Property management companies are tasked with the responsibility of managing almost all of the tasks that come along with real estate ownership. Probably the most important role is that of acting as a liaison between the landlord and tenant. Some of the duties of property management companies include collecting rent, responding to and addressing maintenance issues, advertising vacancies for landlords, and doing credit and background checks on tenants. In exchange for these services that they provide, property management companies charge landlords a percentage of the rent collected each month, which is typically about 10 percent of the gross rent.
I personally own an investment property in the state of North Carolina which is managed by Aaims Property Management in Fayetteville (1). My rental property has a monthly rent of $1000, $100 of which is automatically taken out as monthly compensation to Aaims. At the beginning of a new contract, Aaims has the responsibility of checking the fair market value of the rental properties in the neighborhood of my home, coming to agreement with me about the monthly rent, and advertising the home for rent. Once there are prospective tenants for the home, Aaims screens and interviews the prospective tenants, does a background and credit check, and then confers with me about the final list of tenants that are eligible for the home. Upon reaching an agreement about the chosen tenants, Aaims contacts the tenants and sets up the rental lease, security deposit actions, and provides the tenants their keys. When they move-in, the tenants proceed to provide the monthly rent to Aaims Property Management and contact them should they have any maintenance issues or questions about the home. Aaims then directly deposits my rental payment into my checking account every month, less their 10 percent fee.
If previously agreed upon in the management agreement, repair costs may be marked up by a percentage by some property managers (2). My property management company does not do this. For example, two months ago the garage door at my rental property stopped working. Aaims Property Management called a local garage door company to come out and fix it. The garage door company fixed the garage door and provided a maintenance invoice to Aaims. Aaims then paid for the repairs and deducted the costs out of my monthly rent payment. I was provided a copy of the garage door invoice along with my monthly rental statement. Some property management companies also manage home owner associations (HOAs) and condo associations. In addition to managing income and expense related activity, property managers may also manage construction, development, repair and maintenance on a property. The role of the property manager in repair and maintenance is large part of a property manager’s function.
Property manager relations with tenants give a face to the landlord and provide them the necessary buffer, servicing their desire to profit and distance themselves from the literal tenant relationship. The property manager also acts as a face of authority to the tenants. Property managers usually do some type of inspections on the property in the timeframe of the lease. Aaims Property Management does quarterly inspections on my property. During these inspections, they check many items such as the exterior roofing and walls as well as the landscaping. On the inside, they check paint, flooring and carpets, appliances, smoke detectors, and air vents. The landlord receives a copy of this checklist upon completion of the inspection, for their records.
Not anyone can be a property manager. Most states require that property managers have a real estate brokerage licensure. And if they do not have a licensure, they are considered a property management salesperson, who will closely work with a licensed broker. “Most states regulate property management by including management functions such as leasing, offers to lease, negotiating leases, renting, collecting rent, etc., as covered real estate activities. In many cases, property managers who do not engage in leasing or renting activities are exempt from licensure. The typical definition of broker also specifies that these activities are being done for another individual for a fee, commission or other valuable consideration. Individuals managing their own properties are generally exempt from licensing requirements (3).”
Many real estate brokers who manage properties also double as listing and selling agents in real estate sales. Prior to Aaims Property Management managing my home in Fayetteville, North Carolina, I had the house on the market for sale by owner. One day, a woman came to my home and told me that she was an assistant for a local broker who had someone interested in purchasing my home. She gave me a business card of a broker named Laura Mussler. I called Ms. Mussler as soon as I got the chance because I was very eager to sell my home. It took a couple of days for Ms. Mussler to get back in touch with me, but when she did, she informed me that the “potential buyers” found another house that they liked more and decided to purchase that one instead. However, she told me that she would love to meet with me and discuss more options for selling or possibly renting out my home. Ms. Mussler was a very nice lady, so I agreed. Only later on did I learn that this “baiting” technique that she used was a scam.
