Can property management make landlords pay fees not approved?

8 Replies

I am a young landlord just renting out my first property. My property management company has been less than transparent, from my perspective. They have charged me for fees that are a surprise on my statement - and when I ask them about it - they claim that my last account administer (who has since left the company) told them that I had approved it but never did the due diligence of double checking with me. Are they allowed to charge me for fees that I never approved? If not, how can I get my money back as they are holding it?

I have also been charged a couple of fees that I DID approve, but was given the impression they would be small cheap jobs, but then when the bill came they were much more. 


Every month when the statement comes I've have charges I did not recognize, and the math never adds up correctly in the end. I end up having to call and speak with multiple representatives just to get to the bottom of it. 


I'm getting to the end of my rope, and wondering how I can switch companies smoothly even though the tenant signed a lease with this company. Please help! And if you know of any great companies in the Baltimore area, please do let me know! Feeling a bit at a loss of what to do, and powerless. 

Thanks so much! 

Best, 


Julia

Step #1.  Set up an approval process where everything is written moving forward.  Meet with your PM in person if you can and build a relationship.  You will quickly know if it is a relationship you want to keep or not.  Remember the PM works for you and they should act like it.  Not sure what they can or cannot charge for as I dont know your Property Management Agreement.  Do you guys have a PMA?

They could have an exception for emergencies like the monoxide detectors are not installed or if they are and monoxide is leaking into the house from a cracked heat exchanger or non functional flue liner leading to an emergency safety situation and you were unavailable and didn't respond.  For those its really non negotiable.  You have to realize if a tenant dies its on them too.  Otherwise they should get authorization.  Most contracts say upto a certain amount is ok then authorization after that for most repairs.

@Julia Bolt

Read your contract.  Typically you authorize repairs up to a certain amount without checking with you.  You need to set the amount.  If you feel the charges are excessive or they can’t justify the numbers you will need to move on to another PM.  

I would first read the property management agreement. If they are indeed doing something that they should not do and not willing to change, then I would look for another property management company. 

The law typically requires a property manager to disclose any fees. Read your contract closely and ask your PM to explain anything you don't understand. If they are unable/unwilling to provide you with a clear explanation, that's a red flag.

Some of this could be innocent. For example, the PM gets a call that the toilet is clogged. Your management agreement says the PM can hire a plumber for jobs estimated to be less than $200 so he calls a plumber. The plumber gets there and discovers tree roots in the sewer line so it takes longer than anticipated and your bill comes in at $360. That's not uncommon.

All I can say is make sure you have a clear management agreement and that you understand it. If not, it may be time to investigate other property managers and find one that's willing to educate you and communicate more clearly. Here's my guide to finding a property manager:

Remember: cheaper doesn't mean you'll make more money.

You can start by going to www.narpm.org to search their directory of managers. These are professionals with additional training and a stricter code of ethics. It's no guarantee but it's a good place to start. Regardless of how you find them, try to interview at least three managers

1. Ask how many units they manage and how much experience they have. If it's a larger organization, feel free to inquire about their different staff qualifications.

2. Review their management agreement. Make sure it explicitly explains the process for termination if you are unhappy with their services, but especially if they violate the terms of your agreement.

3. Understand the fees involved and calculate the total cost for an entire year of management so you can compare the different managers. It may sound nice to pay a 5% management fee but the extra fees can add up to be more than the other company that charges 10% with no add-on fees. Fees should be clearly stated, easy to understand, and justifiable. If you ask the manager to justify a fee and he starts hemming and hawing, move on or require them to remove the fee. Don't be afraid to negotiate!

4. Review their lease agreement and addenda. Think of all the things that could go wrong and see if the lease addresses them: unauthorized pets or tenants, early termination, security deposit, lease violations, late rent, eviction, lawn maintenance, parking, etc.

5. Don't just read the lease! Ask the manager to explain their process for dealing with maintenance, late rent, evictions, turnover, etc. If they are professional, they can explain this quickly and easily. If they are VERY professional, they will have their processes in writing as verification that it is enforced equally and fairly by their entire staff.

6. Ask to speak with some of their current owners and current/former tenants. You can also check their reviews online at Google, Facebook, or Yelp. Just remember: most negative reviews are written by problematic tenants. The fact they are complaining online might be an indication the property manager dealt with them properly so be sure to ask the manager for their side of the story.

7. Look at their marketing strategy. Are they doing everything they can to expose properties to the widest possible market? Are their listings detailed with good quality photos? Can they prove how long it takes to rent a vacant property?

This isn't inclusive but should give you a good start. If you have specific questions about property management, I'll be happy to help!

@Julia Bolt like most have noted... look over your agreement. Moving forward whether with this or another PM make sure that any 'approvals' or 'declines' on workorders are done in writing... email will do. As far a cheap jobs coming in higher than initially quoted I agree with @Nathan G. could be justified if after the contractor arrives on scene there are complications during the repair... it may quite honestly be an attempt by your PM trying to save you $ and getting your property taken cared of. Additional charges are never good, they should be pretty simple to understand, what kinds of additional charges are you seeing?  

Sounds like you need a new property manager or manage yourself. I'm a new investor and didn't feel comfortable with any property managers so I'm managing myself. Its been pretty smooth so far. I have been creating processes to manage and I am learning a lot about managing. To learn more about management you should read Brandon Turner's book on managing rental properties. Its good for managing yourself or managing the property manager. 

I'd absolutely fire them and get a new manager. Take it from someone who gave PMs way too much leeway when stuff like that started, and it always ended up costing me a fortune and they never got better. Had to fire them and hire new ones.