Need advice and input on management company situation

5 Replies

We have a rental home (was our personal home) and hired a management company to professionally manage. Per our lease agreement our tenants were to provide a 60 day notice and our management company sold us on the fact they advertise a property for 60 days in advance as well.
So aug 1 st our tenants gave notice to vacate on sept 30 in accordance to our agreement.
Then mid aug we get a notice from our management company that the tenants would like to extend their lease 60 days until nov 30th. We agreed pending a walk through (that's wasn't completed until one week later). So toward the end of August we agreed to extend 60 days and our management company advised they would take care of it and send of an addendum.
Flash forward another 2-3 weeks to September 16th we get notice from the management company the extension was never signed and tenants will be vacating at original notice date of 9/30.
As you can understand my husband and I were left in shock as we thought this was handled and only leaving us 14 days to advertise/re-rent the property instead of our advised 60 days. The management company scrambled to advertise the property again and posted ads before our review (so we never got to increase rent) I should also mention our house rented in 3 days the first time around, it's a nice house in a nice area and fabulous school zone.

Fast forward, we have planned on the standard vacancy cost but because of the failure to advertise we won't have tenants moving in until 11/20 giving us a 6 week vacancy or 3k! We feel the management company should split the vacancy cost (or some sort of retritubition)with us since it was their mistake but they do not feel they've done anything wrong and they said 'we can't force someone to sign an agreement' but from our point of view we feel 2 weeks of no signature is cause for concern or at least to communicate with us.

Has anyone ever experienced this or have any thought and feedback that can help us?

Thank you!

Unfortunately, many managers do not operate in the same fashion that you would. There is a low barrier to entry and it's hard work; so, you end up with managers who do not stack up against your standards. Managers are also very hard to interview, you can pepper them with questions for a couple of hours, you can contact references, you can get referrals, you can get leases and contracts, walk through all the screening and marketing procedures...the list goes on and still end up with a manager who does not meet your expectations and it can also make REI not profitable relative to other investment opportunities (as is the case here with unnecessary vacancy).

There are spirited debates on BP all the time about self versus 3rd party management and many members do not feel it's possible to make proper returns using 3rd party management in SFR REI (and that opinion is not due to the management fee). Many will likely respond that, with a nice home in a nice area with high demand, you should self-manage.

There does not seem to be much that you can do in this situation aside from sitting down and setting expectations, managing the manager tightly (I know, this defeats the purpose) and, long-term, shopping for the best manager. It's one of the toughest aspects of REI and many investors are a good manager away from doing some great things in real estate.

Too true, Mike.  I fight the unfortunate image of Property Management all the time.

I think the tenant is the unscrupulous one here but none of us are perfect so when something does get overlooked or a mistake is made,  the opportunity to make it right will win a client over forever.  Call your PM, talk it through, and it will probably work out.  



So to recap what you said; 

Tenant gives notice, they rescind and want to extend and you agree to that. The next step is sending out an addendum to the tenants putting that in writing. Mgmt company sends that out but tenant never signs and basically sticks to original move out date. Manager now rerents unit albeit at the same rent amount.

Now we're left with how could this happen and obviously the PM is at fault here.   Take the PM out of the equation and now you are in charge. What would you have done that would have changed the outcome? You agreed to the extension and now you personally have sent out the addendum but the tenant didn't sign it. How would you force the situation so it ended up differently?

My contention is there is nothing you can do to force tenants to sign. Now you are stuck in limbo. You can't file eviction because you have presumably accepted rent thus creating a tenancy at will which requires 15 days notice to terminate and then if they don't vacate you still have court. 

Things are not always cut and dry nor do they run on any exact timeline when dealing with tenants. Your best laid plans can be thwarted in an instant when dealing with human behavior. 

Sounds like the manager failed to communicate up to your expectations in both keeping you in the loop on the tenants failure to sign and the new rent amount and you should have a conversation with the broker about that. My guess is you will be able to reach some agreement for a free or heavily discounted tenant placement fee or reduced mgmt fees for a period.

Look on the bright side, it is rented. although it will sit vacant for a few weeks, they did get it rented, i have Student rentals and if you can't get them rented before college starts, you may be sitting on them for a year. as the owner your job is never done once you hire a PM, there seemed to be a lack of communication and followup. I would sit down with your PM instead of fighting with them and explain your concerns and calmly see how the two of you can work things out so it does not happen again and things do not fall through the cracks. As much as we would all like to think our PM's are only looking out for our properties, they may have 100's of others they have to manage and being on top of them is the property owners job. why not take the vacant time and do some maintenance if something is needed, you don't have to schedule with the tenant.

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