Does your PM receive 'kick backs' from tradies?

Kick backs happen a lot. My property managers have a list of contractors I gave them to use. They always call me prior to contacting my prefered contractors to ask what I want done.

 

@davidst

PSBA act 2002 requires a full disclosure of any commission paid or received.

if they not declaring it, PM and/agency can be in trouble.

 

I disagree that kick backs happen often.

I've never received a kick back. I choose my tradies because they do a good job; both workmanship and also the way they present themselves which in effect represents my company.

 

Spot on, I don't think many managers would be doing this. It would be illegal if not disclosed in the mgmt agreement.

I asked my agent when speaking with them and their response mirrored the below comment by 'MRO'. They said they prefer to use their own contractors as they can control the outcome. They said they use contractors who aren't the cheapest but are the 'best value' in their opinion.

I think the problem is everyone thinks their guy is the best and the concept of 'best value' differs from the agent and owners perspective. The agent is likely to value ease of communication and timely completion to minimise tenant issues while an owner is more likely to value the cost as more important.

 

In 20+ years as a PM I've never received a "kick back" - not only is it illegal unless disclosed on the authority, we've got a duty of care to our clients to have any repairs etc carried out in an efficient, trades-like and cost effective manner. The trades we use, we use on an ongoing basis, we have a relationship with because they meet the standards I noted above and if there are problems with the repair we can have it dealt with in a professional manner. They're also our eyes and ears inside the property and highlight any issues with the tenancy that we might not get to see at the next inspection.

 

Obviously this isn't always the case, especially with smaller companies. But the tradies that get a lot of business from an agent, normally give "gifts" to them as a thank you. They also do discount rates or favours for their own properties etc.

Not a kickback but a benefit for the company to give to select trades people.

 

I think the issue it that it's easier for a PM to have their go to guys for maintenance and repairs. Our PM is not a renovator so does know or particularly care if the quote is a bit high. He sees us as investors and has commented before that we "get to deduct it at the end of the year anyway"

We have advised him to contact us and we will use our trusted tradies. Works much better for us! Most of the time it's simple stuff that hubby can do himself....like screwing a tap back on that was unscrewed by the tenants lol!

 

PM's should not receive kick backs from tradies. It's hard enough to get suitable tradies to properties and do the correct work without all the dramas. If landlords have their own tradies, no problem - I'll be making sure I have it in writing I am not responsible for them, and as long as we can verify they are suitably qualified to do the work. I'll make sure this is advised in written format. Why we prefer to use our own tradies, in addition to the control factor... Trades people - when a work order has been requested from any agency, becomes a staff of that agency despite them being classified as a contractor. If it can be proven that the agency provides regular work to that trades person to rely on as an income...beware, now you are their boss - precedent cases. So if you do not ensure their insurance and work cover is up to date, you stand the chance of being responsible should they hurt themselves at a property you send them to. Beware beware.
Have fun! From the black loud

 

I think at the end of the day if the quote is crazy high just get your PM to negotiate or get another quote. They should also know whats expensive and what not. Maybe request for 2-3 quotes before going ahead with the job?

 

One of the main reasons is that every time a new tradie is used, the details for them and their public liability cover etc needs to be added into the system and verified. This is a time cost on the part of the PM to essentially achieve the same result by calling and using a tradie whose work and details is already verified by the agency. As has been mentioned, the rapport that is built over time with certain tradies also allows for a smoother relationship as the tradie knows they will be paid (many hate being paid via PM as they have to wait until disbursement to get paid depending on agency processes) and if there are any problems with the work, the PM knows it will be fixed as the tradie doesn't want to lose the work across the whole portfolio if they do a bad job.

All in all, it's an added work load for the PM which is more than likely why you find resistance. As has also been mentioned, any kick backs, soft or hard dollar rewards of financial incentives should be disclosed to the landlord either directly or via the management agreement.

Having said all that, your PM should still be acting in your best interest and just because a tradie has always done a good job and charged a good price, doesn't mean they always will. We verify and cross check quotes with our preferred tradies to make sure there is no price creep over time and they are still charging market rates. It is the responsibility of the PM agency to manage the investment to the best of their ability and too many agencies do not represent the investor's best interests with respect to cost management in my opinion. This was one of the primary reasons why we started our business. A PM needs an investor's experience and PoV and the system for maintenance and tradies they use are a direct reflection of this.

 

For many jobs I now get my own tradies to fix things.

While I don't believe that the PM is getting a kick back, I do believe that many PM choose their prefered trades based on ease for them to use (ie the trade goes out, does the job & thats the end of the issue); so maintenance issues take less time for them to resolve.
From the tradie perspective, they've realised they're on a bit of a gravy train & they can quote anything for the job & the PM will still present it to the owner (which 50% of the time, if its the only quote presented the owner will probably accept).

The issue of course gets worse, when they have a couple of trades - both just quote inflated prices & the owner loses.

 

If the owner pays slightly more it is a first world problem. The job is done with minimal inconvenience for all parties, downtime is minimised, pm comes up smelling like roses as the works are actioned, subby gets paid, no time wasted by getting 2 or 3 quotes (unproductive time quoting, it might achieve a cheaper quote but there's lost time), you lose a tenant because it takes weeks to get a minor issue rectified (costs the owner letting fees) & loss of rent.

 

For a recent job in Perth my property manager organised their trades person around - they quoted $2200. I asked them to get a second quote as it was quite a lot of money. The second mob quoted $2500. I ended up organising my own plumber - they charged me $400 for exactly the same work. While a price mark up like that is a first world problem yes, it does make you wonder what you're paying the PM for.

I wish I could say the above is an isolated example, but its not. I think the trades consider jobs through PM as less price sensative as the person they deal with (the PM) doesn't really care about cost, but cares more about getting it done no matter what and moving on to their next task.

 

I'd agree Waldo - paying 6 times the price isn't a little more that's incompetence on the pm not knowing what a job is worth

 

mate I think it happens more than it doesn't. I had a similar instance where a simple wire was disconnected that was not making air conditioning work. PM's contractors all wanted to replace the whole aircon unit as it was "faulty" and no way it can be fixed. Showed me 2 quotes and both were around the same figure. I asked family friend who is electrician to have a look as he was working near the building and he told me its working now he just had to replace one wire. When I asked him how much he said "few beers".
While I assumed the agent didint receive kickbacks, I think their contractors were on the gravy train, later I found out that those 2 contractors do all the work for the units in the building (300 apartments), they are also good friends with the building manager, few months after that I discovered that Building manager and the PM are friends too, that's when we had to change the agencies!