PM Company Making me Pay the Utility Bill

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Anthony Wick

Rental Property Investor · Ankeny, IA · Member since 2017 · 2k+ posts · 3k+ votes

7y

@Russell Brazil You're taking it to a different level that nobody is presenting. If the PM's job is to make sure the utilities are placed into the tenants name, and if the municipality makes the person responsible for said utilities, then the owner simply would not be liable for this bill. That's the matter at hand. The PM clearly did not do their job, as presented here by the OP. Now, if I missed something pertaining to this exact thread and questions, then I'll listen to that evidence. This was a question about the PM doing their job, not if investing in real estate is risk free. If you feel the PM has zero responsibility here, then we shall simply disagree.

4 Reply

Russell BrazilBusiness Member

Moderator

Real Estate Agent · Washington, D.C. · Member since 2012 · 17k+ posts · 30k+ votes

7y

@Anthony Wick

The utility bill until its in the tenants name is a liability of the owner. Liabilities of the owner are their responsibility to pay. The only person who can open a utility bill in their name is that actual person. Everyone in the thread wants an answer thats fair as opposed to an answer thats correct. Some utility bills such as water still remain the responsibility of the landlord even if its in the tenants name and they dont pay.

You could have a great PM here or a totally ****** pm, and the result would still be the same, the utility bill is the liability of the owner. The owner can feel free to add it to the tenants bill if they seek restitution in court.

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2 Reply

Bob Prisco

Specialist · Cleveland, OH · Member since 2018 · 1k+ posts · 666 votes

7y

@Rob Jones the 1st thing YOU need to make sure is all utilities are transferred to the tenant. The utility co is not aware of a new tenant . Should the PM co reminded you and told the tenant , yes, but they are human errors happens . .

Bigger issue, Why did the PM co move in such a loser ? They should 100% reimburse you the fee, I assume it was one month rent , this will cover the $200 bill, .

Good luck

Rental Property Investor · Phoenix, AZ · Member since 2013 · 919 posts · 911 votes

7y

Anthony Wick

Rental Property Investor · Ankeny, IA · Member since 2017 · 2k+ posts · 3k+ votes

7y

I guess we'd have to see the original contract between the owner and the PM to decide whose responsibility it was to make sure the utilities are in the tenants name. I self manage. In my lease, the new tenants are not given the keys and allowed to move in until I verify all utilities have been transferred into their name. Yes, the utility company will bill me for the water should the tenants move outside the city limits and not pay their bill (if they move inside the city limits the bill will follow them). However, I do have options such as keeping their damage deposit and/or small claims court. Just like the OP may have those same options, or to take the PM to small claims court if the contract was not followed.

But I do agree with several posters here that the PM does have some explaining to do, perhaps starting with their vetting process for a new tenant.

Rental Property Investor · Phoenix, AZ · Member since 2013 · 919 posts · 911 votes

7y

@Rob Jones, if you have 7 doors with this PM and your property manager is making more than you, YOU have a huge problem.

It's your property manager.

He/she doesn't care about you at all. They want the placement fees, project management fees for repairing the place when it turns. I WANT that deal! ;-)

There is ALSO a possibility that your properties are 'hood' class, D/F and the type of tenant that can be attracted is the one month and 'done' type. You bought the property, I'm assuming you know what you bought?

2 Reply

Phillip Dwyer

Real Estate Agent · Henderson, NV · Member since 2011 · 1k+ posts · 550 votes

7y

Am I missing something here? The OP says the tenant never paid a dime. In this case, would it have mattered if the utilities were transferred? There would still be an outstanding bill to the utility company, and typically those bills have to be paid before they will turn on service. Either way, it then becomes the owner's responsibility.

2 Reply

David Hedges

Investor · Crown Point, IN · Member since 2014 · 177 posts · 84 votes

7y

if they never cut over the utilities, yeah.. you are responsible for it.

if by chance it was cut over but the tenant never paid... it depends on the local laws.

I've seen this in my area where local municipalities have laws like this, where if the tenant fails to pay, the landlord or property owner becomes responsible.

If it's Indiana, they just passed a state law (HB1347) that stops this sort of thing, and should be going into effect soon.

Lonnie Davis

Property Manager · Charlotte, NC · Member since 2019 · 2 posts · 0 votes

7y

@RobJones I would certainly recommend you review your PM agreement. The PM company is acting on your behalf with regards to activating the utilities. Part of their responsiblity is to ensure utilities are transferred into the tenants name. Sounds like they failed to do that. Normally, they would apply those charges to the tenant but ultimately the responsiblity does fall onto the owner of the property. I would push back on the PM company. Let them know they failed to uphold their fiduciary responsibilities and you are considering filing a complaint with the Real Estate Commission. That should get their attention.

