PM gave tenant 10 day notice then terminated management contract

PM gave tenant 10 day notice then terminated management contract

Investor · Anchorage, AK · Member since 2015 · 267 posts · 76 votes

Hello BP folks! I'd like advice as to what my top priority should be in the next 7 days with this problem. I'm an OOS investor with a rental SFR in Indiana.

1) The property manager did an inspection at my request April 24 (she hadn't been inside the property in about 6 months) 

2) The PM issued and delivered to front door a 10 day notice due to unauthorized pet (a dog) and $756 owed in April rent and late fees . She delivered that on April 26. 

3) She recommended I do not reimburse the tenants any money for a  floor replacement they did in the kitchen on  April 13  for $550 because it was not pre-authorized. They quality of the work is pretty good

4) Instead of paying April 1 rent, they instead spent $550 to replace the kitchen floor on April 13 through a vendor. They said was dangerous and caused them to trip several times with one of the tenants supposedly flaring up their back from tripping. They took "before " photos that show 8-10 floor tiles missing and some of them cracked at the edge. They felt the kitchen floor was an"emergency" and too dangerous to live with. They told the property manager about the floor in Dec or Jan. However, it appears to me that due to some miscommunications with the PM, and lack of persistence of both the PM and tenant, and PM not returning voice mails ,the PM never got in to inspect it before they tenants replaced the floor on their own.

5) There was also a problem with a railing at the exterior front staircase being "useless" because it only extends up 3 of the 6 steps to the front porch. This was installed by the same PM. 

6) The tenants are wanting a new railing installed at the back door, stating that one of them fell in the past 3 months at this staircase due to no railing and dislocated her shoulder. She told me she's not blaming me for her Mom dislocating the shoulder. She knows there was a lot of miscommunication about the work orders. She just wants it safer

7) Both tenants are are social security disability for at least since they moved in 18 months ago...both have had some hospital admission or emergency room visit in past 3 months.

8) The property manager sent me an email May 2 to terminate the management agreement.

Where do I start to attack the problem??

I told one of the tenants by phone  and email on April 30 I would reimburse her part of the floor replacement cost ($300) as a compromise if she pays all of the April rent by the 10 day notice deadline (May 6) and the May rent by May 30.  That was before the property manager resigned. 

I could ask the tenant to mail me the rent directly or deposit it in my online account until I get a new PM.

There is a No Eviction Order in Indiana so there's no ability to follow through on any eviction in the near future. Looks like they have most of the power to do what they want due to the non eviction order

Looks like I have these options:

1) Should I just ask them to "pay what you can for now" and let them deduct the cost for a railing at the back step from rent as long as they give me a written bid in advance that is reasonable?

2) Or should I take a hard line?

3) Maybe do nothing if they pay no rent and then hire an eviction service to evict them once the "no eviction " order is lifted if money is still owed?

4) Focus on persuade them to pay soon so I can give them $300 reimbursement for the floor I offered?

The entire time they've lived in my place they have often been late or made partial rent payments, but they would catch up in a couple of months.  They say the reason for the April non - payment was they were busy dealing with one of the tenants having surgery in Indianapolis (about 70 miles away). They really like the house. They just aren't paying yet this past due.

Sorry this was so lengthy and rambling! 

Any replies would be appreciated! :)

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Nathan GesnerBusiness Member
Moderator
Real Estate Broker · Cody, WY · Member since 2010 · 28k+ posts · 41k+ votes
6y

There's a lot going on here, so let me start with the big issues.

1. You admit your tenants have paid poorly in the past. They have an unauthorized animal that is potentially causing damages that may cost you hundreds or thousands of dollars when they leave, and they completed renovations on the home without permission and without following the lease or the law. These are not good renters and you should get rid of them as soon as possible and start over.

2. The PM is not a good PM. They clearly don't communicate well with you or the Tenants. Any PM that terminates a client in just ten days is probably a PM that is running scared. They probably enjoy management...as long as there are no problems. In other words, they like collecting rent and getting their fee but they're not actually looking out for you or your property.

Do not negotiate with the tenants. They agreed to pay rent and that's their obligation. They made renovations without your knowledge or permission and probably didn't do a great job so you may have to spend money to fix what they've done. I would tell them (concisely, professionally, and kindly) that they need to meet their obligations or move out. They rented the property as is, not with the promise of renovations or improvements, and they can move if it no longer meets their needs.

Speaking of which, I get the feeling this is probably a C-class rental. You would do well to fix it up to ensure it's safe and robust before placing another tenant. It sounds like you or the PM were taking shortcuts and doing crap repairs - or no repairs at all - and that's only going to attract more bad renters.

In the meantime, start looking for a good PM. 

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!

