PM Company Making me Pay the Utility Bill

85 Replies

Hello BP,

I'm in a situation that I'd like to hear from other owners on.  The PM company I use placed a tenant in one of my properties with a lease start date of May 1st, 2019.  The PM company told me everything checked out on the background check so they were approved to move in.  All good things.  Long story short the tenant moved in and never paid another dollar.  We started the eviction process during the middle of this month.  I understand stuff like this happens...it's part of owning rentals.

The issue I'd like feedback on pertains to the tenant's utility bill.  Upon move in either the PM company or the utility company did not switch the utilities into the tenant's name.  Needless to say this tenant ran up a huge utility bill(over $200) and my PM company saddled me with that bill.  They went as far as to taking the money out of rent I received from another property to pay for said bill.

My question to the group is....is this my bill to pay?  Am I wrong for requesting this money be refunded to me from my PM company?  The way I see it, either the PM company dropped the ball in making sure the tenant had the utilities in their name or the utility company dropped the ball in changing it in a timely manner.  Either way...I am not at fault here and I see it as being very unreasonable that my PM company make me pay.

Side note---By default, whenever a property turns over the utilities get placed in the PM company's name. This bill was not in my personal name or my LLC's name.

I'd love for anyone to either validate my perspective or provide me with a new one.  Thanks in advance!

I don't use PMs so I cannot say what's right. If it's the PM's obligation to ensure utilities have been moved over, that's on them. And do they have the right to collect from another property of yours? (I don't know what sort of agreement you have with them).

Perhaps it's time to shop for a new PM.

Hi Rob,

It's probably best to look at your contract with the PM Co. and see what it says about this.

Good Luck!

@Scott Mac

Nothing in our contact governs this.  I read through everything today.  

@Tchaka Owen

Unfortunately I moved away from my properties and kept my full time job so it made more sense, at the time, to move everything to a PM.  There isn't anything in the contract that says they can pull from another property....but there also isn't anything that says they cannot.  Being a person that works full time in a client facing role, if I knew my company or one of the vendors we worked with were at fault, I would not allow the client to have to pay for that.

My wife and I talked about this situation earlier today because, for some reason, I'm much more bothered by this than I should be.  She compared this situation to someone going in a department store, buying a pair of pants, taking them home, then realizing there was a hole in them.  Upon discovering the hole, the customer returns the pants to the store for a refund.  At that point the store says "it's not our fault, it must have been the manufacturer that put the hole in them" and refusing the refund the customer their money.  In this situation, the customer is definitely not at fault.  The store may be at fault or the manufacturer may be at fault.  We don't know. Either way, we know the customer isn't at fault and it wouldn't be ethical for the store to say "it wasn't me so I'm keeping your money."  

In my situation, my PM told me that it could have been the utility company that dropped the ball or it could have been his team.  Either way, it wasn't me that dropped the ball so I don't see it as being reasonable that I should I have pay for someone else's mistake.  When I requested that he refund me the money while the situation was sorted out, he got an attitude with me and got really short.  I could tell he wasn't happy with me.  It's not an honest way of doing business and it worries me about the overall relationship moving forward.

@Rob Jones , should you have to pay this bill? Well the short answer is no, but from a legal standpoint if the utilities were in your name and the management company failed to make sure that services were transferred, then your on the hook for these fees. 

If your management company is any good, they will admit fault and make it right but ultimately you are responsible for the fee. In the future, when you property gets rented call the utility company and place a cut off of services. Usually a day or two after the tenant moves in.  

Hi Rob, I've spent a lot of time on both sides of this (ownership and PM), and sadly payment of this bill is always going to come out of your end. It sounds like you called the PM and tried to get them to cover it - and that was certainly the right move to try, as sometimes you can get them to split it with you. But despite the error of not correctly getting the bill changed to the tenants name - the bill itself falls into their responsibility of paying out of the property's accounts. There likely is a section in your PM agreement about payment of taxes, insurance, and other encumbrances - this bill falls into that last portion.

