PM Company Making me Pay the Utility Bill

General Landlording & Rental Properties
7yFollow

PM Company Making me Pay the Utility Bill

Rob Jones
Rental Property Investor · Raleigh, NC · Member since 2016 · 109 posts · 59 votes

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!

2Reply
213 views

Most Popular Reply

Stephen Akindona
Investor · Memphis, TN · Member since 2013 · 741 posts · 845 votes
7y

@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.  

11Reply
See this reply in the discussion

85 Replies

Jump to latestLatest
  • Rob Jones
    OP
    Rental Property Investor · Raleigh, NC · Member since 2016 · 109 posts · 59 votes
    7y

    @Garrett Pearson

    That's a really good idea.  Thanks for that!

    0Reply
  • Caleb Heimsoth
    Rental Property Investor · Durham, NC · Member since 2016 · 7k+ posts · 7k+ votes
    7y

    @Rob Jones what part of eastern NC is this in?

    0Reply
  • Chris Martin
    Investor · Willow Spring, NC · Member since 2009 · 5k+ posts · 3k+ votes
    7y

    If you are between tenants, most PMs want utilities on for a 'make ready', even if there is minimal work done. In late spring, you may want the A/C on. You may want water on for 'final clean.'  Most PMs take care of this by placing utilities in a landlord/manager account that keeps utilities on during vacancy. Everyone in the industry knows how this works. When tenants move in, as pointed out in prior posts, the process makes sure that utilities are switched before or at lease signing. This may or may not have happened, perhaps that's the gist of the post. Regardless, there is still a bill for the 'make ready'. In the Raleigh area (not sure if that's where the property is … I think not based on the 100K comment) the fees for just transferring utilities, even if for a day, are $50 for water and $17 for electric. If the A/C is on for a week or so while the unit shows, then the bill will be more than $17, maybe a lot more. So, without seeing the bill(s) and their service dates, I can't conclude anything. $200 to me doesn't sound outrageous unless new facts come to light I've not seen. 

    What do I think? The OP is pissing into a fan. I don't know why people would do such things, but it happens. 

    In rental real estate, you either manage the property or you manage the manager. The former is an inanimate object the latter is a person. Two different worlds, really. From afar, it sounds like the OP is micromanaging. I know (in an earlier life;) how I handled being micromanaged. Hopefully you and the manager can work this out. 

    2Reply
  • Rob Jones
    OP
    Rental Property Investor · Raleigh, NC · Member since 2016 · 109 posts · 59 votes
    7y

    @Caleb Heimsoth

    Greenville

    1Reply
  • Russell BrazilBusiness Member
    Moderator
    Real Estate Agent · Washington, D.C. · Member since 2012 · 17k+ posts · 30k+ votes
    7y

    PM companies manage, they dont take on the liabilities of the owners.

    [email protected]301-893-4635Podcast Guest on Show #192
    District Invest Group546 Reviews
    WebsiteView Page
    4Reply
  • Rob Jones
    OP
    Rental Property Investor · Raleigh, NC · Member since 2016 · 109 posts · 59 votes
    7y

    @Russell Brazil

    What does that comment even mean? And how does that add any value to our conversation?

    4Reply
  • Russell BrazilBusiness Member
    Moderator
    Real Estate Agent · Washington, D.C. · Member since 2012 · 17k+ posts · 30k+ votes
    7y
    Originally posted by @Rob Jones:

    @Russell Brazil

    What does that comment even mean? And how does that add any value to our conversation?

     It means the utility bill is your liability, not the PM company.  It adds value by giving an answer to the question that you posed. 

    [email protected]301-893-4635Podcast Guest on Show #192
    District Invest Group546 Reviews
    WebsiteView Page
    3Reply
  • Anthony Rosa
    Rental Property Investor · New York City · Member since 2019 · 703 posts · 538 votes
    7y

    Look at it as a win win for you. For $200 you got rid of a no good tenant and you can get a new PM.  That was a cheap buy out and killed 2 birds with one stone. 

    0Reply
  • Rob Jones
    OP
    Rental Property Investor · Raleigh, NC · Member since 2016 · 109 posts · 59 votes
    7y

    @Russell Brazil

    Isn’t it also the PM’s responsibility to place a tenant that won’t default in less than a month?