The DIY Landlord Book4.7247 Reviews
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13 Replies

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  • Real Estate Broker · 3412 S. Harlem Avenue Riverside, IL 60546 · Member since 2015 · 6k+ posts · 5k+ votes
    6y

    @Tricia O'Brien that is really crummy of the PM to quit on your right now! It sounds like you are an out of area owner as well, which puts you at a slight disadvantage. 

    Personally, I would contact the tenants to see how legitimate the payment issues are. These are unprecedented times, and I do not think it makes sense to hold a hard line right now. If the tenants seem like reasonable people who intend to pay, your best course of action in the short term is probably to work something out with them. Honestly, it sounds like the PM was doing a lousy job. 

    I would also take action on any safety items immediately as you don't want to give them ammunition if they decide to drag things out in court later on. 

    Out of curiosity, where is the property located? 

  • Todd SnyderPro Member
    Rental Property Investor · Wooster, OH · Member since 2018 · 44 posts · 18 votes
    6y

    The first thing is handling any safty problems with the property. I would get a list from your tenants of all the safty problems in the property with pictures of you can and hire a local handy man to come and fix them all, and send you pictures of the completed projects. 

    After all the safety problem are fixed you start to have some choices. First choice is offer cash for keys and hope they take it. If they don't they might hold out until you can get an eviction. The good news is if they take it the sooner you can get your property back up and running!

    Second option is hold out and collect as much rent as possible till you can evict them. Ethier way these tenants have to go If you want to ran a strong business.

    Lessons to learn from this

    First, don't accept partial rent. As soon as you accept money from a tenant it count as rent in the courts eyes no matter the amount you actually received

    Second is make sure you have something in you lease that says no alteration can be made to the property with out owners consent.

    Third is include your PM on any calls and emails you have with the tenants. By the sounds of it your PM quit because you have the option to reimburse the floor even though the PM said it was a bad idea.

  • Todd SnyderPro Member
    Rental Property Investor · Wooster, OH · Member since 2018 · 44 posts · 18 votes
    6y

    I recommend picking up the book of property management from Brandon and Heather Turner.

  • Nathan GesnerBusiness Member
    Moderator
    Real Estate Broker · Cody, WY · Member since 2010 · 28k+ posts · 41k+ votes
    6y

    There's a lot going on here, so let me start with the big issues.

    1. You admit your tenants have paid poorly in the past. They have an unauthorized animal that is potentially causing damages that may cost you hundreds or thousands of dollars when they leave, and they completed renovations on the home without permission and without following the lease or the law. These are not good renters and you should get rid of them as soon as possible and start over.

    2. The PM is not a good PM. They clearly don't communicate well with you or the Tenants. Any PM that terminates a client in just ten days is probably a PM that is running scared. They probably enjoy management...as long as there are no problems. In other words, they like collecting rent and getting their fee but they're not actually looking out for you or your property.

    Do not negotiate with the tenants. They agreed to pay rent and that's their obligation. They made renovations without your knowledge or permission and probably didn't do a great job so you may have to spend money to fix what they've done. I would tell them (concisely, professionally, and kindly) that they need to meet their obligations or move out. They rented the property as is, not with the promise of renovations or improvements, and they can move if it no longer meets their needs.

    Speaking of which, I get the feeling this is probably a C-class rental. You would do well to fix it up to ensure it's safe and robust before placing another tenant. It sounds like you or the PM were taking shortcuts and doing crap repairs - or no repairs at all - and that's only going to attract more bad renters.

    In the meantime, start looking for a good PM. 

    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!

    The DIY Landlord Book4.7247 Reviews
  • Rental Property Investor · Portland OR · Member since 2018 · 2k+ posts · 3k+ votes
    6y

    The one thing that popped out at me is : be sure you have rental Property liability insurance - i would not be surprised if these tenants start threatening legal action for injuries caused by an unsafe dwelling. 

  • HVAC Tech · Fort Wayne, IN · Member since 2015 · 423 posts · 223 votes
    6y

    What part of Indiana?

  • Real Estate Broker · Kansas City Metro · Member since 2015 · 2k+ posts · 1k+ votes
    6y

    @Tricia O'Brien yep what Todd Snyder says. Get a good, recommended PM over there to take over asap. Call around to the area. Maybe even the old PM has someone they can recommend. Crummy situation for sure.

  • Property Management · Indianapolis, IN · Member since 2015 · 111 posts · 94 votes
    6y

    @Tricia O'Brien to add one more thing that should cause some concern.  According to our legal counsel, we are not even allowed to post any demands for payment still during this time of moratorium.  We are waiting to hear if that has changed with current government orders but we sure could not do that in late April.  I don't know if there is any enforcement but this situation could get even messier due to that action by the PM. 

  • Drew SygitBusiness Member
    Property Manager · Royal Oak, MI · Member since 2012 · 12k+ posts · 9k+ votes
    6y

    @Tricia O'Brien: a lot of good advice already. 

