PM not paying rent - Advice needed

[Soren Lorensen]

Hi All,
I've been a lurker for a while and have seen how much knowledge you have and was hoping for some advice on a problem with one of my PMs. Also thought the issue could be of interest to others if they ever find themselves in the same boat.

The problem is that after three years problem free with a PM they have suddenly stopped paying me the rent. After repeated phone calls I have found out that the owner of the agency is going through a messy divorce and fighting over the business with soon to be ex partner. Every time I call the PM promises that it is in the hands of her solicitor and the money will be paid within 48hrs but it never is. I have missed out on one months rent and with the first of April rapidly approaching it looks likely that I will not be getting next months rent either.

I have plenty of backup funds so making my load payments is not a problem, but I do need a "damage limitation" plan.

Do I stick with the current PM and hope the mess will be resolved eventually?

Do I cut my losses and move to another PM, and can I terminate my agreement immediately with current PM on the grounds they haven't paid or do I have to stick to the 90 days notice in my contract?

If I do move on to another agency how do I go about getting back the money owed?

Any other advice/suggestion greatfully recieved. Also for info I am not Australian by birth so not totally familiar with the legal system here.

thank you
Soren

P.S anyone know a good PM in the Minyama area of QLD?

 

[TommyR]

Hi,

perhaps you could get advice from the Real Estate Institute or the equivalent body in Qld. Messy divorce or not your money should surely be in the agents' trust a/c.

In the mean time I would be making new arrangements for the payment of your rent - they are in breach of your agreement, I don't think I would be worrying about the 90 days notice - as you said at this stage it's about damage minimisation.

Good luck

Tom

 

[pennyk]

Hi,
I would also get a solicitor to send them a formal letter of demand. (or you can write one yourself, but it always looks better on solicitors letterhead!!).The sooner you put it in writing, the sooner you can begin legal action.
I would also inform the RE body in the state... they have your money illegally.
and change PM's!
Pen

 

[Perp]

Agree with all advice; no room for pussy-footing around on this! The money is yours and should be in a trust account and totally immune from any other activities of the agent. The fact that they're suggesting it's not is highly worrying. Get onto it immediately; send a letter of demand for rent in arrears and get a new agent (unless you get a very good explanation for what has happened).

 

[Xenia]

Soren,
This is not a normal situation so I cannot comment fully. I would presume that the trust account (where your rent is located) will be frozen by their solicitors so that the money cannot be touched. Messing with money in the trust account would be fraud!

It dosen't look like your demands are going to be met so further endevours may result in more frustration on your behalf.

I would certainly ring the REI in QLD for ways to move forward. I would also presume that they have breached their agency agreement with you (check with the REI) so you should be looking at a new pm at this stage to take over.

The money paid in the trust account will probably be paid to the relevant ledges but I doubt in their situation they are managing the property in terms of looking at rent arrears, maintenance etc. You still need to be on top of all this which is why you need a new pm.

Their solicitors may actually take all accounts and give them to another agency automatically???

I'm not sure how the situation would be rectified and there is absolutley nothing you could have done to check against it, I'm sure this is a situation they also would rather not be in!

It something that requires time to rectify but in the mean time I would suggest that you begin with advice from the REI!

 

[Xenia]

Soren I just read the posts above where someone mentioned that the rent money may not be held in trust! I'm not sure if this was assumed by the poster or whether it is a fact!

The rent money needs to be held in the agent's trust account, this is required by law! If they are holding client's rent money in any other account they are commiting a serious breach of the trust act. They can be fined for fraud and lose their license.

If it is in the trust account (should be) it will be rectified eventually!

 

[yo yo ma]

P.S anyone know a good PM in the Minyama area of QLD?

See my post below of who I use in the area... Although based in Mooloolaba, they manage 2 properties for me in Kawana
http://www.somersoft.com/forums/showpost.php?p=354594&postcount=6

 

[yo yo ma]

I have plenty of backup funds so making my load payments is not a problem, but I do need a "damage limitation" plan.

It is not up to you to make the payments & this shouldn't come into it.

Do I stick with the current PM and hope the mess will be resolved eventually?

You shouldn't have to hope to resolve it eventually. You need to get this sorted out as a priority before it gets any worse... I like the solicitor idea.

 

[Soren Lorensen]

Thank you all for your wise and speedy replies.

In response to a few of the comments I am assuming the money is in a trust account.

