I need your help. I have a property in Dallas and we let a property manager manage the property.
2-3 Months ago the property manager found a tenant, did a backround check and told us she is ok.
First month were already a late pay but did paid at the end.
Now after 2-3 Months I get a phonecall from my property manager saying " The tenant has made a chargeback and got over $4000 in rent out of the property management account. " The property management also say that we have to pay them back the + $4000 since they got the charged back.
What should I do ? How should I react in this situation ? I am worried about my property and the eviction and paying the +$4000 to my PM.
Real Estate Broker · Minneapolis, MN · Member since 2011 · 5k+ posts · 6k+ votes
6y
@Michael Thach this whole thing doesn't make sense. First of all you have to get informed, as the RE Investor you are the CEO of your business, and what I read here is your acting more like a receptionist than a CEO, be informed and take control.
Next, that kind of charge back makes no sense, charge-backs don't happen like that for NSF, this feels more like a tenant disputed charges with CC company as fraudulent so CC co yanked funds. STILL the PM should have no problem dealing with such a situation and the situation your explaining screams of ignorance and inexperience. If a PM can't handle such an easy issue, I'd fire them instantly. A PM is a problem solver, that's the job, one who can't solve easy problems......
The payment processing is an item set-up by the PM, and only the PM can address. I wouldn't pay the PM a dime, it's their issue to resolve and correct their processing issues. IF they did all the work, put in the effort, and showed proof that they were out of pocket and not getting $ back from processor, I would maybe split it with them 50/50 but not a snowballs chance in hell I would eat the expense for their screw-up with their payment processor on a tenant they placed, no way. And actually I'd be tearing them a new one asking how they allowed such a mess in the first place.
And by the way, I am in Property Management, professionally, so if anything I am biased for PM's not against. We don't have this issue except very very rarely, because we are professional and have systems in place, and when it does happen we resolve it ourselves, often only informing a property owner of the issue and our solving of it, thats why it's called property MANAGEMENT and not "sitting".
Again, step up and be the CEO or get ready for a long rough ride.
Rental Property Investor · Sioux Falls, SD · Member since 2015 · 9k+ posts · 18k+ votes
6y
When you say "charge back" do you mean they stop paid a check or was rent paid on credit card and they disputed the charges? First thing you need to do is figure out how it was charged back and work with the payment source to resolve. If they stop paid a check, that is considered fraud if the check was legitimately written. If they reversed credit card charges, you can dispute it with the credit card company.
Just for future reference, always get security deposit and first months rent paid via secure method (cashiers check, money order or cash). That doesn't mean they can't cause trouble month two or three, but at least it offers you some level of protection in the beginning.
Real Estate Broker · Charlotte, NC · Member since 2016 · 569 posts · 351 votes
6y
Talk to your property manager if they are prepared they can fight the chargeback with the right documentation. These are the documents typically needed to win a chargeback: Applications Credit reports, Leases, Copies of drivers licenses and/or paystubs, a signed letter from the resident authorizing that they made the payment. It's always a red flag if a renter pays the first and security with a Credit Card!
Your PM needs to sort it out. First and foremost, they are not out $4K, YOU are out $4K in rent. They are out the fees associated with renting it and monthly fee. If they accept debit and credit cards as forms of payment, they need to have a policy for situations like this. They can contact the bank and dispute the charges. They should also press charges for fraud against the person living there and have them immediately removed from the home.
Investor · Narragansett, RI · Member since 2013 · 8k+ posts · 4k+ votes
6y
Only they can dispute the credit card charges and if they have already dispersed money to you I would not pay them back. They have no incentive to dispute charges or file a complaint if you do. They need to dispute this with the credit card company. Now if it turns out they accepted a credit card that doesn't belong to the tenant they need to file a criminal complaint against the tenant.
Real Estate Investor · Hayward, CA · Member since 2015 · 134 posts · 88 votes
6y
Personally, you might want to look for another PM. Seems like they did not do their due diligence on screening so if they didn't do it with this one, chances are the next one will be the same and YOU will be out the money.
I would need to know more facts, but just from what you wrote, I would find another PM with excellent reference.
Is this tenant still there? Have you personally talked to the tenant to see what is going on? I would want to hear both sides of the story. It is your property and you have the right to do this. Do you have a copy of the application they completed? It should have the information you need to contact them.
Thanks Joyce, this would be worth a try. I did not approach my tenants yet. All I received was a phone call from my PM and saying that the tenants have chargeback the security deposit, and 2,5 months worth of rent and that I have to pay for it.
I have a question for the community now. This is part of the contract for the form of payments.
" (1) Tenant must pay all rent timely and without demand, deduction, or offset, except as permitted by law or this lease. (2) Time is of the essence for the payment of rent (strict compliance with rental due dates is required). (3) Unless the parties agree otherwise, Tenant may not pay rent in cash and will pay all rent by (select one or more): cashier's check electronic payment money order personal check or other means acceptable to Landlord. Landlord may or may not charge a reasonable fee to process or accept payment by (select one or more only if Landlord indicates a reasonable fee may be charged):
x cashier's check x electronic payment
x money order
personal check
x other means acceptable to Landlord. "
So there is a X for electronic payment and other means acceptable to landlord so does it automatic means I would accept credit card payments for rent ?
Anyway I learnt that I should never ever allow creditcard payment for rent. However I felt that the PM should have known this and warn or protect me from this kind of procedure.
