work needed to be done for the home, when I requested the final walk through photos and itemized list of repairs, the e mail was left unanswered, which makes me believe that he actually didn't take any photos and made no such list.

My question now, is that I know generally speaking involving the legal system is a huge waste of time and money, but since the manager knowingly risked my entire investment by breaching his PM contract with me, which requires him to limit my liability and take care of the property, it seems appropriate to sue him for the entire value of the home, which is not a small amount and I feel like it's a needed lesson for him.

On top of handing off the keys to a neighbor, there are other things stated in the PM contract that mandates him do that he doesn't do. 

For example:

  • The PM should upload all invoices and documents to the owners portal but the owners portal has nothing in it, and he only sends a monthly statement by e mail. 
  • The tenants' portal was supposed to be used to submit requests but the tenants don't even have login information. All tickets are called in or e mailed.
  • He was supposed to file 1099 for me but he doesn't do it. When requested he sent me an annual statement and told me to take it to my accountant.

There are many other things this guy doesn't do, at the very least I feel like his license should be revoked. What do you think is the best course of action here?

I would say - fire them ASAP, find a better PM company, and move on. Unless they caused actual monetary damage to you, I don't see how a lawsuit would be worthwhile. 

You can also try reporting them the TREC and the IRS if you feel there is sufficient grounds. Probably don't need a lawyer for this. Not issuing you a 1099 sounds like they might not have proper accounting practices in place, so both TREC/IRS would be interested to hear that I'm sure

Would you mind PMing me the name of this company? For future reference

Good luck with your situation!

Regards

Dmitri

If you cannot prove damages you probably don't have a case. Besides that, why bother? Find a new PM and keep on making money.

No company avatar mediumJohn Thedford, John Thedford | 239‑200‑5600 | http://www.capehomebuyers.com

You're kidding...right?

What you've described is why you should fire them, not a reason to sue them.  Have there been any monetary damages done to this property that you can document, that are sizeable enough to warrant the time an effort of legal recovery?

Sounds to me like you are just mad at yourself for not doing a better job of filtering out this PM in the first place, and not taking the responsibility for it.

From what I can see, so far, all you've "lost" is peace of mind...and a little bit of your ego.  Fire them, replace the PM, learn from the experience (more valuable than what you've lost...or could gain by suing), ...and move on.

...and I say all of this as someone who likes to point out to others that if it wasn't for lawyers, you probably wouldn't need attorney's.

Originally posted by @Joe Villeneuve :

You're kidding...right?

What you've described is why you should fire them, not a reason to sue them.  Have there been any monetary damages done to this property that you can document, that are sizeable enough to warrant the time an effort of legal recovery?

Sounds to me like you are just mad at yourself for not doing a better job of filtering out this PM in the first place, and not taking the responsibility for it.

From what I can see, so far, all you've "lost" is peace of mind...and a little bit of your ego.  Fire them, replace the PM, learn from the experience (more valuable than what you've lost...or could gain by suing), ...and move on.

...and I say all of this as someone who likes to point out to others that if it wasn't for lawyers, you probably wouldn't need attorney's.

Great post! This probably describes 99% of frivolous lawsuits - just based on hurt feelings.

As investors, we can learn from the other side of this as well - manage relationships, avoid hurt feelings = avoid lawsuits.

From a legal perspective, unless your contract had a liquidated damages clause, "Must pay X if you violate the contract", then it is most assuredly not worth taking to Court. 

Hi BP,

Thank you all for the replies and sorry I have been so quiet. I am currently in Dallas dealing with the situation and wanted to give everyone who replied a quick update of what I found out that didn't go with what I was told by my PM.

To start, I wanted to make it clear that all the below details were actually obtained from the neighbor in person and on a 3 way call between myself, my tenant and the neighbor. This whole time the manager never showed up to meet with me, nor did he request to meet with me. In fact, I told him I would be in town 10 days ago and he informed me he would be unavailable to be here for my walk through with the contractor late Friday night.