    The major concern is avoiding a lawsuit. These tenants have already told you they've tripped and fell an hurt themselves - and they are already on disability income!

    I'm guessing the PM quit, hoping to avoid liability in a lawsuit. You want to do your best to document that the PM failed to do the proper repairs - assuming you weren't being cheap and NOT approving suggested repairs.

    One thing everyone above seemed to miss - the story states these tenants are both on disability income, so their income isn't being affected by COVID-19 issues. They are just slow payers or spending their money on other things, instead of paying their rent on time. 

    Cash-for-keys is probably your best option. You will want to hire an attorney to create a liability waiver agreement for them to both sign, so they can't sue you after they move out!

  • Investor · Tempe, AZ · Member since 2018 · 1k+ posts · 731 votes
    6y

    @Tricia O'Brien, wow.  This is a ball of tangled string.

    @Nathan Gesner had some great points.  It is important to get your mindset straight.  Each of these are different events that are isolated.

    • Safety of the house: It sounds like there are several hazards in this home.  Injuries have already occurred.  You need to make sure this home is completely up to code for safety.  It is hard to win an argument when you do not have a solid foundation to stand on.  Find a local contractor who knows safety codes to review the property and give you a full report.  Handrails, fire detectors, unleveled flooring, etc.  Regardless whom the tenant is, the property has to be livable and safe.
    • Quitting Property Manager:  Their contract should state a termination policy.  If they expect you to provide the 60-day notice then they should honor their 30-day clause; both are typical duration but theirs could be different. They need to provide you all the proper documentations and deposits within your state limitations.  They're leaving you to dry, hold their feet to the fire to make sure you get everything within the legal duration.
      Current Tenants:  By your own admission, they have been late on rent before.  It's your risk, your decision.  It shouldn't take months to get caught back up on rent or else you are being vulnerable.  Always file the proper paperwork for notices and evictions until they are caught up.  By doing so, you empower yourself to control the situation rather than letting the tenants continue to be late.  You can file for eviction and always waive it once they have paid full.

    Best of luck in this situation!  Keep us updated if you need any more advice.  A lot of great feedback from BP community.

  • Investor · Anchorage, AK · Member since 2015 · 267 posts · 76 votes
    6y

    @Joel Wilmoth , @Jonah Hartsburg, 

    @Vicki Roy, wow that's a good point about the 10 day notice.  Has anyone in Indiana heard if we are allowed to post any demands for payment ( like 10 day notices) at this time (May 24) even though we are still in the eviction moratorium?  I read at www.IN.gov there was some clarification of the governors non-eviction order by the Indiana Supreme Court, but I'm not sure what the court said. 

    Tricia O'Brien

  • San Jose, CA · Member since 2015 · 4k+ posts · 3k+ votes
    6y
    Originally posted by @Tricia O'Brien:

    Hello BP folks! I'd like advice as to what my top priority should be in the next 7 days with this problem. I'm an OOS investor with a rental SFR in Indiana.

    1) The property manager did an inspection at my request April 24 (she hadn't been inside the property in about 6 months) 

    2) The PM issued and delivered to front door a 10 day notice due to unauthorized pet (a dog) and $756 owed in April rent and late fees . She delivered that on April 26. 

    3) She recommended I do not reimburse the tenants any money for a  floor replacement they did in the kitchen on  April 13  for $550 because it was not pre-authorized. They quality of the work is pretty good

    4) Instead of paying April 1 rent, they instead spent $550 to replace the kitchen floor on April 13 through a vendor. They said was dangerous and caused them to trip several times with one of the tenants supposedly flaring up their back from tripping. They took "before " photos that show 8-10 floor tiles missing and some of them cracked at the edge. They felt the kitchen floor was an"emergency" and too dangerous to live with. They told the property manager about the floor in Dec or Jan. However, it appears to me that due to some miscommunications with the PM, and lack of persistence of both the PM and tenant, and PM not returning voice mails ,the PM never got in to inspect it before they tenants replaced the floor on their own.

    5) There was also a problem with a railing at the exterior front staircase being "useless" because it only extends up 3 of the 6 steps to the front porch. This was installed by the same PM. 

    6) The tenants are wanting a new railing installed at the back door, stating that one of them fell in the past 3 months at this staircase due to no railing and dislocated her shoulder. She told me she's not blaming me for her Mom dislocating the shoulder. She knows there was a lot of miscommunication about the work orders. She just wants it safer

    7) Both tenants are are social security disability for at least since they moved in 18 months ago...both have had some hospital admission or emergency room visit in past 3 months.

    8) The property manager sent me an email May 2 to terminate the management agreement.

    Where do I start to attack the problem??

    I told one of the tenants by phone  and email on April 30 I would reimburse her part of the floor replacement cost ($300) as a compromise if she pays all of the April rent by the 10 day notice deadline (May 6) and the May rent by May 30.  That was before the property manager resigned. 

