Property Manager Placed Tenant Without Authority or Signed Lease. House Burned Down (Vic)

We have worked with the same property manager and real estate agent for many years. She was great in the beginning and we recommended many friends, colleagues and family to her over the years. Around 5 years after we started dealing with her, she started to change. She kept moving from one office to another and each time my family & I followed her, choosing to ignore occasional minor lapses when they occurred. She always seemed to have a valid reason for changing workplaces and, as we do not live in Melb, we made excuses to stay with her: "She is overworked" "She said she will look after us when she finds time" "We are overseas and very busy people, she is the only person we know" etc

Last year she placed an unemployed tenant in one of our houses without written or spoken authority to act. No lease was presented to us for signing (nor has she been given authority to sign on our behalf). Just before Christmas, the tenant's deranged girlfriend torched the house causing a great deal of damage.

Our agent should have insured the house (or encouraged us to do it ourselves by providing us with quotes etc) but it turns out she never bothered. 6 weeks have passed and she has thus far failed to provide us with photos of the damage or a police report. Instead of trying to put the situation right, she has tried to pressure us into selling other property we own (which she also 'manages').

Chasing the former tenant is not going to work, he is unemployed and possibly mentally ill. He should never have been placed in our house in the first place. Pursuing him for money or trying to bankrupt him would be a waste of energy.

To us, it seems like the agent is the one to have caused the problem. Talking to her has gotten us nowhere. She blames us squarely for not being insured and has become truculent and very hostile. What recourse do we have? If you were in this situation, what would you do? Thank you in advance for responding.

 

Hi,Sorry to hear this.
Did you get rent paid by the tenant till the Xmas? I always thought that taking a landlord and or a building insurance is the owners responsibility. Hope experienced members can comment further.

 

If you have owned this house for many year (and others) you should have arranged insurance many years ago. That onus falls on you.

She and the agency is somewhat responsible for putting in a tenant without your consent. How did this come about - did you know it was empty? Was their communication about finding a tenant?

You may have a case against the agency for placing a tenant who wouldn't normally pass tenancy checks but not necessarily against them for the damage as that wasn't caused by the tenant but by his girlfriend who I presume wasn't on the lease

 

It is your responsibility to insure your assets. Playing the blame game and saying its their fault for not insuring it is rubbish.

 

Thanks guys. It's been a very stressful and traumatic time for my family and I.

Self management was never an option for us. The reason we employ and generously pay a Property Manager is so a full time professional can handle ALL aspects of property management, including insurance, paying rates, screening tenants etc. Correct me if I am wrong but surely there is more to the job than just collecting rent?

 

A property manager will happily pay insurance renewals from rent held etc under instruction. But it is not their job to select and take out an insurance policy - that's up to the owner to choose an insurer based on their personal situation, risk profile, prior claims history and acceptance of a PDS/T&C's.

That aside you have two courses of action

1) Against PM for breaching their professional duty by putting unemployed unvetted unapproved tenants into the property

2) Criminal claim against tenants for wilful property damage

 

Insurance is a personal responsibility. No one else can do it for you as you have to give details etc and incorrect information may void the policy.

The PM will pay property related bills on your instructions. I don't know if a PM would take responsibility for renewing insurance as renewal implies acceptance of conditions etc., and also confirmation of details.

We never signed lease documents. The authority to act gave this responsibility to our PM.
Marg

 

This is clearly an unfortunate situation to be in. Aside from what is happening with this property, why is your property manager pressuring you to sell your other properties? If she is still managing them I would immediately find someone else to handle those other properties while you work out what to do with this one.

With regards to insurance, even though it is your responsibility your property manager would want to have on their records details of insurance I presume if you didn't would advice you to do so.

 

Thanks folks for your responses. I am not saying she torched the house herself. Instead she put in place a tenant with drug, employment and mental health issues. It was foreseeable that such a person and his companions would cause problems.

> Aside from what is happening with this property, why is your property manager pressuring you to >sell your other properties?

Her business is doing poorly and she needs money for her own rent and living/business expenses. Also, she assumes we need cash in hand in order to get the wrecked house fixed up.

