All Forum Posts by: Robert Gilstrap

Amber,

So to recap what you said; 

Tenant gives notice, they rescind and want to extend and you agree to that. The next step is sending out an addendum to the tenants putting that in writing. Mgmt company sends that out but tenant never signs and basically sticks to original move out date. Manager now rerents unit albeit at the same rent amount.

Now we're left with how could this happen and obviously the PM is at fault here.   Take the PM out of the equation and now you are in charge. What would you have done that would have changed the outcome? You agreed to the extension and now you personally have sent out the addendum but the tenant didn't sign it. How would you force the situation so it ended up differently?

My contention is there is nothing you can do to force tenants to sign. Now you are stuck in limbo. You can't file eviction because you have presumably accepted rent thus creating a tenancy at will which requires 15 days notice to terminate and then if they don't vacate you still have court. 

Things are not always cut and dry nor do they run on any exact timeline when dealing with tenants. Your best laid plans can be thwarted in an instant when dealing with human behavior. 

Sounds like the manager failed to communicate up to your expectations in both keeping you in the loop on the tenants failure to sign and the new rent amount and you should have a conversation with the broker about that. My guess is you will be able to reach some agreement for a free or heavily discounted tenant placement fee or reduced mgmt fees for a period.

Which one is a NARPM member?

 I feel the owner should abide by the agreement he signed. In this case the PM gave him an out of $730 but he doesn't want to do that either.  I place a high value on what PM's (at least professional ones) bring to the business because I am one.  

As far as lease up fees being an incentive to churn customers perhaps that's the case for dishonest managers but never so for professional managers. The only way a PM can make money in this business is get tenants into the system and keep them paying forever without causing too much trouble. For some reason everyone has this misconception that PM's are just praying for tenants to vacate so they can make all this money on the turnover. It's just not true. Think about it; when the unit is vacant now the PM and the owner no longer have an income stream, the PM faces losing the door altogether, the PM has to expend considerable resources to find a new tenant, do more work, etc. all of which cost the PM lots of $$.  

Perhaps in Greenville multi-family owners don't pay lease up fees but I can assure you that they are paid all around the country. In fact the lease up fees are typically even more when you factor in onsite salaries, employee benefit costs, etc.

I would say not charging a lease up fee is not in the customers best interests because now I see no incentive on your part to provide a well vetted tenant. In fact you now have a reverse incentive to just slam someone in the property as quickly as possible so the income stream can begin.  I guarantee every tenant we place for a full year so my clients know my interests are aligned with theirs. If I place a deadbeat then I lose big time.

Greg,

Respectfully I disagree with you. The management agreement spells out the scope and authority of the relationship. Without seeing his exact management agreement it's impossible to know with certainty what language exists in it but I can assure you with 100% certainty that a PM can absolutely be a party to a lease.

It sounds like you are confusing how sales brokerage agency works vs. how property management agency works.  The owner sending instructions to do or not to do something are meaningless depending on the terms of the management agreement and the authority granted to the manager in that agreement. If the owner has relinquished control and authority to a manager over particular aspects regarding the property (ie. tenant selection, setting rental rates, lease renewals, etc.) then they no longer have any say in those particular areas.

Now that being said if the owner wants to terminate his agency agreement all he has to do is contact the broker he has agency with and terminate. Immediately upon termination of agency all those relinquished powers and authorities are regained by the owner.  However, that just terminates agency and has no effect on the contractual terms remaining in the agreement regarding monetary penalties or other non agency related provisions.   So in this particular case he could terminate agency immediately and the existing PM would no longer have any authority to non renew the tenants lease BUT the owner would still be on the hook for the monetary penalties. Whether or not they could be collected on from the owner is another question.

Mike,

when you say "Managers work hard and deserve to get paid well but a never-ending commission after termination of the contract is unusual and not acceptable."

The commission is not "never ending" it's until the tenant moves out and although that might not be standard in your area it's quite common all over the US. As far as it being "acceptable"; it must have been acceptable because the owner signed that agreement. 

I agree there are a few markets where lease up fees aren't charged but I wasn't referring to other markets; I was referring to the Atlanta market where it is absolutely unheard of to not pay a lease up fee. 

Perhaps "idiot" was too strong; instead I should have said "poor business skills". How is not charging a lease up fee equate to  "aligning their interests with that of the owner"?

 Greg,

The PM is not acting unilaterally they are acting under the terms of both the management agreement (which calls for termination fees) and the lease (which they are a party to). If the owner has granted management rights to the PM then the PM can choose to non-renew that lease. Also how is the PM acting in bad faith? All they want is what the contract calls for; the owner is the one who wants to do something different. When confronted with that choice the PM even gave an alternative resolution. The best interests of the parties are first and foremost those duties and responsibilities laid out in the management agreement.

It's good that  contributors are saying "not legal advice" because they don't seem to know much about contract law.

After reading all the responses I'm also amazed that everyone keeps harping on the inability of the manager to get rid of the tenant. Eliot said multiple times that "getting rid of the tenant" was effectively non-renewing the tenant and yes the PM can do that if the mgmt. agreement allows for that.

I'm also struck at how everyone somehow sees this PM as screwing over the owner.

Eliot, you said that you never paid a procurement fee for this tenant and only paid a 10% management fee for the months the tenant has been in place. You said you "don't think it's fair to pay them twice for 1 tenant." 

So how would you be paying them twice for the tenant?  Managers get paid to procure good tenants and then they get paid to "manage" that relationship, payments, accounting, repairs, etc.   

You signed an agreement that called for no procurement fee and only a 10% management fee with termination language that says they get "X" if you terminate.  They found the tenant, they brought the value (a paying tenant) to the table for you.  Now they have agreed to just settle for a simple $730 procurement fee and call it quits.  How is this screwing you?   

You clearly signed up with an idiot manager because no manager in their right mind would place a tenant for free.  In my opinion they are just trying to get paid for what they provided and the thought process of going to court over $730 is ridiculous. 

Germain, you live right where you need to invest. Cobb County is fantastic. I look for deals right along I-75 North so Cartersville (Bartow County), Acworth (in 4 different counties), Kennesaw (Cobb County), Marietta (Cobb County). Smyrna, Vinings, etc are all great places to invest. 

Clearly I'm biased here but the decision about whether or not to hire professional management is not as simple as taking phone calls at 2am.

Why do you hire someone to change your oil, cut your grass, or fix your broken washing machine?

You could do all these things yourself but the reality is that the professional who performs these tasks can do it cheaper, faster and with a better result than someone who is not experienced.  They have better tools, know the shortcuts, understand the laws, treat it like a business, have the contacts, etc.

A professional manager can rent your house faster and usually for more money. They keep you out of trouble, they have established contacts for maintenance, they understand the laws, etc.  I could go on but the reality is that a good professional manager will save you far more money than you ever pay them.

Anything that teaches you a specialty is worth it in my opinion. If you want to learn residential management then join NARPM 1st and foremost.