    I could ask the tenant to mail me the rent directly or deposit it in my online account until I get a new PM.

    There is a No Eviction Order in Indiana so there's no ability to follow through on any eviction in the near future. Looks like they have most of the power to do what they want due to the non eviction order

    Looks like I have these options:

    1) Should I just ask them to "pay what you can for now" and let them deduct the cost for a railing at the back step from rent as long as they give me a written bid in advance that is reasonable?

    2) Or should I take a hard line?

    3) Maybe do nothing if they pay no rent and then hire an eviction service to evict them once the "no eviction " order is lifted if money is still owed?

    4) Focus on persuade them to pay soon so I can give them $300 reimbursement for the floor I offered?

    The entire time they've lived in my place they have often been late or made partial rent payments, but they would catch up in a couple of months.  They say the reason for the April non - payment was they were busy dealing with one of the tenants having surgery in Indianapolis (about 70 miles away). They really like the house. They just aren't paying yet this past due.

    Sorry this was so lengthy and rambling! 

    Any replies would be appreciated! :)

     You know what, Tricia, I don't think this is as bad as you might think.  I don't think you should give up on these tenants yet.

    The pros are that they have been taking care of the place and they haven't filed any lawsuits even though they could have.  They also did a good job fixing the floor.  They've paid late, but they've always paid.  They have dependable income.

    As to the dog, if they're disabled, the PM shouldn't have just tried to evict them over it without considering it could be claimed as an emotional support animal.  I'm surprised they didn't immediately go there.  The fact that they didn't, also says they're way more easy going than they needed to be.

    They like the place and are taking care of it.

    So, I think they just need to be made aware that they can't be late anymore or they'll end up evicted when the ban is lifted and it will hurt their credit and they may not be able to find another landlord.  Let them know nicely that you know they would have both received $1200 in stimulus money.  You understand it's a hardship for them to have to drive to medical appointments, etc., but if they don't make paying rent on time a priority, they'll end up evicted, and if you have to come fly there to take care of problems from Alaska because they aren't paying rent, you are going to have to hire a lawyer and evict them and get different tenants.  You can do this in a nice, friendly but firm way.

    I inherited some tenants like this, and I'd say "You know I'll have to kick you out.  I can't let you pay late.  I really hope you don't make me have to do that.  I'd really hate to, but I will if I have to.  So, can we get things on track and keep them there?"

    And tell them if they want to keep the dog, they will have to get a note from their doctor saying it's needed as a companion animal for their disability, and they can keep it.  

    You might be able to get referrals from a BP owner in the area for handymen, plumbers, etc., and possibly just manage it yourself.

    Anyway, I think this might be okay.  It just sounds like you need to get the railing fixed and let the tenants know they need to pay on time going forward or they will definitely be evicted.

    Also, I'd go ahead and credit them for the work on the floor if they can prove their cost and if their labor seems reasonable.  That seems fair.  But, let them know they can't do any deductions for repairs going forward without your prior written consent.

    Who knows why the PM quit.  If she wasn't collecting the rent, you had a right to start micromanaging her.

    Anyway, I don't think you need to throw the baby out with the bathwater here.  Not yet.  I did have to kick out a couple of my inherited tenants, but it was done amicably without drama or damage.  I was able to collect back rent and get others on track, so it can be done.  They just need to know they have to pay you first, if they don't want to get kicked out.

    And by the way, people on Social Security are technically "judgment proof" but only as far as collecting on a judgment, and only so long as they don't co-mingle funds in their account or have a separate account that their SSA checks aren't deposited into.  You can still get a judgment.  So, that could be something you could nicely let them know, too.  Let them know that your policy is to go ahead and sue tenants who owe you money because you feel it's your duty to let other landlords know if they didn't pay you.  So, even if you might not be able to collect the money, you would still get a judgment and that would hurt their credit and ability to rent from someone else.  So, unless they want to deal with that, they can either give you notice to move out amicably, or they can start paying rent on time every month.  

    Anyway, that worked for me.  Best of luck.

  • Property Management · Indianapolis, IN · Member since 2015 · 111 posts · 94 votes
    6y

    @Tricia O'Brien Update from Indiana.  Governor extended foreclosure and eviction moratorium until July 1.  It sounds like this is final extension (fingers crossed).  Our attorney has us (beginning June 10) going to properties and posting demand notices so we can have all of our eviction packages ready to file on July 1. She consulted with several other eviction attorney specialists a few weeks ago and determined at some point the order (and its revisions and extensions) no longer prohibited us posting notices.  Their advise is to first confirm occupancy then after the due date on your lease (and any grace period offered) begin posting demands for payment.  

    I'm not an attorney, nor have I ever played one on television.  So, I just follow the directions of legal counsel and this is our new strategy going into June.  Best wishes!

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