Property Manager making payments on behalf of tenants.

Hi everyone,
I've been having some issues with Property Managers recently and am trying to get some understanding as to whether the issues are them doing the wrong thing, or me having unrealistic or unreasonable expectations.

We have a property that is currently rented and the tenants caused some damage to a totally different neighbouring property with a truck while they were moving in.
They were seen causing the damage by the neighbour, (who knows me well as we used to live there) and they contacted me directly as well as advising our Body Corporate who then notified me to put them in touch with the tenants.
(The Body Corporate didn't want to get involved as the damage wasn't to common property)

As I was unsure about the privacy implications of sharing the tenants details, I referred this on to our Property Manager and asked them to advise the tenants of the situation and that the owner of the other property wanted to contact them to organise for them to pay for the repairs.

I pretty much through that was the end of the matter and that our tenants would then engage directly with the neighbour to sort it out amongst themselves.

Without my knowledge or any instructions to do so, the PM facilitated a quote for the repairs, which they then sent to me for my approval!

I let them know very clearly that this had nothing to do with me and that they should send this on to the tenant to discuss with the neighbour.

I was also pretty miffed that they even went to the trouble of organising this on behalf of the tenant for free, as whenever I ask them for a trade to provide any quotes, I immediately get hit with a $120 call out fee.

The neighbour eventually contacted me to let me know that they had been paid and the repairs had been completed, so again I thought I was done.

Then I received this months rental statement which included an additional line under "Income" for the collection of cash from our tenant to pay for the repairs, and a subsequent line under "expenses" for the payment to the tradesperson for the repair.

When I asked the PM why, they advised that it was because "Office policy is that all transactions, especially cash transactions made from a tenant needs to be receipted to the property they reside and into our computer system."

I believe that this is a transaction between our tenant and another third party and our PM should not have been involved in facilitating any transactions on their behalf.
After all, we pay them a fee to manage our property, not to provide a free dispute resolution and payment service for our tenants.
I also am concerned that this may be misrepresenting the income/expenses for our property and has potential tax implications for us as well.

I want to know if it is legal and/or correct for them to have done this, and whether I can ask them to remove these transactions from our statements and our records.

P.S. There is nothing covering this sort of thing in the Rental Authority agreement, (which I haven't signed yet, as we were disputing a range of additional fees and charges that were not disclosed to us at the time we asked them to quote to take over management of the property from the previous PM), and I don't know if there is any agreement to do this in the lease as I have not yet seen a copy of it. (Although I understand that the PM may have signed this on my behalf).

Let me know whether I should just accept the situation and let this go, or whether I should just initiate steps to sell off all my rental properties.

(I really can't be bothered shopping around for another PM as the last one screwed me over for thousands of dollars of "repairs" to another property that were never done, so if this one is also dodgy, the ever reducing returns mean I'm done.)

 

Instruct the PM to remove the third party transactions from the statement and move on if they don't

 

Erm, why is the only choice between 0 and 100?

Honestly it seems like a non event and it was kind of weird that you contacted your PM about this in the first place. So in a way, you instigated it.

 

Thanks @wylie.
Yes. I expect I will do that, but I'd like to know where I stand from a legal standpoint before I do.

With a net return after interest and expenses of around 3%, if I can't find a property manager I can trust to do a proper job looking after my interests then selling to re-invest elsewhere is a serious option.

 

Yes - of course you are correct.
That should have been an option.
I meant to "move on" in the sense of not pursuing it any further and letting them off the hook.

 

I believe you should have the right to approve the quote, or get your own as well and you should still be able to go through their insurance.
You don't have to accept the cheapest dodgy repair they can find do you?

 

From the point of view of a property manager, I wouldn't be getting upset that they are ensuring the repairs get completed and keeping peace with the neighbours. They're not charging you extra for their time and its a good thing they are seeing the issue through to its resolution.

Regarding the transactions on your statement, although it nets to 0, I can't speak for the tax implications - hopefully they can remove them for you and you can move forward.

 

Thanks for your reply @thatbum.
I guess my username was well chosen because I don't understand your comments.

I'm not sure what you mean by "0 and 100"?
Can you please explain?

What did I instigate?
The neighbour contacted me and the Body Corporate after they saw my tenants causing the damage and took photos of them and the truck. (The impact made a lot of noise apparently).

Since they know me well, they contacted me as a courtesy instead of going straight to the police. (They left the scene) without reporting the damage).

Are you suggesting that I should have taken responsibility to pay for the repairs to the neighbours property myself?

Or are you suggesting I should just accept income and expense lines on the rental statement that don't relate to my property? (I would be OK with this if it is above board and doesn't have any tax implications for me).

