PM asking for money.....

Rental Property Investor · FL · Member since 2017 · 74 posts · 27 votes

Hey there everyone! I have a unique situation....or at least one I've never come across. I sold a rental home a few months back and no longer have any ties to it. I received a note from the former property management that I used stating that some of the rent payments bounced because of a credit card that got bounced back from the bank. Now, that PM company wants me to pay them the amount of the bounced funds , $1200. In addition to this, they're stating the charge occurred over six months ago. Has anyone run into something like this before? Any ideas on what to do? Help is appreciated! Thank you.

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Investor · Singapore · Member since 2013 · 1k+ posts · 3k+ votes

The PM is responsible for rent collection. Once they receive funds, they transfer the funds to the owner. No PM transfers uncleared checks for example. If the PM used CC to collect rent then they assumed the risk of dealing with the CC company. Maybe no one expected a reversal after six months and this should be easily resolved by the PM with the CC company. The ex owner did not get the funds from Visa and doesn't need to deal with them. The PM did and can recover the funds from the CC by showing documentation that the payment was legitimate. That is the correct resolution for this matter. The PM just is lazy and doesn't want to fight with Visa and is going for the easy route of claiming from ex owner.

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Nathan GesnerBusiness Member
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Real Estate Broker · Cody, WY · Member since 2010 · 28k+ posts · 41k+ votes
5y
You sold the property and the funds were valid at that time. If the tenant reverses the payments, that's between the new owner, the PM, and the tenant. I would kindly, but firmly, tell them it's not your problem.
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Rental Property Investor · FL · Member since 2017 · 74 posts · 27 votes
5y
Thanks, that's kind of what I thought except in the PM agreement it stating something along the lines of if any funds are dispersed and then returned it is the responsibility of the owner.
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Kim Meredith HamptonBusiness Member
Real Estate Broker · St Petersburg · Member since 2014 · 2k+ posts · 2k+ votes
5y
@Account Closed it’s amazing what people can do with their credit cards, accounts etc... I have heard of people going back and disputing all kinds of things. I had friend of mine that said a boyfriend and girlfriend broke up, he went to his bank and disputed all the charges for six months, then they got taken back out of their property management account.
You are right, you don’t own the property anymore, but these rent monies proceeds were sent to you, so if any bills, Managment fees etc... were derived from that income, they come out of the property management business trust account, and now they must come up with the money to replace if you do not. They didn’t own this property, but now will have to pay on your behalf. I know it sucks, but do the right thing and talk through with them everything to make it right
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Kim Meredith HamptonBusiness Member
Real Estate Broker · St Petersburg · Member since 2014 · 2k+ posts · 2k+ votes
5y
Originally posted by @Nathan Gesner:
You sold the property and the funds were valid at that time. If the tenant reverses the payments, that's between the new owner, the PM, and the tenant. I would kindly, but firmly, tell them it's not your problem.

Nathan, come on man, as an owner of a brokerage, you know that’s not the right response!!

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Theresa HarrisPro Member
Member since 2019 · 15k+ posts · 11k+ votes
5y
If they accepted the payment, that is their problem. Plus wouldn't that mean you are also out of the rent for that period of time in which case, they'd be asking for more than $1200.
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Rental Property Investor · FL · Member since 2017 · 74 posts · 27 votes
5y
@Theresa Harris
No the rent was paid to me at the time. It went through the PM company. What I’m trying to understand as well is, how was this not caught until six months later?
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Nathan GesnerBusiness Member
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Real Estate Broker · Cody, WY · Member since 2010 · 28k+ posts · 41k+ votes
5y
Originally posted by @Kim Meredith Hampton:

At the time he sold the property, everything was clean. The tenant reversed the payment months after closing. Why would the seller be responsible for something he didn't do on a property he doesn't own?

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Theresa HarrisPro Member
Member since 2019 · 15k+ posts · 11k+ votes
5y
Originally posted by @Account Closed:
@Theresa Harris
No the rent was paid to me at the time. It went through the PM company. What I’m trying to understand as well is, how was this not caught until six months later?

But if the rent went to you through the PM company, when the tenant reversed the charges, the PM would be out their fee plus cost of the rent. All charges, not just their fee would have been reversed.
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Brooks Johnson
Realtor · Minneapolis (Blaine), MN · Member since 2018 · 45 posts · 34 votes
5y
@Alec Weissgerber
What I’m unclear on is, did this bounce 6 months ago and they didn’t notice till now or did a tenant challenge a charge 6 months after the fact? I’d think that if they provide valid info to the credit card company showing it’s owed it would be reversed. If it’s a new problem I’d honor it with the PM but fight the CC company within a reasonable amount of effort. If their accounting is that out of date I’d say it’s on them at this point.
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Kim Meredith HamptonBusiness Member
Real Estate Broker · St Petersburg · Member since 2014 · 2k+ posts · 2k+ votes
5y
Originally posted by @Account Closed:
@Theresa Harris
No the rent was paid to me at the time. It went through the PM company. What I’m trying to understand as well is, how was this not caught until six months later?