Randall Weatherall

Real Estate Agent · Memphis, TN · Member since 2019 · 261 posts · 253 votes

7y

I'd say it's on the PM Co. to ensure a service swap within 2-3 days after move-in. If they can show they did that and then the utility company just went back to the other account, like some have said here, then my opinion may change, but you are paying them to manage your units and if they can't handle a utility swap, then that's definitely an issue with them and not your responsibility. There will always be some things an owner needs to take care of/address even with management, but that shouldn't be one of them.

Rob Jones

OP

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

7y

Wow this thread has escalated quickly lol. Long story short is the PM has agreed to refund me the money. He made it right, we’ve had a discussion, figured out how to make it better, and are moving forward for the remainder of our PM agreement.

For those with the question about the classification of the property, the one in question is a B-/C+ class property. This section 8(none of my properties are) nor is it really close to a section 8. It’s an $800/month rent which, in Greenville, NC, is going to attract your $40-65k per year person who may have student loans or a car note or a dent in their credit that would prevent them from getting a mortgage. This place is very close to the hospital which has always worked very well for me.

Mike CumbieBusiness Member

REALTOR® · Brockport, NY · Member since 2015 · 3k+ posts · 4k+ votes

7y

"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'm not trying to sounds mean or harsh so please don't take it that way. Businesses/Owners deal with each other all of the time. Sometimes they will even be suing each other while still working with each other on other projects. It is simply a matter of a disagreement on a contract and they want someone else to figure it out (and it matters enough to get people involved). There is a reason businesses can't go to small claims court and have to go as an individual. It is nothing personal it is a difference of opinion on a contract matter.

Throughout the whole thread there is a whole lot of "personal feelings" and "I am the customer, they should just try and make me happy" writing. Fast food restaurants do that with the public, Retail stores do that with the average customer, cable companies do that with homeowners. Businesses working with businesses have things outlined in a contract. if the contract does not cover this specific situation, then the investor eats it. The contract spells out what they will do. If it is not in there then it's not included. If there was a retail project management company that guaranteed happiness and things done your way, they would cost 40%.

Just my 2 cents and I hope it works out for you

Rental Property Investor · Phoenix, AZ · Member since 2013 · 919 posts · 911 votes

7y

@Rob Jones, I'm glad that the PM made it 'right'. I'm not 100% sure it's still right. I doubt I'd be satisfied.

Their poor choice of tenant cost YOU a lot of money while they made a lot of money. I'd want to at least know what their criteria was to pick a tenant that didn't make it to 'month 2'.

The tenant base you are describing really can't afford an eviction on their record. They will be in the 'hood forever more. And most of these type of tenants know that.

I'm sure you were charged a placement fee upon placement of the tenant. I'm pretty sure they will charge you for the next tenant placement as well.

Rental Property Investor · Phoenix, AZ · Member since 2013 · 919 posts · 911 votes

7y

@Rachel Foster, I have interviewed a number of PM's over the years when I was considering 'outsourcing' my PM.

Basically they are 'boilerplates' that are skewed towards them and non-negotiable. You do what they say or 'pound sand'. The contracts I reviewed were beyond ridiculous. Why would ANYONE agree to some of those terms?

Many that I spoke to would talk a GREAT game, but would not be willing to put the terms in writing. I wonder why? ;-)

James Wise

Real Estate Broker · Cleveland Dayton Cincinnati Toledo Columbus & Akron, OH · Member since 2013 · 30k+ posts · 20k+ votes

7y

Originally posted by @Alan Grobmeier:

@Rob Jones, I'm glad that the PM made it 'right'. I'm not 100% sure it's still right. I doubt I'd be satisfied.

Their poor choice of tenant cost YOU a lot of money while they made a lot of money. I'd want to at least know what their criteria was to pick a tenant that didn't make it to 'month 2'.

The tenant base you are describing really can't afford an eviction on their record. They will be in the 'hood forever more. And most of these type of tenants know that.

I'm sure you were charged a placement fee upon placement of the tenant. I'm pretty sure they will charge you for the next tenant placement as well.

Every tenant out there that's got an eviction on their record has had no evictions on their record at one point or another. The knee jerk reaction to the tenant being evicted doesn't provide for a productive conversation. It's an $800/mo rental. These things are going to happen. Doesn't mean anyone did anything wrong. Cool the jets brotha.

