Fraudulent transactions on rent collection

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Fraudulent transactions on rent collection

Krishna Raghavulu
Investor · Concord, NC · Member since 2016 · 3 posts · 0 votes

My property Management company collected rent from a tenant through a credit card for over 3 months after which they found out that the credit card  was a stolen one and hence they had to refund the money to the bank for the fraudulent transactions. Now my property management company is asking me to pay back the 3 months of fraudulent transactions money back. They are now evicting the tenant which will result in another 3 months of rent loss, resulting in more than 6 months rent loss for me. I am not happy that my Property management company accepted the payment through credit card and that I have to incur the loss now. Is there any option to minimize my losses here? Am I supposed to refund the money to the property management company? 

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Theresa HarrisPro Member
Member since 2019 · 15k+ posts · 11k+ votes
7y

Not sure what you should do for the last 3 months, but going ahead tell the PM that you will not accept credit card as payment.  I can't even imagine putting rent on a credit card, then again I remember when you couldn't use a credit card at the grocery store.

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  • Kyle MccawBusiness Member
    Property Manager · Keller, TX · Member since 2011 · 1k+ posts · 1k+ votes
    7y

    This is the risk in accepting credit card payments. Almost all professional property managers accept cards and rarely do we see fraud issues. Unfortunately this is part of the risk of owning rental units. I'm not sure about North Caroline, hopefully a judgement aginst the tenant will help recoup the loss. 

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  • Krishna Raghavulu
    OP
    Investor · Concord, NC · Member since 2016 · 3 posts · 0 votes
    7y

    Thanks Kyle for the quick response. The bank reversed the transactions from the property manager and now my Property Manager wants me to refunds those funds. My question is why should I take the loss. Is nt it the responsibility of the property manager to collect the rents and deal with all the disputes? It is not fair for the property manager to come back after 3 months and ask me for a refund.

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  • Theresa HarrisPro Member
    Member since 2019 · 15k+ posts · 11k+ votes
    7y

    Not sure what you should do for the last 3 months, but going ahead tell the PM that you will not accept credit card as payment.  I can't even imagine putting rent on a credit card, then again I remember when you couldn't use a credit card at the grocery store.

    1Reply
  • Laura Kayes
    Property Manager · San Antonio, TX · Member since 2018 · 75 posts · 70 votes
    7y

    Hi @Krishna Raghavulu,

    First, read your PM agreement and see if you can find any answers within that regarding credit card payments, refunds ect. 

    Second, fire the PM immediately. Find another PM company to take over and get the eviction process started as soon as possible. When you find the next PM, ask what methods of payment they accept and ask a lot of questions before signing with them. Read the agreement carefully. 

    In my opinion, you are not responsible for the credit card transactions. You're not the renter and you're not the one responsible for paying rent. The tenants are. 

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  • Elliot Galpern
    Member since 2018 · 24 posts · 14 votes
    7y

    I would go after the tenants criminally as well. You provided housing which they had no intentions of paying for by using the stolen credit card. 

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  • John Thedford
    Real Estate Broker · Naples, FL · Member since 2013 · 9k+ posts · 6k+ votes
    7y

    you need to spend 15 minutes with an attorney and get answers to your questions

    1Reply
  • Krishna Raghavulu
    OP
    Investor · Concord, NC · Member since 2016 · 3 posts · 0 votes
    7y

    Thank you all for your comments and suggestions. I am planning to consult an attorney and get an opinion. I would greatly appreciate any reference for a good attorney who can help me in this situation. Thank you!

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  • Theresa HarrisPro Member
    Member since 2019 · 15k+ posts · 11k+ votes
    7y

    @Krishna Raghavulu 

    I would also ask your property manager why it took 3 months.  The real owner of the credit card should have called the bank and had the card cancelled after the first transaction.  

    1Reply
  • Ravi P.
    Investor · Schaumburg, IL · Member since 2015 · 219 posts · 104 votes
    7y

    @Krishna Raghavulu

    Thanks for sharing your experience. I do not accept cc as a form of payment for my rentals, but I have managed business which accept cc.

    First I would ask the management company for proof of the fraudulent transaction. Do not make it easy for them otherwise they have no reason to improve their practice of being diligent since they feel they would be indemnified by the owners. Once received verify that it is a legitimate issue. Not saying your management company has bad Intentions but there are a small few that exploit the situation.

    Secondly, if it is valid you should she who would be liable according to your contract. It appears that your management company was negligent. Who is accountable in that case?

    Contact your attorney and have the management company also file a report with the police dept if the tenant is still living in the unit. Don't let this blow over. You trusted them to do the right thing.

    Good luck.

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