Is this a shady property manager?

Question

One of my tenants, who is a landlord (I actually have two separate tenants that are landlords) - go figure, is a bit of newbie and has signed a 5 year contract with a property manager that is not living up to expectations. She asked me for advice but as I have never used a property manager I thought I'd pass it on to you guys.

She owns a newer largish house in a nice neighborhood. She has a good tenant. Her problem is that she has spent $7-$8K in repairs for each of the last two years.

She has asked the manager for receipts but he refuses to give them to her stating something like "these are my guys so the receipts are mine", whatever that means?

So she got a home warranty recently and told the property manager that for all repairs greater then X dollars he must use the home warranty company. That way she can keep tabs on the cost. He was very upset about this and told her it was a bad idea and kept telling her to cancel it.

She would get rid of him but is concerned about the 5 year contract. The funny thing is when my broker did some research on this property manager we found out that he isn't even licensed and in Texas I'm pretty sure you have to be a licensed broker (not just Realtor) to conduct business as a property manager.

What advice would you give?

Account Closed · Answer

I looked it up, and yes you have to be a licensed broker in Texas to be a property manager. So, the contract is not valid. She just needs to cancel her contract with that company. If he won't provide receipts and/or invoices detailing the charges, then he is pocketing the money. She needs to find a company that will be happy to provide the documentation.

He has no recourse because he is practicing real estate without a license. She should have no trouble getting out of that contract. It isn't valid or enforceable.

Mike Franco · Answer

She could also threaten to sue for fraud for those $16000 in repairs. That would pressure the manager into providing invoices, and if he can't, he will most likely cancel the contract preemptively.

Alberto Furet · Answer

Have her read the contract again. A typical property management contract usually has an "out" for either party if they are dissatisfied with the other party. It's usually 30 days notice. It might be cheaper to just part ways rather than involve a lawyer. I would contact the state and the BBB and alert them to his practices.

David T. · Answer

Just fire him and if he resists, get the lawyer to threaten him with the IRS, fraudsters biggest fear. You are being defrauded, but you already know that! Your money is gone. Good luck with it anyway.

Jon K. · Answer

I would demand receipts. I don't see how a property manager contract precludes that. And ditto the lawyer and using is unlicensed status.

Robert Steele · Answer

My thoughts exactly. I told her to talk to an attorney about getting out of the contract. Hell, she could simply blackmail her way out by simply threatening to report him to the Texas Real Estate Commission for practising unlicensed.

Lynn McGeein · Answer

I've used property managers since 2008, and they call me before completing repairs costing over $200 (unless emergency, of course), and I always get a copy of the paid invoice with my next monthly statement (all scanned and emailed to me).  They also have never had an issue getting me 3 estimates for larger repairs, and don't charge me extra to obtain them.   These are different companies in different states, so I would think it's fairly standard practice to send homeowner the repair invoices, and it sounds like she needs to investigate further.

Robert Steele · Answer

No, that was $7-8K per year for the past 2 years. Ever since he started managing it.

Bryan H. · Answer

8k in repairs in 2 years seems high, especially for a newer house. I have seen limits on repairs in contracts, so anything in excess of $250 has to be approved and multiple quote provided. I wouldn't pay anything without seeing receipts and I wouldn't work with someone who didn't work in a transparent nature and open the books to me when I requested. What are they hiding??

I'd review the contract for anything on cancellation. Contracts I have used in the past didn't specify damages for early cancellation. Just that I had to provide 30 days notice in writing. The contract was mainly to detail responsibilities and financial terms, nothing holding either party to being stuck with the other.