Hello, I have a question about whether property manger is at least partially responsible for repair costs on bursting pipes due to heating being off after tenant abandoned the property. The property manager for one of my rentals in Indy claims he is not responsible for that. This is how it happened: tenant stopped paying rent in November, 2016 after moving in 3 months later. We filed eviction on Nov. 18. My property manager confirmed to me they check the property on weekly basis to see if tenant moves out, if so, they will transfer utilities under their name and make sure heat is on to prevent pipes frozen. Tenant shut off utilities on Dec. 1 (I guess they moved out on or before that date). Property manager changed the lock on or before Dec. 9, but didn't turn on heat until Dec. 17. When my friend went to check the property, he found there are 4 places that the pipes burst. I spent $500 to fix them. The explanation that property manager provided is the gas company won't turn on gas without electricity being on, and the power company didn't turn on electricity until mid December. I asked him why it took so long, he said it's on them and he has email communication that they requested electricity to be on in early December. When I asked him today to forward the email to me, he said he has done that in December and refused to resend it. I feel that even though the property manager requested electricity to be on in early December, they should have followed up with the power company if it was not on the next day (the power company "Indianapolis Power and Light Company" has been very responsive and always turned on electricity within 24 hours for my other properties). The property manager charges regular monthly management fees when the property is vacant, so I think they should be at least partially responsible for the cost of plumbing fix. Please kindly share your thoughts or experience, really appreciate it.

Annie - As someone who invests out of state frequently, I understand your challenge well and I'm sorry that you're going through it. I went through a similar challenge on my first out of state property - about six years ago, I bought a decent but old three unit in a transitional neighborhood. The cash flow was (and still is) great but I had to go through two property managers before finding the right one. I'm hopeful that your current arrangement will be more fruitful but I have had mixed luck with family and friends in similar contexts. As far as whether or not you or your PM is responsible for the pipes, do you have a formal PM agreement with them? If so, it's worth understanding whether the PM has breached any of its provisions. One provision to be weary of is a provision limiting the liability of the PM which, in my experience, is common in PM agreements. Then, absent a breach of any other applicable provision in the agreement (i.e., a provision limiting what the PM can spend without your approval) or the applicability of any state law to the contrary (for instance, in New York like many states, a liability waiver is ineffective for fraud), the question will be whether or not the PM's conduct falls outside of the liability limitation provision (many of them provide that the PM is nonetheless liable for, i.e., its gross negligence, bad faith, fraud, etc.). My gut reaction is that it probably isn't worth the time and the headache for a possible $500 recovery if the PM won't work with you amicably and out of court, even if they did breach any PM agreement (believe me, I spent more than that learning my lessons about ineffective PMs so consider yourself lucky) but do review them on Yelp, report them to Better Business Bureau, etc. to help the rest of us. Good luck! (No legal advice here.)

Awesome. Then you might be aware on average LA has a lot more cash flow overtime than Indy. Rents have tripled in LA since 2000. More initial cash flow on paper is not always how some real estate investments get evaluated entirely. If they do Detroit is #1 for that. I have owned out of state too in Colorado and Texas. Unfortunately I was partly ignoring the future cash flow bigger picture to creating bigger pockets. It is when I took a step back the real future cash flow realities were understood better. Good luck!

@Cary Plotkin @Billy Smith Great suggestion! I didn't know I have this option so I'll call the utility companies on Monday to set it up. Thanks for sharing. @Ray Lai Thanks for the warm words. Some people have privately messaged me to ask for the name of the PM company, I have no problem sharing this info. 2016 is my first year to try real estate investment; I'm proud of what I've accomplished so far - bought 6 rentals, 4 of them with complete interior rehabs, 2 filled with great rent to own tenants, and most importantly, gained tons of knowledge and experience. Because I bought all my properties at great price and I tried to be hands on afterwards, my returns aren't too bad in spite of working with those PMs. @Michael Noto @Robert Herrera My PM and I have mutually agreed to terminate our PM contract before the pipe incident happened (see my reply to Zach and Andraw yesterday).

Is PM Responsible for Bursting Pipes?

Andrew S.

Investor · Raleigh, NC · Member since 2013 · 1k+ posts · 708 votes

9y

Of course, we don't have both sides of the story, but given the limited info your provide, I'd say the PM should take (at least partial) responsibility for this.

The PM blaming the power company sounds bogus - I have dealt with many power companies and none of them ever turned power on or off via e-mail. Now yours may be an exception (check with them, but I SERIOUSLY doubt it), so if the PM refers to an e-mail as proof that he requested power, then they are most likely full of it. Naturally, that also explains why he doesn't want to re-send it....

PS: It would be very unusual to take 20 days for the power to be turned on once properly requested - more typical is 24-48hours. If the power company really did take that long, it would have been up to the PM to a.) inform you, and b.) put into action a mitigation plan

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Annie Li

OP

Rental Property Investor · La Puente, CA · Member since 2015 · 87 posts · 20 votes

9y

@Andrew S. Thanks for your prompt response. I feel the same way because it shows some extent of neglect when the PM is managing my property.

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Ben Leybovich

Rental Property Investor · Phoenix/Lima, Arizona/OH · Member since 2012 · 4k+ posts · 4k+ votes

9y

Let's see - a CA investor buying a property in the Mid-West because the numbers looked great on paper. But, from paper to real life, the tenant skipped, the pipes froze, and now the numbers don't look so great... is that about the size of it?

OK, here's the problem - it doesn't matter what anyone here thinks relative to your question. What's important is this: Are you willing to spend money to force the PM to pay for any of it (and likely fail), and if you are willing to spend money - how much are you willing to spend?

You see how this works now?

6 Reply

Zach Quick

Investor · Bentonville, AR · Member since 2014 · 759 posts · 379 votes

9y

Of course @Ben Leybovich is right. I would take $500 as a cheap lesson learned and then assess how I really wanted to move forward with this property. I was expecting you to say much more than $500.

Also what monthly management costs are they charging you when its vacant? Sounds like a good gig for them.

Is PM Responsible for Bursting Pipes?

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