Fire That Owner: Know When to Drop a Client or Not Take One in the First Place

In Business Topics, Owner Topics by Ben Parham

The old mantra is “All business is good business.” I’m here to tell you that that is a load of crap. In the property management world, there is a such thing as bad business and more specifically, bad owners and/or properties. The smart property manager who wants to run an efficient operation and maximize their profit will be selective on the type of owner clients they choose to work with. Merely signing up anyone and everyone because your primary aim is to get a lot of properties is not a wise decision. There are warning signs you can look for that will help you steer clear of getting into bed with a bad client from the start. Other times, what starts off good can go south and you need to know when it’s time to simply remove yourself from a bad client relationship.

Let me give you a little example of a client that I recently fired. This particular owner was a new client who became extremely displeased that I had had his house cleaned and carpet shampooed before a new tenant moved in. How dare I want to give the tenant a clean house, right! He voiced his displeasure to me by phone and email on a couple occasions and said he expected to be reimbursed. I informed him that the cleaning was necessary in my judgment and the cost was under the $250 amount that our management agreement authorized us to spend without permission, therefore there would be no reimbursement. I thought that was the end of it until I got an extremely threatening voice mail from his father. I mean seriously… a grown 30-soming year old man got his daddy to call me and once again demand that I refund the money. That’s when my “crazy alarm” went off and I decided working with him going forward was not an option. Below is my emailed reply (note that his name has been changed):

“Hi Richard,

I received a voice mail from your father upset about how I am handling your property. As he is not a party to the management agreement, I won’t be able to discuss any details with him, however it is apparent to me that my judgment as a professional property manager of 15 years is not valued and you are looking more for someone to help you manage your property yourself rather than someone to manage your property for you. Our system is not set up to be micro-managed in that fashion and I’m sure there is probably another property manager out there that will better serve your needs.

Regarding the costs for cleaning and carpet cleaning, neither of those items were over $250 and the management agreement authorizes me to spend up to that amount per item if we deem it necessary. Whether or not you had it cleaned before, in my judgment, it was not clean enough to deliver to a tenant. We had had multiple showings with people and kids coming in and out. The property needed to be cleaned again and the carpets looked the same. I’m sorry that you and your father do not agree with this, but as I said, if my judgment is not valued and you feel like you need to approve every decision your property manager makes, you really should save the cost on a property manager altogether and do it yourself.

As such, I am terminating our management agreement. I will forward a check for the security deposit, your $250 property reserve, a copy of the lease, and move-in inspection, and will notify the tenants to deal with you directly. If you seek the assistance of another property manager, please have them contact the tenants.

Best regards, Ben Parham”

So let’s look at tome cases in which you should probably consider severing ties.

Potential owner is difficult to work with from the start

Wants significant changes to the management agreement

Every good management company has a system and it is important that new properties be placed in that system. This is how you can manage 15, 50, or 100 properties efficiently. It is impossible to build a large portfolio if every property you managed has a different set of rules and expectations that you have to adhere to. The rules and expectations are usually set out in your property management agreement. You should determine what your management agreement is going to say and then stick to it. If you get a potential owner wanting you to make significant changes to your agreement, you can be sure that they will also micromanage every other aspect of your management performance. Do yourself a favor and tell them that you simply are not the property manager for them.

Wants to use their own lease

Similar to above, having different leases on different properties makes your job difficult when managing a large portfolio. Tell your potential owners that they have to allow you to use your lease. If this doesn’t work for them, then you don’t work for them.

Wants to implement their own lease policies

You usually charge a pet fee of $250; they want $500. You usually charge a security deposit of 1 times rent; they want 2 times rent. You usually have rent due by the 5th; they want it due by the 3rd. Don’t change your system to suit the desires of one client. If they won’t conform to your system, you don’t manage their property. It’s that simple.

I had a potential owner that I had sent a management agreement to and then he proceeded to call me a couple times a day for 3 days to ask questions about the it. My agreement is very short at 5 pages so the amount of questions was excessive. He then said his attorney did not like the management agreement (shocker) and he wanted to know if I could call his attorney to discuss. I told him no, I couldn’t, and that I was declining to manage the property. I was already exhausted from working with this guy and I hadn’t even started managing the property yet. Imagine how he was going to be any time there was a repair.

Owner wants to be too involved

I have a clear and cut philosophy on how I work for my clients: “You hire me to manage your property. Not to help you manage it yourself.” You should not have to run every decision by your owners. You should not have to get permission on every repair if it is under your pre-authorized dollar limit. If an owner tries to micromanage your management of their property, cut them loose and find another owner client that appreciates your role.

The other thing that should not be tolerated is the owner communicating directly with the tenants without your knowledge. Things get ugly really quick when there are too many hands in the pot. It also undermines your authority with the tenant when they know they can just pick up the phone and discuss an issue with the owner. When I find out that an owner is communicating with a tenant, I give them one warning to cease and then I remove myself from the situation if it continues occurring.

Owner doesn’t want to maintain the property

Repairs that are needed for the safety and wellbeing of residents must be done. Even less critical repairs should be completed to keep the property in good shape and to keep your good tenants happy. It’s your reputation on the line – not the owner’s – so if an owner isn’t going to maintain their property, don’t maintain them as a client.

Owner demands you do anything illegal or against Fair Housing.

This goes without saying, but if an owner ever demands that you do something that is either illegal or against Fair Housing laws, drop them immediately and without warning. This can sometimes be your only defense against a resulting action brought against you by a tenant.

Take control of your portfolio and be intentional about the clients you do business with. Don’t get caught up in worrying so much about building your portfolio that you build it with bad owners or properties. Focus on having good quality clients who respect and appreciate the role you play in managing their asset and you will find your job to be a lot more enjoyable.