Xenia your comments about it being frozen would make sense and explain why my requests (and demands) for payment just keep getting fobbed of with the response of "the solicitors are dealing with it, you will get you money within 48hrs".

Also your observation that in their situation they may not be doing the best job managing the property, is exactly the same thought that went through my head. Even assuming the money was in my bank account monday morning I have now lost faith in their ability to manage my property as it definately won't be their top priority right now.

You are all right I will need to change PM's. I wasn't really ready to face the reality of having to move on but your responses have made me realise it is inevitable as I don't really feel that we can have a working business relationship after this however it all turns out.

I will definately be on the phone to the REI on monday morning.

Unfortunately I could do without the extra hasstle right now as one of my IP's in Mackay was flooded in Feb and still uninhabitable and being rebuilt now, as they say "it never rains but it pours" or is that not a common saying in Oz.


thanks again

 

[Soren Lorensen]

yo yo ma,
Thanks for the recomendation, funnily enough the agent I am with was L.J.Hooker before they were taken over by someone else last year (I won't mention the new name). I was always very happy with the service from L.J.Hooker and never had any problems with them.

 

[redsquash]

Are you saying you have been waiting for rent which was due march 1 and that you have been fobbed off all this time with the excuse the solicitor is dealing with it .
Bells are ringing !!!!!!!!!!!!!
If it is in a Trust account , which it must be then get cash deposited into your account Monday morning before 1130am, or inform the agent that he will lose his license for tampering with funds.

Any personal PM problems are unrelated to the trust account.

I would call this stealing.

 

[Xenia]

Are you saying you have been waiting for rent which was due march 1 and that you have been fobbed off all this time with the excuse the solicitor is dealing with it .
Bells are ringing !!!!!!!!!!!!!
If it is in a Trust account , which it must be then get cash deposited into your account Monday morning before 1130am, or inform the agent that he will lose his license for tampering with funds.

Any personal PM problems are unrelated to the trust account.

I would call this stealing.

Red, if solicitors have frozen their trust accounts they would not have access to it so they can neither steal money nor distribute funds to clients.
If they are in a legal battle they would have lost all control over their business. Sorento is an innocent third party in this matter but he still has the obligation to look after his investment, it still needs to be managed first so that the tenant does not fall into arrears and further payments are paid to a different trust account, one where he will have access to (via the managing agent of course). Recouping the money from the current agency is a secondary issue to the continual management of this property.

 

[marg4000]

Soren, I believe I know the agent you are referring to. We had a property with that agency also.

We received a letter from the receivers on Thursday March 20th stating that they had been appointed as of 1st March. Any payments after 1st March are controlled by the receivers and will be remitted at the end of the month.

At the moment the only payments in doubt are those made to the agency between 1st and 29th February.

I will sent you a personal message with further specific details (once I figure out how to do it).
Marg

 

[Soren Lorensen]

Marg,
that's interesting, if it is the same agency I don't know why we havent recieved anything info from the recievers. Look forward to a pm from you.

Xeria, you are right, our first priority is to protect our investment. Will be calling the REI first thing monday morning to find our what our obligations are with regard to our agreement with the agent.

 

[Raddles]

Hi there
if receivers have been appointed to the real estate agency then that is normally an event of default (apart from the failure to make the payments discussed) which will terminate a contract, including an agency arrangement.
It will be interesting to see what the receivers are proposing to do - whether to manage the business until the rent roll can be sold - or whether they will just be terminating everything and getting in what is outstanding.
As has been highlighted - the first priority is to sort out the ongoing arrangements - then pursue the receivers for further information.
I note that we once were involved in an agency in the ACT where the husband and wife team went their separate ways - there was no financial impact upon us as one party just bought out the other's interest in the business. It is very unusual to have a trust account frozen as has been described by others and it is also surprising that you haven't been given more notice of the problems.
Can you review your agency agreement and see what it says when a default happens? It may be you will need to give written notice of the termination of the agency given what has happened.
thanks

 

[Soren Lorensen]

I have reviewed the agency agreement and interestingly enough it has a section "what happens if the lessor is in default under tenancy agreement" but not a section for what harrens if the agent is in default

 

[marg4000]

For those interested, here are a couple of relevant paragraphs from the circular letter we received from the Receivers and Managers....