So here are some of the things I had to find out by myself after getting to the home:

  • The unrelated neighbor was actually the tenant's daughter, so she's actually family, although she's not on the lease.
  • The neighbor daughter had asked the manager if it is okay for her to take over cleaning the home and get it ready while her mother returns to her home state to prepare the funeral. Without asking me, the PM said it is okay, so the tenant moved forward with leaving her daughter the keys to the home and wrote a notarized letter stating she is leaving her daughter in charge of her responsibility and possessions in and of the house.
  • The PM told me the neighbor daughter was just some neighbor living across the street, failed to mention the agreement he had with the daughter and the fact that she is actually the tenant's daughter and asked me to go get the keys from her when I arrive at the home.
  • I got angry due to the amount of liability risk involved with this and told the manager he has 24 hours to fix the situation before I send him a lawyer's letter. 
  • The manager hurried over to the house the day I flew into Dallas and changed all the locks and put up a lockbox without informing the neighbor daughter
  • Without knowing the liability risk involved with entering the home, the neighbor daughter found out the keys she has no longer worked, but the tenant had paid for the entire month of August already so they are still in possession of the house, called the manager and told him if he doesn't give her the code, she's going to call the police and have them watch her break the lockbox off the door and then send him a lawyer's letter.
  • The manager shouted at her and said the owner didn't want to have anything to do with them any more, that they don't need to do any cleaning any more and everything left in the house would be thrown away, so she can't enter the house any more.
  • I happened to catch the daughter on the phone heading over to break the lockbox and found out about all of the above and told her to calm down and I am allowing her to enter the premise with the lockbox code.
  • The daughter cleaned out all the trash and moved all left over furniture in the home and met me for the final walk through the next morning (should be the PM doing this). As of now, she has no need to enter the property any more and will be responsible for switching off the utilities on Monday.

PM related new info that either turned out to be a lie or was just never made aware to me:

  • Manager told me the tenant is forfeiting her deposits because she is breaking the lease and want to use the deposit to pay for last month rent when the tenant actually has no money and absolutely need the deposit back to live and that's why the daughter is paying for all cleaning and repairs
  • Manager told me the tenants didn't have room for the furniture left in the home so I can keep all of them, which is not true.
  • Manager never scheduled a final walk through with the tenant
  • Manager didn't know the exact move out date of the tenant

So here you have it, quite an exciting weekend where I was getting on average of 2 hours of sleep a night trying to resolve the issues. It does post an interesting question to me, which is whether it is alright for the daughter to enter the premise and do what her mother was supposed to do and have all the liabilities transferred to the daughter while she is doing it?

To everyone who said to fire the PM ASAP and questions my lack of filtering that led me to hire this PM:

  • He wasn't just some guy off the street, I interviewed him for 2 weeks and documented the entire conversation on an e mail chain and he gave really good answers and his response time was really great (2 to 3 replies a day).
  • He was interviewed to take over the original would be PM who was also the leasing agent who doesn't know anything about PM, so at the time he was saving me from another bad PM
  • The home this PM is in charge of is fairly new with very little repair work. The whole time he's managed the house (10 months) we've only had 2 service calls, making my interaction with him extremely limited, so it's really hard to tell how irresponsible and lack of PM knowledge he really is/has
  • I intended to change this PM due to other factors and have been looking for recommendations on BP and have interviewed a few, he will be fired once I can get one in place to take over since I am out of state.

Don't get me wrong, I am not saying I have no fault in this situation but trust me, ego is 100% not a part of this equation when I have a 200k house on the line. I will take all the fault as long as I can make sure the house is safe and secure, but what can I do when I've taken all the precautions I should do (interview, meet with the PM, check reviews and references etc) and he just basically lies about everything up front, and then once he gets the business he literally just collects the check and sends me a statement every month. What else should I do to make sure this doesn't happen again?

Also, going back to the original topic of the post. Everything I've mentioned in the original post have specific language in the contract mandating the PM to do them, yet he doesn't do any of them. If we can't hold the other party liable for breaking the contract and the only thing we can do is fire the PM and risk having to pay termination fee, what is the point of signing a contract?