Please educate me on the correct course of action I should have taken.

P.S. I forgot to mention that this was a rental truck, and despite the evidence to the contrary, the PM's first response was to offer to contact the well known self drive hire car company, (Not a delivery company), to find out who had rented the truck as the tenants initially told her that it wasn't them and that they hired the driver AND the truck from them. She believed them.
Not surprisingly, the hire car company wasn't helpful.

 

Thanks @Mel Morgan.
That makes sense. If there are no legal or tax implications, I'm inclined to let it go.

From a PM's perspective, if I ask them to remove these from my statement, should they easily be able to do this without causing any reporting or compliance issues? (I'm not even sure what the rules are?)

 

The way the PM has dealt with this from an accounting/paperwork/receipting manner is correct and you’re concern over it is unnecessary.

 

From another PM, I a agree that the income & expense will be a nett zero, it should also appear as miscellaneous income not rent & no commission should be charged).

What I have issue with is if the agent doesn't have a signed management agreement are they entitled to any management fees whatsover? This may be a breach of the Agency Act as well.

 

Thank you @JoannaK
That's good to know.
So there should be no Tax implications for over-reporting income and expenses, or alternately if I report the correct amounts that don't match the statement?

 

It's another line on the statement described as "Repair common property" - which is incorrect as the repair was to a totally different property.
I didn't even think to check that before, but it appears that no additional commission was charged.

That's correct.
They do not have a signed agreement yet as I was originally quoted only a fixed percentage when I asked for an all inclusive quote, yet the agreement I was eventually sent included additional monthly account management fees, statement fees, software fees and an annual statement fee. The total of all these increased the total by roughly an additional 1.5% annualised so I refused to sign it until they send me one with our previously agreed terms which I absolutely will sign when they send it.

I'm the first to admit I have trust issues due to being burnt before, so I document everything.
I have no problem with paying them fair and reasonable fees for doing their job, but I expect transparency and accuracy in return.

 

I also expected the tenant to deal with the neighbour and their repairer directly, not for the PM to get involved other than to pass on the initial communication.
I’m still not sure about any possible Tax implications.
I think that my gross income before expenses will possibly be increased, but the net income should be the same.
I’m not comfortable that someone else’s cash transaction is being mis-represented in my statement however.
The invoice clearly states a different address so this may not be able to be treated as an eligible expense anyway.
The payment as well as the repair is referred to as "Repair common property" so unclear how the Tax Department or my accountant would treat that and allow it to be removed from "income" reporting.
This is my biggest concern. I'm not keen to get on any ATO audit lists or have to explain this at some point years from now.
I'll probably give my accountant a call today and ask his opinion on this before deciding what to do.

 

I dont understand how the PM was even involved. I thinkThatsbum called it correctly. You instigated it. Now stop it. If a neighbour contacted me I would give the personal details of the tenant and allow the two parties to address their issue between them. You rproperty is uninvolved. If starta property is involved you will charge the tenant for the damage if you are required to pay. I dont see how a tenant damaging strata property is your cost. Its a legal issue between the property owner being the strata or another owner. NOTHING to do with you. The cost is not deductible for you anyway as it repairs OTHER property.

tell your PM to butt out.

 

Such a weird story, wonder if there's more to it the Agent/other parties haven't told you.

 

I'm sorry if I was unclear. I thought that I explained in the first post that the PM got involved only because I wasn't sure about the privacy rules regarding tenants information. I am very conscious of not infringing my tenants rights, and that's why I have a PM as I expect them to know how to handle these sort of situations. If I had known that I could have just given the tenants names and contact details to the neighbour, without breaching their right to privacy, I would certainly have done so.
I couldn't find anything online specifically regarding whether I was permitted to do this, but found this:
"A real estate agent may only disclose your personal information for the reason they collected it (the primary purpose) unless an exception applies."
This occurrence didn't seem to meet any of the criteria for an exception from what I could find?
I'm happy to be educated so that I know better in future, so please share a source.

By the way, I DID tell my PM to not get involved and to leave me out of it after they sent me the first quote. (I think that's in my first post as well?)
Clearly they ignored me anyway.

And yes, I already know that the cost is not deductible for me, and that's why I was concerned about the Tax implications of these transactions appearing on my statement.

I'll accept that I'm guilty of ignorance and the crime of expecting my PM to know my rights and obligations and to advise me accordingly.

Looks like the rental property market is not for me.

I spoke to an agent today and as soon as I can get the tenants out, it's going on the market.

Next problem : Now I have to research how, and if. I can issue a Notice to vacate...