Frances Buerkens

Rental Property Investor · Lexington, KY · Member since 2018 · 40 posts · 26 votes

7y

It's your PM's responsibility to ensure that the tenant puts the utilities in their name - so in my opinion (since your contract does not cover this detail), you should not pay the bill because the PM failed to do their job.

I was in a similar boat recently when the tenant failed to convert the water to their name - and pay their $200 water bill. The PM wanted me to pay the bill so they could add the bill to the tenant's existing rent. I was not comfortable with this solution. The tenant finally converted the water so things are still evolving. It remains to be seen if they paid their bill but it appears that it is no longer in my personal name.

Sometimes land lording is babysitting. Luckily my other tenant who I picked and self-manage is phenomenal.

Steve B.

Engineer · Portland, OR · Member since 2014 · 1k+ posts · 1k+ votes

7y

@Rob Jones what was this tenants credit score?

Stephen Willis

Rental Property Investor · New York, NY · Member since 2019 · 42 posts · 13 votes

7y

@Rob Jones Hey, I saw a lot of round-trip conversations. I feel that this problem will really cost you a lot of money, but there is no way to change a property manager. Clearly your contract may be a reminder, but the next time you sign a contract. It is best to add a clause that they are not entitled to deduct profits from other property to pay the fee without prior approval.

James Wise

Real Estate Broker · Cleveland Dayton Cincinnati Toledo Columbus & Akron, OH · Member since 2013 · 30k+ posts · 20k+ votes

7y

Originally posted by @Stephen Willis:

@Rob Jones Hey, I saw a lot of round-trip conversations. I feel that this problem will really cost you a lot of money, but there is no way to change a property manager. Clearly your contract may be a reminder, but the next time you sign a contract. It is best to add a clause that they are not entitled to deduct profits from other property to pay the fee without prior approval.

A property management company isn't going to agree to anything like that. From the property management company's perspective all of your properties fall under your 1 account. If you owe the company money they are going to take it out of your account. It is irrelevant to them which rental is pushing the account in the green and which one is pushing it into the red. All of the funds in your account can be used to pay your debt to them.

Sachin Amin

Columbus, OH · Member since 2018 · 164 posts · 126 votes

7y

@Rob Jones I had to pay $600 similarly..PM will simply hand over the bill to owner of the property

Christian HansenPro Member

Rental Property Investor · Cary, NC · Member since 2014 · 120 posts · 89 votes

7y

@Rob Jones Hi, as a PM here in the Raleigh area I'll chime in. First, the utility changeover stuff sucks! Theres too many players in the mix.

I think one thing to remember is that I don't believe you or the PM can set up/create a utility account on behalf of the tenants, they have to do that themselves, as their credit gets checked etc. However, the tenants are obligated to setup and pay utilities by terms in the lease, or should be, its definitely stated so in the Standard Form lease used by most here in NC. So, if they don't it's really the same as unpaid rent and should be charged back to them. But I see where you would want the PM to cut the power at a certain date. On the flip side, I will say that I (as a PM) am very careful to make sure power stays on. Because, if there is an ice-maker or ice cubes in freezer with no power they melt, leak out and can really damage the flooring (depending on type). Also when its 100 degrees outside its not good for the house to get that hot inside. At the end of the day really bad tenants like this will cost you money one way or another, better a $200 utility bill than some type of intentional damage that would undoubtably exceed $200 significantly.

There are a lot of variables here but it does clearly sound like the vetting process really was not up to snuff! That, is of course entirely the PM's responsibility and one that can minimize these situations down the road. I find the lease up process to be a super critical step in the whole lease term going well, for everyone involved.

Sorry you had this experience, feel free to reach out if you need anything.

Account Closed

Member since 2019 · 1k+ posts · 1k+ votes

7y

@Rob Jones only way I wouldn’t fire these guys is if they confirmed tenant had util in their name and the tenant switched it out immediately after. Don’t let others stupidity dictate your success.

Jacob Villalobos

Whittier , CA · Member since 2013 · 176 posts · 96 votes

7y

"utility company that dropped the ball or it could have been his team."

PM dropped the ball.

Next time have a preset cut off date for power...

Cheryl Logue

Rental Property Investor · Denton, TX · Member since 2019 · 7 posts · 5 votes

7y

@Rob Jones

You are the PM’s customer. Make it very clear this situation is not ok with you. If they don’t value your business relationship then move on.

If the PM won’t at least split the bill with you, then find a new PM. Get clearer on these kind of terms with new PM.

Good luck!