Sorry about the EXTREMELY long post everyone, I hope at least the drama is entertaining enough for you to read to this point

Account Closed You have no damages, there for any lawsuit would be a frivolous one.  You would actually open yourself up to more liability by suing.  It is entirely possible that not only would your case be throw out as frivolous, again since there are no actual damages, but the judge could order you to pay all court costs and pay for the property managements legal fees.

Medium logo lf re cire box white bboxRussell Brazil, Associate Broker w/ Long & Foster | [email protected] | (301) 893‑4635 | http://www.RussellBrazil.com | MD Agent # 648402, DC Agent # SP98375353, VA Agent # 0225219736, MA Agent # 9052346 | Podcast Guest on Show #192

Account Closed I have read both your long posts and am I missing something? WHY are you considering suing them?

This is so ridiculous. It sounds like your PM is running back and forth trying to appease you because you keep changing your mind about what you want. First, he doesn't need your permission to allow someone else to enter the structure, he made a judgement call, which is what you pay him for. Second, because this neighbor is being allowed in by the tenant, they don't need your permission or his permission to enter, remain, clean, or otherwise interact with the property. Finally, as others have said, why would suing your PM even enter your mind, just what???? Smh....

@Russell Brazil and @Nick Britton

The reason why I thought I even have a basis for suing them is:

  • They handed off the keys to a third party who isn't named in any of the legal bidding documents I have on hand, and that opens up the possibility that they could let even more stranger in the house that the PM nor I could account for. If the property is damaged in any way or if appliances are stolen by any of these people, the fact that the manager knowingly handed off the keys to someone who can't be legally held accountable for would be viewed as intentional negligence by me, and my entire asset is endangered. Even if now I know the daughter is taking responsibility for her mother, how much legal bidding power does the notarized sheet even have? Is it even a valid move to do this when I wasn't informed nor agreed to it in the first place.
  • The PM agreement had specific languages mandating the PM to such things as uploading records, keep records, file 1099 etc. and the PM is obviously not doing any of those things. If that's not intentionally breaking the contract, especially after I had asked him to do each thing listed, I don't know what it is. Hence the question, what is the point of me signing a contract with him if I can't hold him accountable for anything that he was supposed to do, and if I can't hold him accountable, what exactly is the contract for?
Originally posted by Account Closed:

@Russell Brazil and @Nick Britton

The reason why I thought I even have a basis for suing them is:

  • They handed off the keys to a third party who isn't named in any of the legal bidding documents I have on hand, and that opens up the possibility that they could let even more stranger in the house that the PM nor I could account for. If the property is damaged in any way or if appliances are stolen by any of these people, the fact that the manager knowingly handed off the keys to someone who can't be legally held accountable for would be viewed as intentional negligence by me, and my entire asset is endangered. Even if now I know the daughter is taking responsibility for her mother, how much legal bidding power does the notarized sheet even have? Is it even a valid move to do this when I wasn't informed nor agreed to it in the first place.
  • The PM agreement had specific languages mandating the PM to such things as uploading records, keep records, file 1099 etc. and the PM is obviously not doing any of those things. If that's not intentionally breaking the contract, especially after I had asked him to do each thing listed, I don't know what it is. Hence the question, what is the point of me signing a contract with him if I can't hold him accountable for anything that he was supposed to do, and if I can't hold him accountable, what exactly is the contract for?

So it sounds like you have actual damages. They did not file the 1099.  So your damages would be about $5 maybe? Maybe another $10 for not uploading records?

Their negligence  in handing off the keys does not mean anything unless you have damages.  Yes someone could have stolen the appliances...and if they did...you would have damages in the amount of the appliances.  Without actual damages it does not matter if they broke the contract.

You certainly have cause to be released from the contract, but you do not have any damages to bring suit for.

Medium logo lf re cire box white bboxRussell Brazil, Associate Broker w/ Long & Foster | [email protected] | (301) 893‑4635 | http://www.RussellBrazil.com | MD Agent # 648402, DC Agent # SP98375353, VA Agent # 0225219736, MA Agent # 9052346 | Podcast Guest on Show #192

Originally posted by @Patrick Connell :
This is so ridiculous. It sounds like your PM is running back and forth trying to appease you because you keep changing your mind about what you want.