"Trading

I am currently assessing the financial position of the Company with a view to developing a plan for its future. Whilst this assessment is continuing, I intend to trade the Company since I consider this to be in the best interests of all parties concerned and ask for your support in this regard.

Please note, all rental payments due to property owners for the month ending March 2008 will be processed by this office in the ordinary course of business.


"Pre-Appointment Rental Payments

As Receiver and Manager, I am not in a position to remit any rental trust monies to property owners for the period 1 February 2008 to 29 February 2008 at this stage. During the course of my appointment, I will continue to monitor the Company's ability to remit these funds to the relevant property owners. Should the Company be in a position to make payment for this period, all property owners will be notified in writing."


So that is where it stands at the moment. The Receivers were appointed on the 25th February 2008 which is probably why no monies for February were processed.

Guess we will just have to wait and see.
Marg

 

[Firsthomelooker]

This is just one more reason why I am glad I self manage.

 

[Dazz]

For those interested, here are a couple of relevant paragraphs from the circular letter we received from the Receivers and Managers....


"Trading

I am currently assessing the financial position of the Company with a view to developing a plan for its future. Whilst this assessment is continuing, I intend to trade the Company since I consider this to be in the best interests of all parties concerned and ask for your support in this regard.

The definition of "support" of course being about $ 400 per hour from the principal of the R&M company, with further support of $ 250 per hour for the main lackey looking after the books and further payments stripped out amounting to +/- $ 90 per hour for a wet behind the ears secretary or photocopy clerk.

The support will cost about 50K per month whilst we "assess" the best position for stakeholders.....and if you could all just bear with us for a few months whilst we strip the said 50K per month, I'm sure we shall end up with a most suitable outcome for all concerned....in a most professional way of course according to law.....meanwhile helping ourselves.....sorry, I mean professionally managing the very difficult and complex corporate matter.

After 4 or 5 months of phaffing about not telling you a damn thing, amounting to 200K or so of fees, (which you will need to vote on as the first item on the agenda to ensure we get paid 100% in the dollar regardless of the schmozzle) we should be able to reduce that return for stakeholders down from say 70c in the dollar down to 32c in the dollar.....sorry I mean extricate the very best outcome for all concerned.

Oh Marg and Soren, I do feel for you, if this is being professionally managed. Grab an extra tube of KY....you're gonna need it.


Just a weird question.....how can the accountant consider that it's in the best interest of shareholders to continue to trade if he hasn't assessed the situation as yet ??

Please note, all rental payments due to property owners for the month ending March 2008 will be processed by this office in the ordinary course of business.


"Pre-Appointment Rental Payments

As Receiver and Manager, I will continue to monitor.....

Guess we will just have to wait and see.

Yep....at $ 50K per month, I think also the best thing to do is sit back and just wait and see....trouble is, other than a rapidly dwindling pile of cash, what else do you expect to see.


Just as a laugh, when you get invited to the creditor's first and second meeting, challenge the first and second items on the agenda. The first will be the creditors agreeing to the absolutely outrageous fees they wish to charge, and the second will be re-convening for a second time to allow a more prudent and professional approach to fully explore all business opportunities.....both items will shaft you extraordinarily and that will pretty much be the end of the meeting.

You'll look around and probably say to your partner.....but we didn't actually talk about what monies we are owed or when we are likely to see it, or what the level of payout is.....all of those matters will be discussed without your attendance or agreeance, and won't appear on any agenda.....except at the very end when all of the backroom stuff has been agreed and sorted out. You won't be involved but will be cajoled into voting for what they've already pre-determined and agreed....to give it that nice official taint.

Go along and see.....good for a laugh anyway.....I disagreed with their fee structure, that's always excellent for throwing the cat amongst the pidgeons. Make sure you have support from the group of creditors, cos they'll simply get some sap to support the fees and a seconder....then you're stuffed !!!!

Of course, all of the above is pure speculation unsubstantiated in fact. Please consult with your $ 700 per hour solicitor for any real advice. After 10 or 15 hours of explanation they'll fully be able to explain exactly your best outcome. Of course, if you are owed $ 1,200 in rent....all of this is a complete nonsense compared to the professional fees.....so once again please revert to the backup tube of KY jelly, or see your Doctor (at $ 55 per 15 minute session) if pain persists.

 

[austini]

I unfortunately am also with the same PM. However the day I received the Receiver's letter I immediately arranged for transfer to another PM.

Cheers - Gordon