Do you rent your property? Do you use a property manager? If yes, then this information is for you. You may be thousands of miles from your property location and you are reliant on a person who is supposed to take care of your property. Do you trust them? How do you know they are looking out for you and best representing your interests? Are the people you are using even legal in the country – do they have the right to work? The answer is you really don’t know.
So what are some of the tricks that property managers use to try to convince you all is ok? If some of the apply to you, you should consider using an outside CPA to assist as a control against potential financial abuses.
“We Do Everything for You”
Some property managers pitch that they can service all aspects of your property. This means they offer and control the cleanings, maintenance, gardening, accounting and other. All of these are performed under their company. They are not “managing” the provider, but “offering” the service. They will say that is a way to save money and for it to be consolidated and it is easier. But, they are also saying some other things too. The property manager is supposed to act as an independent provider of services and supervise and monitor the services of the cleaners, gardeners and others. When they offer services directly, they are circumventing the whole point of a management service. The following items are common amongst property managers who engage in direct offering of services:
- Over using or exaggerating services – They may perform unnecessary services that they can bill you for – ever see a cleaning bill that looks higher than it should? Have you ever been charged a fee to pay a bill, like your property taxes? This increases their revenues and they will have justifications for the services.
- Limiting Communication – They are also limiting direct communication with service providers. Many providers have their own viewpoint and observations. By controlling or eliminating interaction with outside service providers, they can control what happens to the property and inflate services as explained before or cover up problems that have occurred.
- Limitation of Oversight – If they offer their own accounting services and steer you away from using somebody independent or “their person”, they are trying to control the financial relationship as well. To the extent errors are made or bills are not paid properly, having no independent CPA prevents these from coming to light and there can be systemic financial abuse. An independent CPA provides oversight functions and a control to the property management use of funds.
Monthly Statements are Late or Inaccurate
If this a frequent occurrence it suggests that the information they are processing may not be managed properly. Information should be sent to the owner in the first few days of the month. When frequent delays occur or you find errors, it suggests there is a lack of control inside the company on finances. This is a definite red flag.
Funds Processed From and To Their Account
When all funds are being processed out of the property manager bank account, it can suggest misappropriation of funds. The phrase stealing from Peter to pay Paul works here. When funds are commingled, the environment for financial abuse is ripe. Though your statements may show on paper the amount of funds in your account, the actual cash may not be there to support this. In the event you terminate services or the company goes under, there may be insufficient funds to cover your amounts on paper.
These are just some of the techniques used by property managers in to coercing you or tricking you in believing that they can handle your property. The best controls are a team approach that includes the use of a CPA to monitor and provide oversight and independent advice.
Please contact us at firstname.lastname@example.org if you want to discuss ways to reduce potential abuses by your property manager.
This article carries no official authority, and its contents should not be acted upon without professional advice. For more information about this topic, please contact our office.