Property Management in CA - Posted by Ligo

Posted by Rich-CA on November 18, 2008 at 17:14:54:

Write her a letter telling her that she is to send via Certified Mail or FedEx a copy of the contract or the contract is terminated with nothing owed her.

The problem with a couple of your items is you really need that contract to verify exactly what kind of advertising and so on she agreed to. This is necessary for you to take your next step.

I would find another PM right away. Interview them like you were interviewing and employee. Get an advance copy of their mgt agreement and the lease they use. If they have written procedures, get copies of these. Develop a list of interview questions (such as exactly where the ads are placed and the nature of the ads). I would rather have the ads posted on internet classified if they produce more foot traffic. Remember to ask how many people are working there and what the number of units under management are. Get a distribution (apartments require more time per unit than single family detached houses, for example, because lower income people require more time from the manager - not always true but often enough to take a stab at their workload).

Sounds like you have a one person band outfit. She’s likely in the field all the time and only in the office after hours. If that is true, get a cell number but be sure to only call for questions that do not require access to the files. Find out when that assistant is in the office. These people are usually part time, but do work on a schedule.

Start interviewing now. In your letter to your current PM, give them 5 business days to get a copy of the contract with both signatures on it to you by FedEx or Cert Mail or the contract is cancelled for cause and you owe her nothing.

Do you have the keys to the property and are you local to the property?

Property Management in CA - Posted by Ligo

Posted by Ligo on November 17, 2008 at 09:17:17:

Hi all,

I’ve just recently started in RE investment in CA and took the plunge by closing on a property. Since then, I’ve turned it over to a property management company. I suppose this comes from experience in selecting a PM company, but I’ve been having all sorts of problems with it since then.

Besides being very unprofessional, this PM refuses to release copies of any potential applicants’ information such as the application and credit report to me, the landlord, claiming it being ethical or using some HIPAA law excuses. Is this true?

On top of that, the PM asks if a family member can be placed in the property… how do you guys deal with that? isn’t that a conflict of interest?

Thanks in advanced for you insights!


Re: Property Management in CA - Posted by Ligo

Posted by Ligo on November 17, 2008 at 09:19:38:

Also, its been almost a month and she hasn’t been able to place a tenant in addition to all these disagreements. Now she’s demanding the year’s pay if we were to break the least (we signed a one year contract). Will the court award her the full amount given the level of unprofessional services this PM has provided and has yet to placed a tenant before the contract termination?

What does your management - Posted by Rich-CA

Posted by Rich-CA on November 17, 2008 at 12:31:13:

agreement say? That is what you agreed to and the starting point if you go to an arbitrator or before a judge. Many agreements have the “pay off the balance to terminate” clause in them. I normally cross them out.

Also, do you pay her while the unit is vacant? If so, then depending on your contract, you are likely stuck paying her off to go away. If not and she just takes a % of the gross, you can pay her the % you ow through the end of the agreement. Since she has not placed a tenant, you would owe her zero under this scenario.

I did one PM’s relative and regretted it. It was fine for a year but into the 2nd year, they went down hill fast. Left me with a huge bill in the end and fled the state. The thing is their screening was solid, so its not the PM’s fault. Its just that the PM relied on their being relatives for them to take care of their end of things. Instead of keeping up with them the way they did with others. Nothing intentional, just assumed that blood was enough. Its not and can make an eviction even worse. The PM even started work before my insurance adjuster could look at the damage.

In many markets it takes more than a month to place a tenant. You might want to ask her for a rental CMA including days on market for at least a hundred similar rentals. This will give you a feel for (1) if your rents are reasonable and (2) how long it really takes.

For myself, in AZ it takes about 6 weeks, in TX it used to take 3 weeks and now is up to 5 weeks. In CO (not Denver) it has been taking 2 - 3 weeks. When I had property in the SF Bay Area it took between 1 week and 4 weeks depending on the rent and the state of the economy at the time. Get data, then decide if she’s above or below average.

If you do decide to terminate, make sure you pay her for any advertising she has done on your behalf (that means property specific not general ads for her company). Get receipts and reimburse them. Some PMs count on the leasing fee to pay for this, so that is money you owe.

You also do not provide any details that could be considered “unprofessional”. What is unprofessional? Have her accounting statements been wrong? Has she over priced the rent for the market? Has she failed to advertise the property for rent? Has she failed to document the pre-move in condition? Has she failed to return your 22 phone calls per day when all she has to say is: no news? What has she failed to do that makes you conclude she is unprofessional?

One other thing. As owner YOU have the legal responsibility and relationship with the occupant of any property you own. I require all three of my property managers (AZ, CO and TX) to provide the application (with SSN intact), copies of leases, condition records and so on. All of these are REQUIRED if you sell the property with the tenant in place because they go with the property to the new owner. They are also REQUIRED if you have a tenant who is evicted or abandons the property and you send their file to a collections agency. These things are required of YOU the owner and the PM as your agent has no business interfering with this. Since HIPAA is Federal if this were a real problem, it would affect my PMs in AZ, CO and TX just as much as it affects the PM here in CA. There are requirements about where you store such records, including that the file cabinet MUST lock, but if you meet these requirements or not is between the Feds and you.

Your PM is in error.

Oh, and I also require they send me copies of all property keys. Once I had to send them back because the PM could not find their copy after the tenant had left in the middle of the night.

If you need more info, get the Nolo Press books. They are based here in CA and while some details may not apply in other states, the info does apply here in CA.

You can also e-mail me with other questions. I was a landlord in CA for 15 years before we sold off and went to other states. I am also working on my broker’s license for PM here in CA (not a solicitation for business: I do not have a start date and will work for someone else first to develop my reputation locally).

Re: What does your management - Posted by Ligo

Posted by Ligo on November 18, 2008 at 13:59:41:

Thank you for your insights, Rich.

Unfortunately, I still do not have a copy of the contract. Explanation below…

By unprofessional I am referring to:

  1. failure to furnish me a copy of the contract after numerous verbal and phone request. I wasn’t able to obtain a copy since the contract was signed during our meeting in my property, she promised to send me a copy asap… and that was a month ago. Claims to have sent it via snail mail twice. I even provided a fax number, and she claims to have faxed it. Nothing on my end.
  2. The place of business is closed during stated and posted office hours most of the time. Calling the office number and reaching a live person during business hours is like playing Roulette.
  3. Failure to place ads in print publication as stipulated in the contract.
  4. Failure to follow up with potential tenant in a timely manner. We found this out when a potential tenant looked up our number and called inquiring about the status of their application.

There are other things that I can’t think of at the moment. I’m quickly learning my lesson and will be scrutinizing every PM contracts in addition to extensive research and reference checking from now on that’s for sure.