Fall of a Property Manager

Striking Back

In Part I of this story I outlined problems that I was having with a small town property manger and in Part II I told of my discovery that others were having problems as well. To recap it quickly: The PM was collecting rents but not forwarding them to the owners and he was charging for repairs that never happened or padding the bills for repairs that did take place. The pattern that emerged indicated that he was doing this primarily to those that lived outside of the area.

This article details the steps taken after I discovered that the PM had no intention of giving me the money he had collected on my behalf. He had placed a tenant in one of my rentals, collected rent and security deposits, but did not send me any money nor did he return numerous phone calls or emails.

Steps Taken

The first step was to stop the bleeding. I met with my attorney who drafted a letter to the PM informing him that he had breached the contract and was no longer managing the property. The letter included a demand for immediate payment of all money collected. As expected, that letter was ignored. The tenant was notified that all future payments were to be made directly to me.

Next a complaint was filed with the Nevada Real Estate Division. As it turned out there were already a number of complaints against him. Though I had checked with the RE Division before hiring him there were no violations on his record. The state does not give out information on pending complaints, only violations. With the collapse of the real estate market there is a huge backlog of cases. Had I known of the pending violations I never would have hired him.

The next step was to initiate a small-claims action. It was easy to file and I was given a hearing date of August 5^th. I assembled my case with the help of my attorney but represented myself since this was essentially a slam-dunk. The case was called but the PM didn’t show to defend himself. I merely had to establish that a contract did exist and that rent was collected. Since no defense was provided by the PM, I won by default. Fortunately for me the State of Nevada has a Real Estate Recovery Fund that is meant to reimburse victims of theft and fraud by real estate agents. This fund uses a portion of agent license fees to provide money to repay victims. I am currently in the process of seeking reimbursement.

Not Stopping There

Had I been the only victim this would have been a civil matter. The PM could have made any number of excuses and malicious intent would have been difficult to prove. However, my local real estate agent had connected me with a half-dozen other victims. This made it a criminal matter.

I went to the Sheriff’s Office and filed a complaint. I also contacted each of the other victims and suggested that they do the same. What really surprised me was that a number of them “didn’t want to get involved.” Would they have felt that way the PM had robbed them at gun point? Fortunately a number of people stepped up to the plate and did the right thing. In a town with very little crime this case has become a big deal.

I have been acting as a liaison between the victims, sheriff, and the investigator for the real estate division. This coordinated effort has kept everyone working together to stop this guy. It’s a given that the PM is going to lose his real estate license and be subjected to substantial fines. The detective handling the case for the Sheriff’s Office is preparing to bring the PM in shortly.

What most likely started as a case of a property manager “robbing Peter to pay Paul” had spiraled out of control. The PM will not only lose his license and be out of business; he will probably land in jail or at least be placed on probation and have a criminal record. The state will likely seek restitution of the funds they pay to the victims. If he’s not already at bankruptcy’s door, this will surely push him over the edge.

There are two morals to this story: 1) Some people shouldn’t be in business. 2) Don’t mess with a BiggerPockets member!

Revenge is sweet and not fattening. – Alfred Hitchcock

Photo Credit: Richard Warren

Note By BiggerPockets: These are opinions written by the author and do not necessarily represent the opinions of BiggerPockets.