Buying a property with a terribly property manager

15 Replies

Hi All,

I was hoping for some advice. I have acquired a property in a great area (within 45 minutes of my personal residence), with a great purchase price to rent ratio for my area. The current tenant has also been in the property for just over 4 years and has never paid late. Now the bad news. Prior to the sale, the previous owner had signed a contract with a new property management company (they did not place the current tenant). 

I have quickly found that the property management company is about as bad as they come. I closed on the property 12 days ago and immediately attempted to get in contact with the property manager. Now after 12 days of multiple calls per day and many emails with no response I am not sure what my options are.  I have not even been sent the contract between the owner and the property management company. I do however have a template agreement that states any breech of contract would incur a $735 fee. 

Since I never signed a contract with the property manager am I liable for this contract? (That was my thought going into this, I had just not thought they could be this bad)

If I am liable, are there any actions you would recommend taking?

Thanks!

@Bryston Wisekal I am pretty sure that property management contracts DO NOT transfer with the property.. Tenants do, not property management companies. Fire them

Who is the lease between ? the property owner and the tenant or the Property management company and the tenant?  if the lease agreement is with the PM then go to the office and ask to see the PM agreement that governs your lease.  It is something you should have received ahead of time and the whole issue revolves around whether it survives the sale of the house.  Also what your sales  contract says. I would start by making sure there is a contract.  What happens with your multiple calls per day? do you get a live person ?  what do they say? do they confirm that they know the property is transferred and you are the new owner. Are they collecting rent? 

Also weigh the option of firing them vs. what they are costing you to run the property.  If it only costs $735 to get rid of a problem, which most likely will annoy your tenants because most likely they will not be responsive to a tenant call either, I say pull the trigger and fire them.  To me $735 is a small price to pay to get rid of a problem that could possibly cost you a good tenant.  Also if you are going to self manage after that look at how much you will be saving on their fee as well.

Sounds like they are in breech of contract and owe you $735!

I don't think that the management contract transfers.  If anyone is responsible for the termination fee, it is the former owner.

Make sure that the tenant knows to pay you directly so as to avoid confusion.  Also, let the tenant know that if the property manager contacts them, to tell them to contact you directly.

You might consider changing the keys on the house; most property managers get a set.

I laughed when I got to the 735. 

if it comes to that,  send them a check or put it under the welcome mat of the building's front porch  and tell them to come get it. 

Thank you for everyone's responses! I really appreciate everyone's insight. This has been immensely helpful!

@Nick Britton I guess that is what I get when I ask the PM if I can break the contract. I was able to speak with them once when I first made the offer and they told me I could not. It sounds like you are correct however. Thank you!!

@Colleen F. The lease is between the previous owner and the current tenant. I have yet to get the contract for the PM but the sales contract for the purchase of the home did not specify anything about the PM. As for my multiple calls per day, the office does not have a receptionist and I am leaving voice mails. As for collecting rent, I can only assume that the tenant has already written them a check this month (Rent is due by the 1st ). My next issue will be to ensure I collect the rent from August while I also attempt to fire them. Based on what everyone is saying however I should be able to just fire the PM. Thank you!

@Frank Woodin I think if I am not able to fire them, you will be correct and the $735 would be worth it to get them out of my hair especially since I may be moving out of the area soon and would need to rely on a solid PM. Thank you!

@Kelly B. I would certainly agree! I have documented every call and email and will be sending it to their management just in case they give me any trouble about firing them as well. Thank you!

@John Pierce Based on what everyone is saying, it sounds like you are correct. I will definitely be contacting the tenant and get the rent checks diverted to myself and the locks may not be a bad idea also, given I still don't have any documentation indicating I agree to let them manage the property. Thank you!

Ask yourself the question, who is the property manager going to sue?

If this went to court, you don't have a signature on any agreement with them, so how can they even name you? And even if they put your name as defendant, the agreement still doesn't have your name on it.

Although I'd run it past your realty lawyer to start with, but there is no agreement you have signed with them. If the agreement has been broken, it was done by the previous owner when he sold the property - and I bet there was no provision in the contract for that either.

Collect next months rent directly, and if they call wondering what's going on, ask who they are, and what contract they have with you. Let them explain themselves and how you are subject to a contract you didn't sign.

Fire them! 

@James DeRoest That is an extremely good point. I will check with a lawyer but you are correct about the contract. It simply stated a broken contract would result in a $735 fee. My only fear is that they most likely already have received the rent for August and I may have a problem getting that from them without signing the contract but based on my experience I would rather lose 1 months rent then keep them as PM. Thank you for the insight!

@John Thedford That sounds like my course of action! Thanks!

You will prolly have to pay the fees that would have had to be paid if the contract played out.  ex. monthly 8% in addition to $735.     Do it just to get rid of them!

If the lease is the previous owner and the tenant  and there is no requirement to pay the PM agency you probably need an addendum or estoppel to pay the rent to you instead of the previous owner.  I have seen leases where the payment was to the PM real estate agency even though the owner was the signatory.  Get in touch with your tenant and find out who the rent check went to.  Where does the lease say they should send it? Approach it professionally by saying that you want to introduce yourself and  you plan to institute a payment change, the lease says xyz,  is that who you sent your rent to for the 1st?  Don't get into  the PM issues with the tenant. Ok I am going to send you an addendum and payment instructions for next month. (maybe suggest to start electronic payments). Talk to your legal representative but the first thing I would worry about is where the rent is going now. Sounds like it could be going to the PM or the old owner.

@Colleen F. After some digging I found that the tenant pays the the PM directly however the lease is between the previous owner and the tenant with the payment going to the previous PM. (PM was changed 2 months into the current lease.)  After threatening legal action I finally heard back from the PM. I will taking August's rent and then fire them even if it turns out I am liable for the cancellation fee just to have them out of my hair. Thank you for your advice! It will be very helpful once I fire the PM and manage it myself. Thanks!

Just to bring some closure to this discussion. I have finally gotten a hold of the PM. Looks like there never was a deposit, confirmed with the tenant. I will be getting my August rent in the next week or so and then will be summarily firing them and sending it to a PM that comes highly recommended in my area. At the point it looks like I will be able to get out of the $735 "cancellation fee". Thank you for everyone's help!

That really sucks they seem to be a pretty bad company to work with to have a great tenant and a crappy property Manager. I am new to the property management business we manage right about 500 homes and I would be horrified if this ever happened to one of our owners or tenants. Good luck with these people. Oh you should reach out to their competition in the local area and get there advice most will give it freely and they should all know the laws in that jurisdiction. 

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