Does fired property manager owe me money for...

Question

In November, I fired my property manager for general ineptitude.  On December 1, a tenant abruptly moved out with no notice.  When this tenant signed their lease last spring, they pre-paid their last 3 months Mar '18 to May '18 in advance, in lieu of deposit (I inherited this lease when I bought the building, so I didn't set up the lease).  On Dec 1, the tenant abruptly moved out.  Come to find out: the tenant hadn't been paying rent the last three months -- they blew through all their pre-paid rent, and now I'm left with $0.  My fired property manager never told me that the tenant was using his pre-paid rent for Sep, Oct, and Nov of 2017.  And more galling, property manager was charging me a management fee for Sep, Oct, and Nov on that rent.  Question: what does my property manager owe me, if anything -- management fee?  lost rent for the time it takes to get a new tenant?  nothing?  Is this fraud or just negligence?

James Wise · Answer

Gotcha. I missed that part when I read it the 1st time. Ya you have a reason to have a beef with the former PM but I you fall short of being able to sue or be entitled to any payment from your former PM. There is almost always a clause in the contract where you agree the PM isn't liable for stuff like this.

You really weren't harmed either. Tenant paid rent every month they lived there. I'd say you got out of a potentially tough situation realitively unscathed.

Andrew Robbins · Answer

@Russell Brazil Definitely didn't pocket the money. Yes, she credited those months against the pre-paid rent.  She just never told me that the tenant wasn't paying rent Sep, Oct and Nov.  I'm not sure whether the tenant contacted her in that time to ask if he could just use the rents set aside for Spring '18 and she approved it OR she was unaware of the fact and somehow her accounting system automatically used those pre-paid rents when the tenant failed to pay rent.  If the former, she has a duty to tell me that a tenant isn't paying rent.  If the latter, she shouldn't have set up the account to allow pre-paid rent to be used for any months other than what they were designated for.  The pre-paid rent was to protect me from a tenant abruptly moving out, which is exactly what happened.

James Wise · Answer

Andrew,

I think your a little confused here. You said yourself that it wasn't a security deposit. It was pre paid rent. What do you think is supposed to happen with the pre paid rent other then to go towards those last 3 months? I also don't see why the PM charging you a management fee is an issue for you. The PM did manage the property for those 3 months, so why wouldn't they be entitled to payment for services rendered?

Nathan Gesner · Answer

Yes, your PM should have communicated with you.

They didn't but you still received rent for those 90 days.

Count your blessings, find a better PM, and move on.

Andrew Robbins · Answer

@Matt K. You're probably right about the time and effort. That said, there is a laundry list of things she kind of helped herself to when she was doing the final bookkeeping after the firing.  She has stopped responding to my emails.  Will probably end up in small claims.  I'm just trying to figure out what's reasonable for me to ask for and what's not.

Matt K. · Answer

Not that you are wrong, but the time/effort/costs to prove this probably don't pencil out. That's even IF you get past the contract that probably will kill this idea before it even starts.With that said, have you had a discussion with the PM and tried to work something out. Sometimes people are more receptive to working out a fair solution without trying to make it into a legal battle... if you play hardball like that they'll likely do the same and it'll go nowhere.

Andrew Robbins · Answer

@Andrew Boettcher Thanks for the perspective. You make the point of the PM being my agent/representative.  Doesn't she have a fiduciary duty as my agent to let me know that the tenant was not paying rent and was eating into their pre-paid rent that was designated for Spring of '18?  And by extension, isn't she responsible for the situation where I have a vacancy without any $ that rightly should have been held back -- those were the terms of the lease.  So in a sense, wasn't she complicit in the tenant breaking their lease?

Andrew B. · Answer

I would guess the PM agreed to let tenant use the 3 prepaid months early. In this situation, you definitely still pay PM their fee. It wouldn't matter what lease says is PM agreed to let her do it...remember, they are your agent/representative. It looks like you are SOL for any damages left behind, and lost rent due to tenant moving out early. If PM told tenant they can leave on Dec 1, you really have no recourse. clean the place up and rerent. If PM never told tenant they can leave, then you may have the ability to go after the tenant for any lost rent between Dec 1 and the next tenancy. This may be hard to navigate though since you ended relationship with PM. They may be unwilling to help, and obviously tenant is going to lie to get out early. First step si find out how helpful your old PM will be.

Steven Gesis · Answer

Andrew, I agree that the PM did not represent you in the best interest, perhaps the initial intent was existing but it quickly slipped out of control when the drained the prepaid rent, I wonder if they had a late fee policy, because rent is not complete without a full late fee payment as well, after month 2 they could not have had enough funds to pay month three  ? (let me know if that makes sense) - unless they waive or do not have a late fee policy in place, perhaps they are loose with it. Part of a vicious cycle of tenant placement with $0 deposit or $0 application fee, you are not capturing high-quality tenants in these cases, the result is abrupt move-outs etc... I understand you inherited this, did you inherit the PM company as well? I would say this is more poor management, not having a quality system in place, not being disciplined, many lessons come out of this occurrence, to be frank with you, if the cost of the lesson is (4) months lost rent, I would chalk it up as an inexpensive learning experience. Discuss the failures with the manager and see what happened, perhaps you need to pivot to the alternate manager if systems and controls are not being enforced.

Does fired property manager owe me money for...

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