By Alexx, staff attorney and Barry, owner/partner
Chances are good that if you’ve lived in a rental property or have rented out a property, you’ve had some interaction with a property management company. Maybe you’ve just seen their ads promising hassle free management for homeowners and easy living for tenants. Most of them advertise they increase harmony and peace of mind for everyone involved by putting good tenants in good homes owned by good homeowners. Every company is different but there are some basic features common to most of them, and not all of them are pretty. In essence, property management companies are the middlemen between tenants renting the home and the owners of the home and that has both pros and cons.
Property management companies, like most other private businesses, have to make a profit in order stay in business. They tend to make their profit by taking a percentage of the rental income paid by the tenants to the owners. Many also charge a monthly fee to the owners and bill the owners for any major repairs that the property needs either before or during a tenancy. In exchange, the company acts as a landlord to the tenants. Tenants pay their rent and submit work requests to the company. The company either has its own maintenance staff or contracts with crews to respond to tenant requests and maintain the property in good order.
The Pros for Homeowners
When the company is actually good at management, it can be a match made in heaven. Sometimes homeowners have no experience in the business of being a landlord. Maybe they live out-of-town or out-of-state. In today’s market, many homeowners are renting out their own home or another property hoping to make some income and hold on to the property until they’re able to sell it when the housing market improves. Whatever the reason, many homeowners appreciate that the company takes all the dirty work out of renting out the property. They rather enjoy that it’s the company and not the owner who’s getting the middle of the night broken air conditioning or burst pipes calls, especially if the homeowner has several investment properties.
The company takes care of the advertising and screens tenants according to the owners’ specifications. For instance, while city codes or other ordinances might permit pit bulls as pets, the homeowner might not and so the property management company will tell the prospective tenants, “Sorry, not pit bulls allowed.”
The Pros for Renters
There’s nothing more frustrating than having a serious maintenance concern, like say, a water pipe bursts in your backyard and water is gushing everywhere, and not being able to get in touch with someone who can help you. Property management companies are supposed to give you a local, experienced contact in the community where you live so that when these problems arise, you can get a fast response. It keeps your frustration down and keeps the property in good shape. In theory.
The Cons for Homeowners
- Fees: Fees can be unclear and increase without much notice, depending on the agreement the homeowner signs.
- Gatekeeping: The company may do too good a job gatekeeping and keep the owner in the dark about important issues.
- Price Gouging: The company may overinflate the price of services and labor used to maintain the property with little in the way of oversight.
- Lax Standards: The company may not really check references or run credit checks and not follow the owner guidelines for renting to tenants.
- Bad Workers: The company may hire shoddy or problematic workers, leaving the homeowner vulnerable to legal problems.
- Commissions: The company may also seek kickbacks or fees if the homeowner tries to sell the property without involving the company.
The Cons for Tenants
The same cons that apply for homeowners also have a flip side for tenants, though most tenant complaints usually relate to the feeling of having to go through a tedious bureaucracy to accomplish anything.
- Fees: Tenants may be asked to pay additional fees on top of fees the owners pay with neither being the wiser.
- Too busy: The company usually oversees dozens if not hundreds of properties and may not be able or willing to dedicate attention to any one property.
- Gatekeeping: Most of the time, the property company keeps the owners’ information confidential so the tenants can’t contact the owners directly when they have concerns.
- Problematic standards: The company may engage in problematic screening practices just shy of illicit and blame it on the owners’ preferences, regardless of the truth.
- Bad practices: The company may improperly start eviction proceedings or violate the state’s Landlord/Tenant act and subject the tenant to added expenses and legal trouble.
- Commissions: The company may stand in the way of the tenant and owner striking a deal to purchase the property.
How to Handle Property Management Companies
If you’re a homeowner:
- Be sure to do your homework before contracting with a company.
- Check their references.
- Ask other homeowners for information.
- Read your agreement thoroughly, really really read it.
- Don’t be bullied into signing something you don’t understand just to get started more quickly. Protect yourself from legal liability from the very beginning. If you hire a shady company that you knew or should have known was up to no good, you can open yourself up to all kinds of legal problems down the road.
- Consider having your lawyer look over the proposed agreement to see if the company is trying to skirt the rules.
If you’re a renter:
- Do your homework before moving into a home with a property management company.
- See if you can talk to other tenants to find out what they think about the company.
- Think of the company as your landlord and remember they have to abide by the landlord/tenant laws in your state.
- Read the lease. No, really, read it. In the event of future problems, your rights are affected primarily by what the lease says. If there is something that does not sound right or that you don’t understand, ask for an explanation before signing. Even the best rentals can be nightmares if you get into a disagreement with the management company. Protect yourself at the beginning and avoid unpleasant surprises down the road.
- Don’t be afraid to try to contact the owners if a problem arises that the company won’t fix.
- And keep track of all of your interactions with the company in case trouble pops up later.
- Most importantly, get everything in writing. Oral agreements are easily forgotten. If the company tells you they will have something fixed or will make some change to your agreement, ask them to send you a confirming e-mail. Same with any rent concessions or any sort of reimbursements.
- Many disputes start with “They told me this and didn’t follow through.”
Most property management companies have legal counsel or advisors to help them deal with problems as they come up.
If you run into trouble that you can’t resolve on your own, contact a lawyer for help. Many lawyers offer free consultations and evaluations.
At our office, consultations are always free and we can tell you whether or not you need to hire an attorney or if there are steps you can take to resolve the problem on your own.