It sounds like you might have a PM with a large portfolio under management, of which your property/ies is/are a small piece? Perhaps find someone with a closer match in size to yours - you'll always get better attention/service from a PM who's portfolio is "appropriately sized" to your own.

@Stephen Akindona

The utility bill was in my property management company's name...not my name or my LLC's name. Does that change your perspective from your previous statement?

Also--to your second point, the reason I pay a property management company is so I can alleviate my need to have to manage my own properties.  I would consider calling my utility company and placing a cut off on my services for each and every rental property every time there is turnover as being a duty of managing my own properties.  

I've got a full time job and a family.  Paying a PM to manage my properties is a cost of doing business for me that I'm happy to pay.  If, and only if, it's done the right way.

@Travis Lloyd

Thanks for that perspective.  I guess the reason why I think it's right to refund the money is because I've tried my best to turn the situation around and put myself in the PM's shoes.  If I placed a tenant that moved in, never paid a dime, racked up huge utility bill(and this is truly a huge utility bill...the place is only 1k square ft), and was then evicted....all within a month, I would help ease the blow of that situation for my client by taking the fall for the utility bill since it was absolutely not the fault of the owner that it wasn't validated that the tenant had the utilities in their name prior to being given the keys to the house.  At the end of the day I would have realized that my PM company did not do our due diligence to ensure beyond the shadow of a doubt the tenant had put the utilities in their name and yet we still gave them the keys to the property.  Also, the fact that my PM made me feel like I was in the wrong for asking for my money back while they sorted things out with the utility company also made me realize that he may not be as sold on having satisfied client as I once thought he was.

So a few things to note: its possible the PM DID put the utility bill in the tenants name. In many utility companies, if they never receive a payment or any response to correspondence for a tenant, they will put the charges BACK on the house account. So that is a possibility.

The fact that you're not getting any explanation of how, or any advance notice - simply discovering the charges in your statement is what again points me to a size mismatch. Find a smaller PM who can give you a bit more personal touch. I worked for an NYC firm with over 2k units under management - and the owner with 300 of those units gets the most attention. The owner with 2-3 got the barebones... its just the way of it. Now I'm back to small and private - and they all get that attention.

@Rob Jones is the bill in your name? If so it’s your bill. I would have verified that the utilities were out of your name when they moved in.

200 bucks isn’t that bad really. You’re going to spend a lot more on the turnover, after the eviction. Last year I had tenants stick me with 800 bucks of water/sewer bills. It happens. 200 is nothing.

Also just curious, is this local in Raleigh? If it is, is recommend a new property manager. Let me know if you want any recommendations

@Travis Lloyd

Great points. That could be the situation but, to your point, I was left in the dark with no explanation. It wasn’t until I dig deeper that someone looked into the bill.

Right now his company manages 300 doors. I own 7 of them. In the grand scheme of things 300 isn’t a lot in a big city but, this isn’t a big city. Only about 100k population. With him managing 300 he may have other owners that are more of a priority. I just like to treat everyone the same, regardless of whether I make $10 or $10,000 off of them. It’s just the right thing to do.

Someone should have confirmed that they were changed to the tenant.  That added to the tenant not paying any rent and going through an eviction...talk to your PM company and see what they say.  At a minimum, it should come out of the security deposit and go back to you.

Not disagreeing with how it should be run - just saying how it often happens at larger firms - or even a mismatch of asset classes. I knew of a firm that was 80% condos, and most owners of the remaining 20% multis had fairly long lists of complaints about the management. There are a lot of factors really - but the match between the owner and PM is as import a match as the tenant to the unit. 

The PM should have a process to ensure that utilities are transferred or cut off at move in; otherwise, they have to constantly back-bill the residents.  Ignore the ambiguous replies above...this is clear cut.

@Caleb Heimsoth

The bill was in the PM companies name. Not mine.

I like to think that every dollar is important. I don’t come from money and I work very hard for the money I do have. I take my business seriously and that means taking my money seriously as well. If I scoffed at $200 that $200 would turn into a wasted $400, then a wasted $600, then maybe more. It would create a bad habit that I don’t want to create. It would also set the expectation with my PM that I don’t care about my business and that I’m free with my money. That could open me up to being taken advantage of and I don’t want that to happen.