    1Reply
  • Rob Jones
    OP
    Rental Property Investor · Raleigh, NC · Member since 2016 · 109 posts · 59 votes
    7y

    @Anthony Rosa

    Well it’s going to cost me a lot more than $200(loss of rent, not sure if they damaged anything, court costs for the eviction, etc) but that’s definitely a glass half full kind of perspective!

    0Reply
  • Russell BrazilBusiness Member
    Moderator
    Real Estate Agent · Washington, D.C. · Member since 2012 · 17k+ posts · 30k+ votes
    7y
    [email protected]301-893-4635Podcast Guest on Show #192
    District Invest Group546 Reviews
    WebsiteView Page
    7Reply
  • Anthony Rosa
    Rental Property Investor · New York City · Member since 2019 · 703 posts · 538 votes
    7y
    Originally posted by @Rob Jones:

    @Anthony Rosa

    Well it’s going to cost me a lot more than $200(loss of rent, not sure if they damaged anything, court costs for the eviction, etc) but that’s definitely a glass half full kind of perspective!

     True, it would cost you more but that goes with any eviction and turnover. So, it's fix the place up and for $200 you bought out the bums.

    0Reply
  • Steve Smithy
    Boston, MA · Member since 2008 · 149 posts · 57 votes
    7y

    Wow there is a lot of back and forth on this.  The answer is simple.  CHANGE PROPERTY MANAGER ASAP!  You won't get your money back, you could go fight them but you will waste time/effort/brainpower on something that won't be worth it.  Take your business elsewhere, there is no debate here.  It clearly wasn't your fault and the PM sounds crappy.  You are technically correct,  but you'll spend far more than you will ever get back.  Post a review about the PM to at least warn others.

    5Reply
  • Steve RozenbergPro Member
    Specialist · Houston, TX · Member since 2015 · 1k+ posts · 1k+ votes
    7y

    @Rob Jones

    Hi Rob I could tell you the right thing to do and then I can tell you what the legal thing is in my opinion

    the right thing to do would be for the property management company to somehow come up with an agreement to either reimburse you fully or help split the the cost of the utility bills.

    I will say though that legally it is your responsibility as the owner of the property and it is probably written in the management agreement that you are ultimately responsible for utility bills. this may be a good time to have a conversation with the property management company and make sure that you guys are on the same page and have the right expectations for your business model and if not this may be the time to part ways 

    0Reply
  • Rob Jones
    OP
    Rental Property Investor · Raleigh, NC · Member since 2016 · 109 posts · 59 votes
    7y

    @Steve Rozenberg

    Thanks for the response.  It’s good to hear from a PM on the situation.  If we dig deep into the agreement I’m sure we would find something stating that I “may” be held liable for the utility bill in a normal scenario. The PM and I agree that this is not a normal scenario.  He even went as far as to tell me that “nothing like this has ever happened before”.  If that’s true then we both can consider this a one off and, as a business owner myself, I ere on the side of ensuring my clients are happy in one off situations.  I want to add that he did, in fact, agree to refund me the money.  He has done the right thing in this scenario at the end of all of it.

    Thanks everyone for the input.  This is exactly what I was hoping for when I made this post!

    0Reply
  • Ian WalshBusiness Member
    Lender · Philadelphia, PA · Member since 2016 · 2k+ posts · 1k+ votes
    7y

    It depends on the contract you have with them .

    0Reply
  • Steve RozenbergPro Member
    Specialist · Houston, TX · Member since 2015 · 1k+ posts · 1k+ votes
    7y

    @Rob Jones

    I have learned as an investor as well as a customer of my own company that this is the sand box we chose to play in when we became investors. We don’t give them the profits if the property doubles in value over time so it kind of slides both ways. Good and bad.

    It’s like if the airline flight is delayed and you miss an important meeting and do not get the job, they don’t pay your Salary due to them running a bad airline operation. 

    I get it’s not the same, but these things are small in comparison to why I am even an investor.  I am doing this to build wealth for my family over long term. Over time this will be an blip on the radar of your success.. good luck my friend 

    4Reply
  • Alan Grobmeier
    Rental Property Investor · Phoenix, AZ · Member since 2013 · 919 posts · 911 votes
    7y

    @Rob Jones, I have to seriously wonder about the management company.  In most instances they charge the first months rent as a finders fee plus a percentage of the take per month.  If that was the case, they have collected ALL the money and you have gotten nothing.