Because dishonest people cam go in and reverse things months after the transaction. It’s BS but it happens. Now the management company has to pull out of their own pocket for something they don’t, nor have ever owned, nor was their fault

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Lynnette E.
Rental Property Investor · TN · Member since 2018 · 2k+ posts · 2k+ votes
5y
It would seem to me that the correct action would be for the PM to do what it needs to do to collect the rent.
If the tenant is still in the property then give them a notice that they need to pay or quit, and go through the process like they did not pay their rent, because they did not.
And if they are not longer a tenant, find them and take them to small claims court.
The PM should do its job, collect the rent, not ask the owner to pay the rent.
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Levi T.Pro Member
Rental Property Investor · Tucson AZ / Nice FR / Washington DC · Member since 2016 · 1k+ posts · 1k+ votes
5y
Originally posted by @Account Closed:
Thanks, that's kind of what I thought except in the PM agreement it stating something along the lines of if any funds are dispersed and then returned it is the responsibility of the owner.

The general rule is that contract terms do not survive the termination of the contract unless it is expressly intended by the parties. So unless there is a clause within the contract that gives them this right, I find it highly unlikely enforceable. *not legal advice

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Greg M.
Rental Property Investor · Los Angeles, CA · Member since 2017 · 2k+ posts · 5k+ votes
5y
If the PM suddenly realized that they didn't send you a $1200 payment from 6 months ago and they wanted to send you the money now, would you tell them to send that money to the new owner?
You owe them the money and I'd be stunned if your contract with them didn't clearly state this.
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Account Closed
Investor · Singapore · Member since 2013 · 1k+ posts · 3k+ votes
5y
The PM is responsible for rent collection. Once they receive funds, they transfer the funds to the owner. No PM transfers uncleared checks for example. If the PM used CC to collect rent then they assumed the risk of dealing with the CC company. Maybe no one expected a reversal after six months and this should be easily resolved by the PM with the CC company. The ex owner did not get the funds from Visa and doesn't need to deal with them. The PM did and can recover the funds from the CC by showing documentation that the payment was legitimate. That is the correct resolution for this matter. The PM just is lazy and doesn't want to fight with Visa and is going for the easy route of claiming from ex owner.
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Rental Property Investor · FL · Member since 2017 · 74 posts · 27 votes
5y
Originally posted by @Nathan Gesner:
Originally posted by @Kim Meredith Hampton:

At the time he sold the property, everything was clean. The tenant reversed the payment months after closing. Why would the seller be responsible for something he didn't do on a property he doesn't own

See that's what I think...but the PM agreement says they can come after any wages that transacted during the time of the contract....

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Rental Property Investor · FL · Member since 2017 · 74 posts · 27 votes
5y
Originally posted by @Theresa Harris:
Originally posted by @Account Closed:
@Theresa Harris
No the rent was paid to me at the time. It went through the PM company. What I’m trying to understand as well is, how was this not caught until six months later?

That's a good point....maybe I should see if they are charging me their PM fee in addition to the rent?

But if the rent went to you through the PM company, when the tenant reversed the charges, the PM would be out their fee plus cost of the rent. All charges, not just their fee would have been reversed.

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Rental Property Investor · FL · Member since 2017 · 74 posts · 27 votes
5y
Originally posted by @Brooks Johnson:
@Alec Weissgerber
What I’m unclear on is, did this bounce 6 months ago and they didn’t notice till now or did a tenant challenge a charge 6 months after the fact? I’d think that if they provide valid info to the credit card company showing it’s owed it would be reversed. If it’s a new problem I’d honor it with the PM but fight the CC company within a reasonable amount of effort. If their accounting is that out of date I’d say it’s on them at this point.

All great questions Brooks...I get the impression that they didn't notice til now....I'm not sure why they would be holding out if that wasn't the case? As far as fighting the CC company goes, I highly doubt I would get anywhere, but that begs the question as to why the PM company didn't do it's due diligence with said CC company right? I feel like that should be on them at this point.