@Rob Jones , if the bill is in the property managers name then you should hold them responsible to pay this bill. Also you have hired a PM but there are certain aspects that you have to keep a watchful eye on. This fits into that for sure. This happens a lot where utilities are on in the owners name and never gets switched over when the tenant moves in. You must watch this even with a pm. 

Originally posted by @Rob Jones :

@Caleb Heimsoth

The bill was in the PM companies name. Not mine.

I like to think that every dollar is important. I don’t come from money and I work very hard for the money I do have. I take my business seriously and that means taking my money seriously as well. If I scoffed at $200 that $200 would turn into a wasted $400, then a wasted $600, then maybe more. It would create a bad habit that I don’t want to create. It would also set the expectation with my PM that I don’t care about my business and that I’m free with my money. That could open me up to being taken advantage of and I don’t want that to happen.

That’s not your bill then and I’m guessing you need to start looking for a new PM. 

This after placing a bad tenant and immediately having to evict them? That’s not great.  You’re probably cash flow negative this year now. 

@Stephen Akindona

I had hoped that I wouldn’t really have to worry about much with this PM company. They seemed to operate really well and have processes in place to prevent something like this from happening. I understand we’re all humans and things happen but I was just hoping for him to take responsibility and ownership when his company dropped the ball.

I will add that he has told me he’ll refund me the money. Although I appreciate him doing that he got an attitude with me when I justified my ask. If he feels I’m in the wrong on this and there was something in our agreement that would back him up, I’d lick my wounds and take it on the chin and pay for the bill.

@Caleb Heimsoth

Yep I am in the red on this one and others he manages. He’ll be making more on the portion of the portfolio he manages this year than I will.

Originally posted by @Mike Dymski :

The PM should have a process to ensure that utilities are transferred or cut off at move in; otherwise, they have to constantly back-bill the residents.  Ignore the ambiguous replies above...this is clear cut.

 Agreed. We don't turn over keys until security deposit, first months rent, and proof utilities have been switched over is provided by the tenant.

The nonsense that the utility company dropped the ball is crap - these are companies that spend millions of dollars to refine and automate their processes. Even if the utility DID mess up, the PM should have caught that.

But nonetheless, lets keep things in perspective, you might just need to eat this one and take your business elsewhere (since its only $200).

@Rob Jones , you CAN do the PMing yourself.  Just get a homeowners warranty for the repairs and pick your own tenants. 

If your places are reasonable, they will rent themselves.  It sounds like your PM is willing to take the first person with a pulse.  And THAT's why he is making more $$$ than you are.

Change the dynamics!

@Alan Grobmeier

I used to manage the properties myself and it got to be too much to handle with a full time job. I had 4 at that point and I was living in Seattle. These properties are in NC. I’m back in NC now and currently have 8 properties. Still working full time and now have a baby. My hourly pay in my day job is much higher than what I’d get in return from my rentals so it’s much more efficient for me to focus my time and efforts on my day job than to manage my rentals right now. All this being said, I do live in NC now so having my wife and I manage them like we used to is absolutely an option. No one will ever take care of your properties like you will!

@Rob Jones , I managed as many as 9 properties and had a full time job that sometimes sent me out of the country.  The easiest way for me to handle it was to automate stuff as much as I could and get me out of the 'middle'. 

I got things to the point where I spend more time with my CPA than my tenants on a per year basis, which was really good.  :-)

I'm 'down' to 6 now & it takes me minutes per month.  My average tenant stay is around 5 years, so turns are minimal.  IMHO it's key to limit 'turns' vs profit.  I rent my places for slightly under market so I choose my tenants that meet my needs/goals.   

Although many believe home warranties are 'useless', I found them to be a good 'first line of defense'.  My tenants contact the warranty company, not me.  If something is really bad, the warranty company will contact me anyway.  

And you're right!  NO one will take care of properties like you will.  

Create Lasting Wealth Through Real Estate

Join the millions of people achieving financial freedom through the power of real estate investing

Start here