I always assumed she handled the insurance herself (indeed, sometimes PMs get a kickback from insurance companies for introducing new clients). If she couldn't handle the insurance application herself, at the very least she could have sent me quotes etc so I could have attended to it from afar.

 

Only IF you had an extant PM contract that clearly instructed the PM to pay insurance renewal to your nominated insurer. If not, the onus is on the landlord as no contractual arrangement or formal instruction is in place for that responsibility to be taken by the PM.

The same goes for maintenance, rates, sewage/water etc... If no clear instruction is given &/or the funds are not available in the nominated account, then the responsibility lies with the property owner. Perhaps read your PM contract in detail.....

 

Comrade,
Sorry to read this tale.

1. You could discuss your issues with a lawyer who specialises in no-win no-fee claims. This may safeguard your risk of costs if you lose BUT take care that a realistic fee basis is agreed and its not padded out to be excessive later. They may pursue her for negligence etc and seek to find her fully or partially responsible for your loss. She should be insured and should be licensed so insurance SHOULD be available. She does have a duty of care to act in your interests and negligence could be alleged. Her negligence may be considered to be professional negligence for her qualifications, experience and licensing. And as you suffered a loss due to her actions to permit occupancy without all the formalities of a lease, the tort of negligence possibly established. Her counter claim would be that you were deficient in insuring your own property but that may be more a after thought since a insurer probably wouldnt pay anyway - They may also have found the agent contributed to the loss. The lawyer could assess the prospect of success.

The issue is one of causation too. ie If the unauthorised and illegally granted (a lease is a state govt formality !!) tenancy hadnt occurred the nutty GF wouldnt have had access to the property and no fire would have resulted.

Criminal liability...LOL. Bet you $100 no job, no assets and no likelyhood. Go after the agent.

2. Terminate all contracts with her and seek a new qualified and experienced PM.

 

I have had PMs that suggest insurance, but as the others say, that is really our responsibility as Landlords, if you have a loan with a local bank they force the issue at the start, some do check yearly though.

So your fault not insured, maybe it is even in some email or document from way back, you won't win this one.

You better check and see if your agreement allows them to select and place tenants for you, PMs can do this if agreed to and not many send the leases through either way, so it comes down to this, you need to find this out 100% for sure, but then if you have been getting rent for some time from this person, you can hardly say you expected your place to be empty, so between these 2 things will lay an answer I believe.

 

I will give my clients names of insurance companies I have used/had claims with and a good experience with in the past. I will also suggest they check the PDS that certain events are covered (ie. accidental damage, cover for periodic leases etc).

I however do not recommend insurance companies or gather quotes, this is a huge liability for me and my own insurance does not cover me for giving this kind of advice. I will happily pay insurance renewals if instructed, but I do not take out the insurance for a client. Last thing I want is to be caught in a situation whereby I'm involved in a lawsuit as I've failed to insure a property appropriately.

Your situation does sound incredibly stressful and I do sympathize, but the insurance is on you. Now how to fix it..

Did you have a signed authority with the agent?
Did the authority give permission for the agent to sign leases on your behalf?
What discussions were had, if any, for the new tenancy?

You may have a negligence case against the agent, but it's worth reading up on the legislation (such as lease agreements do not have to be in writing) and engaging a solicitor to investigate whether you have a claim or not and try it on.

With your other property, you need to take that management from the agent immediately. Regardless of who is at fault for this situation, you need to move whatever else you have to someone more competent.

 

I fail to see how the insurance can fall onto the PM

I also fail to see how it was forseeable that the house would have been burnt to a crisp (What does someone like this look like? Red hair, matches?)

I guess at the end of the day, you have fallen victim to not being hands-on enough, and the PM has let you down.

Your next options from here would be, establish how you can fix the building so that it can turn into a money making device again, cease all dealings with the old PM. Even if you did need to sell your existing property, I wouldn't trust this PM with the deal.

 

Between placing the tenant and the fire before Christmas did you receive rent or have knowledge of the tenancy and if so what action did you take?

Or had you accepted that the tenancy was in place.