So I have also digged more into this case and found out with a backround check that my tenant has owed another apartment complex rent and got sentenced by a judge as guilty.
Was I to naive to just believe my PM when he said the backround check came out clean ? So do I have to bear all cost even my PM obviously did not do a good job by screening this tenant ?
Real Estate Investor · FL · Member since 2011 · 586 posts · 360 votes
6y
The money is likely being held by the CC company while they investigate the chargeback. PM needs to provide proof that the charges are legitimate.
Has the tenant given any indication that they aren't happy or they want something repaired? Just seems odd that a tenant who was professionally screened would just randomly try to steal $4k.
I was not aware that my PM would take creditcard or unsecured funds. Is so odd because they are not a small PM company. I did my researched and their PM company had good ratings and seems very knowledgeable.
We did all the repairs she requested in a timely manner. So I am not aware of any problems. Maybe there is a problem and I should contact the tenant. What are your guys thought ? Will it complicate things if I put myself into the case ? Or should I just let my PM handle it ?
But as I found out on a backround check the tenant was sentenced as guilty that she owes a apartment around 1400 USD. So it seems like it's not her first time doing something like this.
Your PM should have caught that. I'd chat with them and find out what is going on. And if they haven't disputed the charges, tell them they need to. If the person whose name is on the credit card says they aren't living there, then have the tenant arrested for credit cared theft and tell the person whose name is on the card that you are going to do that.
Real Estate Broker · Minneapolis, MN · Member since 2011 · 5k+ posts · 6k+ votes
6y
@Michael Thach this whole thing doesn't make sense. First of all you have to get informed, as the RE Investor you are the CEO of your business, and what I read here is your acting more like a receptionist than a CEO, be informed and take control.
Next, that kind of charge back makes no sense, charge-backs don't happen like that for NSF, this feels more like a tenant disputed charges with CC company as fraudulent so CC co yanked funds. STILL the PM should have no problem dealing with such a situation and the situation your explaining screams of ignorance and inexperience. If a PM can't handle such an easy issue, I'd fire them instantly. A PM is a problem solver, that's the job, one who can't solve easy problems......
The payment processing is an item set-up by the PM, and only the PM can address. I wouldn't pay the PM a dime, it's their issue to resolve and correct their processing issues. IF they did all the work, put in the effort, and showed proof that they were out of pocket and not getting $ back from processor, I would maybe split it with them 50/50 but not a snowballs chance in hell I would eat the expense for their screw-up with their payment processor on a tenant they placed, no way. And actually I'd be tearing them a new one asking how they allowed such a mess in the first place.
And by the way, I am in Property Management, professionally, so if anything I am biased for PM's not against. We don't have this issue except very very rarely, because we are professional and have systems in place, and when it does happen we resolve it ourselves, often only informing a property owner of the issue and our solving of it, thats why it's called property MANAGEMENT and not "sitting".
Again, step up and be the CEO or get ready for a long rough ride.
Real Estate Investor · Tempe, AZ · Member since 2012 · 874 posts · 648 votes
6y
@Michael Thach chances are, if the CC sided against the PM already, the PM did something wrong. Perhaps they charged a convenience fee in excess of what is allowed under the merchant services agreement. A tenant who knows that the issuers only allow surcharges up to the exact amount paid by the merchant could use this against the PM.
A customer in the travel agency I own did a chargeback for a cancelled trip and claimed that the original charge was never authorized. I provided all of the paperwork proving that he himself made the charge (as a policy, we don't take any CCs over the phone, nor collect any CC information) and the bank still sided with the consumer. Since I was refunding these customers anyway, it was a nuisance that I didn't pursue further, but it ticked me off as I had never lost a chargeback before. On the RE side, I've stopped taking rent by ACH for now, as that can be clawed back by the consumer for 60 days or so. Credit cards allow six months or more after the charge to make the dispute.
If the PM is demanding the money, demand from them the documentation of the chargeback and what they did to fight it. Doesn't mean you have to pay them back, but at least you'll see their practices and how they represented your funds.
Specialist · Cleveland, OH · Member since 2018 · 1k+ posts · 666 votes
6y
@Michael Thach well bad PM co, its all about screening , but must move forward. 1st thing, serve the tenant, ( also bouncing checks is a crime ) speak with the tenant . If the tenant is a low life ( harass the hell out of them ) then them. Also where is the 1st last and SD ?
Investor · Narragansett, RI · Member since 2013 · 8k+ posts · 4k+ votes
6y
I would still insist on seeing the PM has done all they can to dispute this. And if it is a big PM company escalate the issue to a higher level. You want to be sure you aren't dealing with an inexperienced individual PM and this issue is being handled by someone experienced.
@Michael Thach well bad PM co, its all about screening , but must move forward. 1st thing, serve the tenant, ( also bouncing checks is a crime ) speak with the tenant . If the tenant is a low life ( harass the hell out of them ) then them. Also where is the 1st last and SD ?
Good Luck
Hi Bob, what do you mean by 1st and last SD ? Thank you so much for your input. We will serve them now.
Property Manager · Cleveland, OH · Member since 2019 · 446 posts · 566 votes
6y
I would sincerely hope your PM already tried challenging the chargeback with all the necessary documentation at the bank level, before approaching you to pay the distributions back.
With that said, that's your rent money, not the PM's, so there is probably a clause in their management agreement protecting the PM from losing that money.