    And if/when they put in the next tenant, they will collect 1st months rent as their finders fee again.  Sounds like a great scam to me.  Where do I sign up?  ;-)

    Security deposit, IF there was one, will be eaten up by eviction costs and then some.  

    It makes me wonder what the criteria was for placing a tenant in your property?  Heartbeat?  Human?  Can count to 20 using fingers and toes?  Did the tenant go thru a background/work history to determine that he/she could afford the property?  Definitely a 'WTF'.  

    I have been a landlord for over 20 years and have not done an eviction, let alone not been paid on 'month 2' of a lease.  

    0Reply
  • James Wise
    Real Estate Broker · Cleveland Dayton Cincinnati Toledo Columbus & Akron, OH · Member since 2013 · 30k+ posts · 20k+ votes
    7y
    Originally posted by @Rob Jones:

    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!

    Tenants don't always do what they are supposed to. Welcome to the land-lording business. Of course it's your responsibility to pay! You own the property. Everything that ever happens at one of your properties will ultimately come down to your financial responsibility.

    2Reply
  • Alan Grobmeier
    Rental Property Investor · Phoenix, AZ · Member since 2013 · 919 posts · 911 votes
    7y

    @Russell Brazil, although your statement is true, 'PM companies manage, they dont take on the liabilities of the owners', it would appear to me that THIS PM did not due diligence on the background of this renter.  

    The PM, IMHO, created this liability on the owner.  ALL things are seen thru credit/background checks and interviewing possible tenants.  

    If the tenant possessed some type of sub-500 credit score, that's monster red flag. Not necessarily to not rent to, but to mitigate possible losses by increasing security deposits.  And/or informing the owner that there is a possible tenant, but the credentials are kinda sketchy, just out of jail, etc.

    Bottom line is there probably more to this story than meets the eye.  There always is 2 or 3 sides every story.  Maybe this is a D/F class property and all you can ever expect is a rotating turnstile.  ;-)  We really don't know 'everything'.  

    1Reply
  • Joshua Howaniec
    Contractor · Indianapolis, IN · Member since 2016 · 267 posts · 144 votes
    7y

    @Rob Jones sounds like this disagreement might be a loss. It could be time to A) eat the the bill and alter contract to change the terms and responsibilities of the PM and or B) change the PM to someone who will take said responsibility.

    0Reply
  • Christopher Thrash
    Developer · Meridian, MS · Member since 2016 · 3 posts · 0 votes
    7y

    @Rob Jones, I agree with Stephen Akindona, but a good PM should not issue the key to a tenant,  until transfer of utilities confirmation has been confirmed by PM.  To correct this I would not allow PM to issue Key to property until tenant can prove or you give permission that utilities have been transferred.  

    Christopher Thrash

    0Reply
  • Billy Smith
    Shawnee Mission, KS · Member since 2016 · 716 posts · 313 votes
    7y

    This is a common issue with utilities, most of the time the PM must make sure the renters have put it in their name. Almost all the time the issue is the renters not doing what they are supposed to do.

    Sounds you have professional tenants that played the system.

    Your PM saying, they have never had this happen is hard to believe.

    Pay the bill your or on the hook.

    0Reply
  • Anthony Wick
    Rental Property Investor · Ankeny, IA · Member since 2017 · 2k+ posts · 3k+ votes
    7y

    @Rob Jones  I would simply ask the PM if they are willing to lose your entire business over their $200 mistake? And to Russell Brazil, what exactly is this PM's job then? So easy to just dismiss this as the owners bill, but the PM clearly are not doing the job they are paid for. The PM company simply "did not manage", which is their job. 

    1Reply
  • Jason Goretzki
    Fort Lauderdale, FL · Member since 2016 · 214 posts · 95 votes
    7y
    Originally posted by :

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

     Before choosing a PM, I had my lawyer preview contracts since he would be the one handling discrepancies.  Do you have a lawyer in the local area of your properties?

    0Reply
Join the conversationCreate a free account to reply, vote on answers and follow this thread.
Log InJoin for Free