Fraud and embezzlement

Discussion in 'Property Management' started by Xenia, 20th Dec, 2016.

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  1. Xenia

    Xenia Well-Known Member

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    We all know there are some really bad managers out there and I have had my fair share of cleaning up a mess created by other agents including recently, lease renewals not done correctly so can't be implemented.

    Outstanding maintenance issues, incorrect paperwork, legal notices not served correctly, absconded tenants and pm not having a clue, wrong advise to landlords..... the list is endless.

    However recently we've had a real bad one we are dealing with in our office, I legally can't expose the agent but the details are:

    A landlord just walked into our office with 6 files in Novemer and told us he had not received any rent since June.

    The agent used this online pm software that allows landlords to view accounts.

    Aside from incorrect entries and messy back end stuff, we could see that only one tenant was behind in rent and the other tenants were paying on time.

    A true total of $58,000 was owed to the landord.

    The tenants were not in arrears, the property manager was.

    On further investigation of the landlords bank account to verify what has been paid and what hasn't, we found that the payments in early June seemed to be coming from an agents personal account not a trust account. Alarm bells right there.

    The reason? This clown does not operate a trust account because he is not licensed.

    The pm is an agency principle or at least pretending to be and has been in business for over 10 years without a license.

    We are now taking legal action against him to recover the $58,000 for our client.

    The solicitor just informed us that he has been operating a business where he uses rental income from clients properties to fund his own developments and pays it back once the developments are sold minus a 3.3% management fee - the cheap fee is a lure to attract more pm clients.

    The properties are a mess, 2 year outstanding maintenance issues, pending tribunal claims, arrears not handled, disgruntled tenants, periodic leases because renewals not sent.... it's a nightmare and we are still fixing all this. Huge job for my office.

    Please use only licesened agents to manage your properties and sometimes what lurks behind cheap fees is not worth the money you save.
     
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  2. Ross Forrester

    Ross Forrester Well-Known Member

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    Oh dear. That is a mess.

    I have come across a few cases of fraud and it is never nice. Sadly many people just sign anything and go with the personality of the person.

    It is so important to check and vet professionals. A lot of rogue operators are out their with a fancy website and a suite.
     
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  3. DaveM

    DaveM Well-Known Member

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    Jeez thats pretty terrible. Always check people's licensing and abn to ensure it is valid before engaging anyone's services be it a pm, trade or buyers agent
     
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  4. Nemo30

    Nemo30 Well-Known Member

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    There was a thread here recently with what sounded like similar circumstances for an agency who posts on here.

    A landlord hadnt received rent in many months. Curious if there has been an update.
     
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  5. datto

    datto Well-Known Member

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    I've had two licensed PMs go broke on me.

    It's a little disconcerting when you see your PM's agency listed for rent on another agency window. You sort of think "well that's a bit strange, better go pay him a visit to see how things are going".

    Belly up lol. That's how he was going. The 'ol gambling habit wasn't paying enough dividends and it all caught up to him.

    Any way I collected all the outstanding monies after some gentle persuasion.

    So if your PM starts to rave on about how good they are at gambling on the English and European soccer leagues it may be time to switch PMs while they are in front.
     
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  6. Perthguy

    Perthguy Well-Known Member

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    With no guarantee that the funds will be recovered, that "cheap fee" could cost the landlord $58,000. From that perspective it doesn't seem cheap any more.

    Good to hear to you are on the case though and getting things sorted. Having some money coming in will be a lot better for the landlord.
     
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  7. D.T.

    D.T. Specialist Property Manager Business Member

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    Wowzers :(

    Hope you can get it sorted for them.
     
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  8. Marg4000

    Marg4000 Well-Known Member

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    We had a Licenced PM go bad. She was collecting cash rent and bonds, issuing hand written receipts then pocketing the money.

    Thanks to a diligent tenant who kept the receipts and worked with us on the claim to Fair Trading we were reimbursed the missing rent and the tenant recovered the missing bond.

    The (ex) PM went to jail.
    Marg
     
  9. Marg4000

    Marg4000 Well-Known Member

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    June till November is 5 months - a long time to wait before taking action.
    Marg
     
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  10. Perthguy

    Perthguy Well-Known Member

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    It is a long time. I would be following up daily if rent was a few days late. People are strange about this though. My parents let their PM get away with this type of thing too. No rent, late rent etc. Mind you, it wasn't $58,000! :eek:
     
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  11. Marg4000

    Marg4000 Well-Known Member

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    Agree.
    We always checked monthly statements and followed up any shortfall. PM started issuing notices if rent was 8 days late.
    Marg
     
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  12. SeafordSunshine

    SeafordSunshine Well-Known Member

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    This shows we should all check our statements every month.
    Do this religiously and you can start asking questions before huge amounts become missing.
    I am sorry for the landlord, and Good on you Xenia!
     