First, he doesn't need your permission to allow someone else to enter the structure, he made a judgement call, which is what you pay him for. Second, because this neighbor is being allowed in by the tenant, they don't need your permission or his permission to enter, remain, clean, or otherwise interact with the property. Finally, as others have said, why would suing your PM even enter your mind, just what????

Smh....

So what you are saying is, the neighbor can legally come in and out of my house when my tenant has left the state already just because my tenant said so? When both parties have made it clear they will not take liability for anything that happens to the house?

Even if I am overreacting and there is no basis for all my worries. If the PM was confident in his judgement call, why didn't he send the notarized authorization to me and explain the situation? Instead he went and changed all the locks on the neighbor and told her not to come back again, which knowing all the details that he knew but I didn't, made no sense?

So what you are saying is, the neighbor can legally come in and out of my house when my tenant has left the state already just because my tenant said so? When both parties have made it clear they will not take liability for anything that happens to the house?

Even if I am overreacting and there is no basis for all my worries. If the PM was confident in his judgement call, why didn't he send the notarized authorization to me and explain the situation? Instead he went and changed all the locks on the neighbor and told her not to come back again, which knowing all the details that he knew but I didn't, made no sense?

 You stated your tenant had already paid through the end of the month, which means they still retain the right to enjoy the use of the home. This means that, yes, they can work something out with the neighbor (family or not) to come in and out of the home in order to handle any ordinary business that may need to be done. This is no different than the tenant going out of the country for a month and asking the neighbor to come over twice a week and bring in the mail, water the plants, and make sure all is well inside the home. It is up to the tenant and no, they don't need your permission or the permission of the PM to do this.

And, regardless of what they say, they are still on the hook for any liability incurred while they are in possession of the home. They can say they aren't, or won't, but that doesn't change the fact that they are. I say they, but really it's just the tenant.

Well, you are overreacting, but I would say you have some basis for worry. You sound like you are a micro-manager, which is different from staying on top of the PM. The PM's job is to make sure the property is cared for, tenant managed, and situations handled without bothering the owner with every little thing. If you want to be involved in every decision, that's fine, but expect to pay a higher management fee in order to have that right. It sounds like there is a huge gap in expectations, both for the PM and for you, and communication issue. Neither are a relationship killer, unless they can't be resolved. Early on, you should have put the PM in their place, and the PM should have put you in your place. Don't be your own worse enemy.

I wanted to add that I am not trying to argue I am doing the right thing here, and this is why I am asking these questions. I admit as a landlord I dont feel comfortable having a third party go in and out of the house when the tenant isn't even in the state any more, family or not, and I am surprised at how loose contracts really are ... They seem to work more like guidelines than a contract since no enforcement could be made.

I am learning and I learned something. Thanks for all the inputs to everyone who replied.

Originally posted by Account Closed:

I wanted to add that I am not trying to argue I am doing the right thing here, and this is why I am asking these questions. I admit as a landlord I dont feel comfortable having a third party go in and out of the house when the tenant isn't even in the state any more, family or not, and I am surprised at how loose contracts really are ... They seem to work more like guidelines than a contract since no enforcement could be made.

I am learning and I learned something. Thanks for all the inputs to everyone who replied.

 Unfortunately, whether or not you're comfortable with a third-party going in and out of the house is irrelevant because you can't stop it. Even if your lease said no third-party individuals in the property without the tenant present, you wouldn't be able to stop it because it interferes with the tenants right to reasonable enjoyment and use of the property. The lease is definitely a contract and is enforceable, but it is also a guideline for how certain situations will be handled.

It sounds like you're the one who has a misunderstanding of the lease, Tenant-Landlord law, and related legal concepts and norms. The tenant didn't do anything wrong and is totally legit, the PM also sounds like they were somewhere within the bounds of reasonableness but possessed poor communication skills. As stated before, it also sounds like they failed to explain expectations to you ahead of time.