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Rental Property Investor · FL · Member since 2017 · 74 posts · 27 votes
5y
Originally posted by @Greg M.:
If the PM suddenly realized that they didn't send you a $1200 payment from 6 months ago and they wanted to send you the money now, would you tell them to send that money to the new owner?
You owe them the money and I'd be stunned if your contract with them didn't clearly state this.

My attorney is telling me that it does state this....that being said I'm going to be asking for more proof and a paper trail of where and how this CC charge was reversed and why we're just now seeing it.

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Rental Property Investor · FL · Member since 2017 · 74 posts · 27 votes
5y
Originally posted by @Lynnette E.:
It would seem to me that the correct action would be for the PM to do what it needs to do to collect the rent.
If the tenant is still in the property then give them a notice that they need to pay or quit, and go through the process like they did not pay their rent, because they did not.
And if they are not longer a tenant, find them and take them to small claims court.
The PM should do its job, collect the rent, not ask the owner to pay the rent.

I believe the tenant is still in the property, but the PM company doesn't manage it anymore. That was terminated after I sold the house. My thought is that maybe the PM company should go after the tenant in small claims court....

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Rental Property Investor · FL · Member since 2017 · 74 posts · 27 votes
5y
Originally posted by @Account Closed:
The PM is responsible for rent collection. Once they receive funds, they transfer the funds to the owner. No PM transfers uncleared checks for example. If the PM used CC to collect rent then they assumed the risk of dealing with the CC company. Maybe no one expected a reversal after six months and this should be easily resolved by the PM with the CC company. The ex owner did not get the funds from Visa and doesn't need to deal with them. The PM did and can recover the funds from the CC by showing documentation that the payment was legitimate. That is the correct resolution for this matter. The PM just is lazy and doesn't want to fight with Visa and is going for the easy route of claiming from ex owner.

I like where your heads at Anish! I think I'm going to go this route and see what I can come up with....seems to me the PM company should be fighting with the CC company at this point.

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Andy Brown
Rental Property Investor · Tampa, FL · Member since 2017 · 70 posts · 115 votes
5y
Not that this helps Alec's issue, but this is Exhibit "A" as to why many property managers don't accept credit cards. Without reading the contract, I suspect that the pm company probably has the short end of the legal stick here.
I'm also concerned that Alec has little-to-no ability to remedy the situation as he 1) contracted and paid the pm to collect rents (which we now see that the pm has not actually done so) and 2) Alec did not charge the tenant's cc himself and does not have standing to call the cc company to push back. Further, the PM is in the best position to both prevent and resolve the issue so I'm not overly sympathetic to it. It took a gamble by accepting cc payments that a tenant would later dispute the charges. This is entirely foreseeable in the landlord-tenant realm.
I would also push back on those who have posted that simply cutting the pm a check for the difference is doing "the right thing". There are too many unknowns in this fact pattern to come to such a moral conclusion right away. My .02
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Account Closed
Member since 2021 · 154 posts · 108 votes
5y
You had no fight in the dispute process... Maybe the pm didn't respond to the merchant dispute letters and lost by default? Regardless you had no due process in the dispute and the pm takes on risk that you pay them a fee for....this is 100% on the pm to make sure payments cant be disputed.
dont pay the pm a penny.
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Nathan GesnerBusiness Member
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Real Estate Broker · Cody, WY · Member since 2010 · 28k+ posts · 41k+ votes
5y
The PM has responsibility to collect rent. When the Tenant reverses the payment - six months later - it is the PM's responsibility to go after the tenant. I don't even think the Landlord could contest the reversal because the payment wasn't made to him. The PM is the recipient, they have the paperwork, they have the responsibility.
If this happened with an active Landlord, I may say something different. But we are talking about a Landlord that no longer owns the property or has any ties to the PM company. It also sounds as if the Tenant still occupies the home!
Some see this as clear proof that you should never accept credit cards because payments can be easily reversed. The truth is, ACH payments can be reversed just as easily and contesting the reversal may actually be harder than it is with credit card companies.
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John Minock
Investor · Menifee, CA. · Member since 2021 · 48 posts · 29 votes
5y
@Kim Meredith Hampton @NathanG Nathan I agree with Kim! The transactions were while this individual owned the property. It is not an ideal situation.
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Craig Janet
Member since 2019 · 223 posts · 261 votes
5y
After a dispute is filed. The recipient must provided proof that the charges are valid. This should be easy if they are still living there. Did the PM follow up with the dispute? If not then they will have to eat this charge.
If they did dispute it, provide the necessary supporting documents and it still wasn't reversed. They I would be open to paying something to them. This is a risk you run when accepting credit cards.

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