Property management Q&A: Non-paying Property Managers

By
14/05/2015

This month our property experts answer your questions about non-paying property managers and properties which have been vacant too long.

Property manager not paying

Q: What course of action can I take if my property manager is consistently withholding my rental payment? The first time this happened she said there was a problem with the bank transfer, which resulted in the payment being two weeks late. The second time, she said the tenant was late with their payment and therefore the rent wouldn’t be paid to me until the next month. Is this grounds for immediate termination of the agency agreement? What can I do to deal with the situation?

A: This is indeed a challenging situation and one that can be frustrating for a property owner who has put their faith in a property management agent. Thankfully, there are some steps you can go through to mitigate the risk of this becoming a consistent problem.

Firstly, I would put in writing when you want your payments to be received; most commonly this is at the end of each month. If you require a different frequency of payment, you should clarify this with your property agent directly before hiring them.

In your email or letter, ask the agent to put in writing the frequency of your payments that they are committing to paying. As with all things in property ownership, creating a paper trail is critical, as this will give you hard evidence should you ever need it in a mediation or legal situation. If they cannot commit to your required frequency, make sure you contact them directly to seek a reason and/or a resolution.

Your property manager may claim that there was an issue with the transfer, therefore making the issue beyond their control. If this was indeed the case and there was a problem with the transfer, it wouldn’t take two weeks to fix, so don’t accept this as a valid excuse.

If you are told the tenant is late with their payment, you are well within your rights to request a one-off payment from your property manager. Whilst not required, this is a nice gesture from them and should be seen as such. A good property manager will always be interested in their relationship with you and should be willing to invest in it.

At the end of the day, if you have tried to resolve the issue with your manager using the above steps, do the right thing by your finances and give them notice before moving on.


Vacant too long

Q: My property has become vacant and it’s now more than a month since my agent put it on the market. She’s suggesting I lower the current asking price of $310 to $290 and maybe even consider making the first month free to get potential tenants interested. Is this reasonable? I don’t want to create a precedent that I’m that type of landlord, but at the same time I don’t want to have my property vacant for a very long time.

A: Having your property vacant for any amount of time is a painful experience for any property investor, so I understand your concern. In this situation, the property manager holds the key to making the right decision, but you can help yourself too.

Firstly, you should have had this discussion with your property manager sooner – even after just a week. Remember, any week your property is vacant is a week that is costing you money! After one week of vacancy, you should have a discussion with your agent, in which they should detail the feedback from the open home, as well as the number of enquiries and private inspections. This information should already have given them enough information to have a detailed discussion with you and to recommend what needs to be done next to prevent another week of vacancy. This should not have taken an entire month for them to realise!

Although taking a financial hit at any time is an uncomfortable feeling, you should carefully consider your situation, and this is where you can help yourself. How well do you know the comparable market in your property’s area? Are you pricing yourself out of the market? Is demand low or high currently? Having this information ready will help you make better decisions and give you more confidence in what your property manager recommends. For example, some regional areas are overrun with vacant rental properties, driving prices down and making it one of the key considerations for tenants.

Without knowing your specific circumstances, I would suggest that you are acting the smartest way, as it is better to lose a few dollars over time than to lose a whole week’s or month’s rent. Depending on the amount of rent you charge and how many weeks the property remains vacant, it could take more than a year to make up for the loss if this vacancy continues for a long time. You should take action for yourself to resolve the situation on your terms and not worry about what others think.

As always, before jumping to any decisions, run the numbers and weigh up your options for giveaways or discounts. Perhaps only one or two weeks’ rent would suffice in your market? Perhaps something as simple as free garden maintenance for a month would be enough? Regardless of what avenue you choose, make sure it is attractive to potential tenants, without crippling your budget. For me, a whole month’s rent seems a little steep, and trust me, I have worked in some tough markets.

Finally, when it comes to your property manager, make sure you grill them for all the details. What has the feedback inspection told them? Sometimes it can be something as small as a fresh coat of paint in a room, or the removal of an ugly shower curtain in the bathroom!

-Nicole Keene
Nicole has almost a decade of property management experience behind her and specialises in proactively managing investment properties.

 

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