PM Company Making me Pay the Utility Bill

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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!

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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.  

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  • Josh C.Pro Member
    Property Manager · Indianapolis, IN · Member since 2010 · 1k+ posts · 1k+ votes
    7y

    Not sure about your area, but here you can’t “put” the utilities in someone else’s name. Only your own or your company. So you can’t force a tenant to take utilities. Also, you really don’t want to cut of water or gas in my area as they are tough to get back on. Plus tenants back out of lease signing all the time so you may cut them off hoping someone is going to sign

    And then they back out and the house has no heat or Ac making the showings tough. Can’t ever turn off gas in the winter. Shouldn’t happen often but is one of those things. Just like a tenant who’s never been evicted before not paying one month of rent. I don’t understand but it does happen. $200 is too bad and hopefully the turnover is just a cleaning.

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

    Thanks again to everyone who has contributed to this post.  It seems as if the common theme is there really is no definitive answer that everyone(owners and PM’s) can agree upon which means these instances should be taken on a case by case basis and some sort of governance should be in place in the contract.  We hav resolved the issue and have moved on.

    I would like to address the individuals who’ve brought up the “in business, there’s no room for feelings” theme.  As a business owner(my wife and I own a gym as well) it is my sole responsibility to ensure my member’s satisfaction, within reason.  If a member feels as if they are being wronged it is my responsibility to make that wrong a right for them, again, within reason.  Without my members, I have no business.  This is the new age of doing business.  Owners and managers don’t “rule with an iron” fist any longer and those who do get exposed very quickly.  It’s much easier to catch flies with honey than it is to catch flies with vinegar.

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

    @Rob Jones whenever utilities are put in my name, and a tenant moves in, regardless of what the PM does, I just call the utility company and verify it’s been switched or or I just shut it off in my name. That’ll solve this problem.

    1Reply
  • Santiago Grossy
    Property Manager · Miami, FL · Member since 2019 · 2 posts · 1 vote
    7y

    Review your contract first and your lease with the tenant second. See what the lease contains and who it makes responsible for the utilities.

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

    @Caleb Heimsoth

    The utilities were never put in my name.  When a tenant moves out the Property Management company puts the utilities in their name until a new tenant moves in.  Once a new lease is signed with a new tenant the PM company verifies the new tenant has placed the utilities in his or her name prior to being given the keys.  That’s the issue here...the PM company did not verify the tenant had the utilities in their name prior to being given the keys.  The utility bill in question has the PM companies name on it....not mine.  But the utility bill period was for the first full month the new tenant was in the house.

    0Reply
  • Patricia N.
    Member since 2019 · 20 posts · 19 votes
    7y

    We had a situation where all the utilities were verified on move in and then roughly 6ish weeks later when we are opening the utility bills they mysteriously reverted back into our name. We called both utility companies and one relayed a stop change had been placed the next day and the other blamed it on a "billing discrepancy". Basically the tenant scammed us. These things do happen and sadly because of the lag in billing it can take well over a month to figure out. While its rare you cant 100% assume the PM dropped the ball. 

    0Reply
  • Natalie Schanne
    Real Estate Agent · Princeton, NJ · Member since 2016 · 1k+ posts · 1k+ votes
    7y

    @Rob Jones - thoughts -

    1. PM shouldn’t collect placement fee for tenant who doesn’t pay anything besides the move in deposits nor any monthly fees. Or your next placement should be free. Make sure fees in contract are on collected rent not theoretical.

    2. What’s wrong with their system that they couldn’t predict this person was bad news? The average person doesn’t NOT PAY so fast unless they get into a car accident right away, etc. Why didn’t they file for eviction on day 2 or day 5/6 of the 2nd month? Have they gone to your property to ask for the money or get a negotiation on when the person will leave? Any info or pics of damage?

    3. How close are you to these properties now? Can you self manage them and hire out a handyman type part time to fix stuff across your portfolio to keep drama/calls to you minimized? Or keeping your pm, can you get more of a say with the tenants placed? Did you say go ahead with this tenant and then the tenant failed to perform? My friend says he carefully chooses his tenants (usually focusing on high income but maybe non perfect credit) and spends very little time managing his 10 properties. Average person / family stays 5+ years.

    1Reply
  • Kimberly H.
    Residential Real Estate Broker · Chicago Suburbs, IL · Member since 2013 · 1k+ posts · 594 votes
    7y

    I'd be way more concerned about how they placed a tenant who never even paid anything upon moving in. 

    0Reply
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