Pm=fired. Lawsuit=pointless as you have no "damages"

Account Closed  I think the PM wants to Fire YOU  you sound like a pain in the you know what over reactive sue happy client that no one in the industry wants to work for..

good luck I bet you have the same issues with every other manager you want to micro manage.. your the nightmare owner... from what I read... Sue   any one who is as sue happy as you are when there is absolutely no basis is a crazy persons... LOL

Medium ksqoekox 400x400Jay Hinrichs, TurnKey-Reviews.com | Podcast Guest on Show #222

@Jay Hinrichs

I know you are a very experienced investor and receive a lot of respect, but I wish what I can get from you is constructive criticism and useful knowledge instead of insult and name calling.

I don't know, so I asked. I didn't do enough research but I can learn and will continue learning. I am not defending my lack of knowledge and I admit I overreacted and jumped to conclusion. I now know suing is not a viable option and is very pointless, but I think the lesson here is now I know, and this will not happen again. I don't see how calling me crazy and a pain to work with will help me improve as an investor, unless you think because I am prone to micro-managing, which I know is a flaw of mine, automatically makes me fail as an investor and I can never improve?

Account Closed may have been on party to a few suits and decided you might be related to the them.  Name calling here is nothing like what you'd endure on your way to court.

By the way, lawsuits are settled out of court most of the time.  Lawyers get their funds and parties to the suit get it over with.  

Now, you should ask, in 5 -10 years from now is this going to be material to me?  If yes, then talk to an attorney or two to see what they think, otherwise, take on the chin and blaze ahead.

Lastly, FIRE fast.   If you don't like the way this was handled, then you should fire quickly.  You have a find a good fit for you or you'll be tortured and tempted to micromanage.  If they're doing things the way you expect and desire, you'll build trust and cease to micromanage.  It takes some people longer than others to trust, but I wouldn't say that's a flaw at all in this business.  There are a lot of crooks and lots of unprofessionalism.  Keep your eyes open.

Best of luck!

Rick

Not giving legal advice.

On the TAR property management agreement there is a clause that says the parties should first "negotiate in good faith" to resolve the dispute. If that is unsuccessful, the next step would be mediation.

If you ultimately end up in court, the PM agreement also states that the prevailing party can collect their legal fees from the other party. Since you don't have any actual damages, it's likely the case will not go well for you in my opinion.

Bottom line is if you are unhappy, you should just fire the company and move on.

Good luck!

 

Account Closed  well that did not come out exactly right I meant your crazy to try to Sue..[ and or foolish take your pick ),  to try to sue  based on the details.. but others told you the same thing

However I have seen this show many time's were owners are just so over the top on little issues that the PM's will choose not to work with them.. 

One thing you did that i think was very smart though is you bought a top end rental. Many of your rental issues will be mitigated by the quality of your property the price point of the rent and then should be the quality of a tenant that can afford said rent. 

Never buy a low end rental you will be pulling your hair out with issue after issue. And those risk getting totally wiped out when they have to switch PM time and again because of on going issues and tussles with the PM

some folks just don't have the temperament for land lording,  

Medium ksqoekox 400x400Jay Hinrichs, TurnKey-Reviews.com | Podcast Guest on Show #222

This didn't go flawlessly but if you are going to hire a PM you need to let them do their job. If you do need to interfere in there work you need to know the laws and your rights in that situation. Sounds like this is a rough neighborhood anyway and you are long distance without a lot of luck on the PM side. I would consider selling the property and reinvesting in something else.

Account Closed

I believe there is a failure to communicate here.  Its between the PM and you.  Reading your two posts and not other member's.  I would gather the PM knew more than he let on and you jump the gun too soon. 

The tenant paid the rent for the month and you nor the PM has a right to enter for the month.  The tenant's daughter was giving the permission so the PM gave the keys for her to do the cleaning in preparation for the final move out and walkthrough. Not to do the PM's job.  None us may like it, but a tenant does have a right to give their keys to anyone as long as that person is not damaging the property or a long term visitor.

I do agree the PM isn't doing a stellar job, but a lawsuit?  Nope, just save the headaches and money and hire a new one.

also, next time, post here for ideas and thoughts before hopping on a plane.

You are also lucky (hopefully) that you don't get sued by the tenant. 

Side note:  In Massachusetts (and a lot of other states), by changing the locks illegally, you could of ended up in court and losing potentislly 3x the security deposit fee.....please please please learn and ask/post before jumping.