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  13. abbyfresh

    abbyfresh Well-Known Member

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    Being licensed and even around for over 50 years through the generations is no guarantee of anything either.

    My first PM was exactly this and I trusted them because that's what you do when you are starting out. You engage the same company that sold the place to you ;)

    Minimal maintenance.
    Don't respond / listen to tenant.
    Hand out keys for opens.
    Extended vacancies between tenants.
    Total incompetence all round.
    No one is accountable for anything.
    I had the whole package until I learnt it was was far from acceptable.

    They still operate today and probably sitting on a rent roll of over 500 properties. Most of their landlords don't know what the don't know unfortunately.

    It is extraordinary to see Xenia and her team are putting up such a case in the name of justice and supporting their new client. I don't think many would enter into such a situation. If it means this person gets a serious slap on the wrist and industry cleaned up further then its a greater win than the actual claim.
     
  14. MyPropertyPro

    MyPropertyPro REBAA Buyer's Agents Sutherland Shire & Surrounds Business Member

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    Is this the thread you're referring to?

    PM Issue

    @Xenia that sounds like a terrible one!

    I think the main lesson with this thread and the one above is that where there's smoke, there's fire. Whether it's fraud, embezzlement or just sheer incompetence, the result is the same so choose your PM wisely!

    Good luck Xenia and keep us updated!
     
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  15. Xenia

    Xenia Well-Known Member

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    There is possible jail time for this agent. It's a serious crime, he is risking clients money on development, essentially creating free lending and charging clients for taking the risk.

    It's dishonest and deceptive
     
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  16. Xenia

    Xenia Well-Known Member

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    What's interesting is that once we found out that there is no license and no trust account we asked him to immediately hand over keys and property files without the normal legal termination notice - not needed since the management agreements he has with his client are void.

    He got fairly aggressive, started yelling and dropping F bombs - very professional conduct- not! And refused to hand over files.

    We downloaded what we could from the online landlord portal but have incomplete information to work with.

    We've had to knock on the door of each house, explain the story to the tenants and get them to now just bypass this agent and pay into our trust account. They all did so we took over via a back door method.

    What's also interesting is that we initiated a tribunal case against the tenant in arrears with an incomplete rental history. We rang sacat and explained situation and they have arranged a hearing based on the guessed estimates we have. I was happily surprised they would do that. It's happening next year.
     
  17. kierank

    kierank Well-Known Member

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    WTF. $58,000!!!!!

    How can anyone let it get this bad???

    I wouldn't allow it to get to anywhere near a tenth of this number (that is, way less the $5,800) before I would take serious corrective action (such as call on my local outlaw bikie gang :) :)) and get them to collect MY money!!!
     
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  18. 733

    733 Well-Known Member

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    Xenia, thank goodness you are sorting through this mess.

    It is so important to be above board with this financial transactions - we recently initiated an an external audit of our accounting processes and are presently upgrading our software over Christmas with an expanding rent roll. As a business grows so do the systems need to be refined.

    How do agents like that get away with it? The Office of Fair Trading visited several PM offices in Brisbane this week four days before Christmas (including ours) to audit business practices - it went well with us with OFT being most helpful to provide advise where required...how did this guy never get audited in ten years????

    Xenia, sounds like excellent work - well done!
     
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  19. Johnny Cashflow

    Johnny Cashflow Well-Known Member

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    Not good. But why did it take so long for the landlord to realise they were getting no rent?
     
  20. Xenia

    Xenia Well-Known Member

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    By the time the landlord got to our office he was as frustrated as f$&@.

    He is a very trusting person, does not know the rules and at first accepted some of the bs the agent was telling him.

    Ie trust accounts are frozen so there is going to be some delays - trust accounts can't be frozen btw.

    I will pay you as soon as I sell this development - this should have rang alarm bells!!! Why does his rental income depend on the agents development projects??

    At the end he ended up going to consumer and business affairs. They were not able to help him, they were asking for figures, paid to dates what the actual losses were.... he has unable to provide any of that. It's difficult for someone to correctly calculate this to date, it took us a long time to sort through it and we are a professional office let alone the landlord on his own.

    He eventually walked into our office, no idea what was owed and almost shaking from frustration. There was 5 months where he was unable to get no where with either the agent directly or with cbs.