Upon meeting with Ms. Mussler, she informed me that the houses in my neighborhood were sitting on the market for rather a long time. 2007 wasn’t a good time to sell, and I believed this being that the market had definitely taken a turn in favor of the buyers recently. Ms. Mussler presented the opportunity of renting out my house. She explained how easy it could actually be with a competent property manager. She claimed that she was personally managing five houses so that while she had a breath of experience in the area, my house would still get the personal attention that it deserved. She advertised all of these services that she could provide under the name of AIT Realty. This was the business on her card. Her phone numbers went to her direct line in her “office” and her cell phone, so I really had no reason to believe otherwise. Upon finding out later on that Ms. Mussler no longer worked for AIT Realty at the time that she solicited her services to me, it was noted by me that she was illegally using AIT’s registered trade name and trademark. This type of illegal action is considered to be Unfair Competition. This application of the Lanham Act’s Section 43(a) that could have been violated in this instance are Tort claims for “palming off” or “passing off,” Trade dress infringement claims, Claims for infringement of both registered and unregistered trademarks, Commercial appropriation of name or likeliness claims, or False advertising claims (4). I informed AIT of this at the time, and I do not know if they ever pursued an investigation.
Ms. Mussler started managing my property in Fayetteville in August, 2007. In the time that she managed the property, I was the one who found tenants for it because I advertised my rental on a website for military members. Ms. Mussler claims to have completed a background check and taken the tenants’ security deposit, as well as had completed all of the necessary leasing documentation with the tenants. Shortly thereafter, my rent payment was late. The tenants were due to pay rent on the 1st, and Ms. Mussler was to take out her 10 percent and then directly deposit the remaining balance into my checking account no later than the 4th of every month. This was the verbal agreement between Ms. Mussler and me. In September, 2007, there was no rent check received by me still by the 10th. I called Ms. Mussler to ask what the hold up was and she explained that the bank held the check to clear her account for 10 days and that the money would be deposited as soon as possible into my account. I asked her if it would be possible from then on to cash the check instead of deposit it into her account, and then deposit the net cash into my checking account. She agreed and we decided to go forth with the new plan in October, 2007. In October, 2007, the rent was late again. It was the 8th and I called Ms. Mussler to find out what was going on. She informed me that the tenants had paid their rent late and that she was literally on her way to the bank to cash the check.
November came and again, like clockwork, I was calling Ms. Mussler around the second week of the month asking about my late rent payment. She explained to me that there was a long weekend with Veterans Day and that she hadn’t gotten a chance to get to the bank. She apologized and the rent was deposited the next day. In December, the rent was late, yet again. I called Ms. Mussler and expressed my concern with the rent being constantly late and I explained that I had a mortgage to pay every month and that I had a new baby, and she was making the situation extremely stressful by being consistently tardy. She told me that the tenants were late again on the payment and I asked her to please explain to them that they have a 4-day grace period and anything after that may reflect poorly on their credit report. She agreed and promised that she would try her best to not let this happen again. I also asked her during this call if she was to be accomplishing a quarterly inspection on the property. She said yes and told me that she would have the report to me by the end of the month.
Come January, 2008, the rent was actually on time, but I still had no documentation of a quarterly inspection. Upon signing the contract with Ms. Mussler, I was given an inspection schedule that annotated that the first inspection would be accomplished on or around December 1st, 2007 and I would be provided a copy of the report no later than 30 days after the fact. When I brought this to her attention, Ms. Mussler responded that that she had completed the inspection and she would have the report to me as soon as possible. My previous neighbor, Melanie, and I had kept in contact throughout this ordeal and she was able to, at this time, obtain the contact information of my tenants. I called them and explained the situation and they informed me that they had not had an inspection on the property at all. At this point I told the tenants that they would be shortly contacted by Aaims Property Management, and that they would set up with them all of the necessary actions for a transfer of management.
During this time, I had been doing some research on Ms. Mussler and found out that she was being indicted on county and state tax evasion charges in the case of her previously owned restaurant, the Braz-N-Rabbit. Ms. Mussler collected but failed to pay over $19,000.00 in sales tax to the Department of Revenue (5). I also called AIT Realty’s main office at this time and asked them about Ms. Mussler’s employment there. They informed me that she was terminated in early 2007 after a rash of complaints. They also told me that her “assistant” that came to my house with the information about the “interested buyers” was probably her mother, and that they had been using that Bait and Switch techniques on countless other homeowners that listed their home for sale by owner.
After telling her that I no longer needed her services and that I would like for her to surrender the security deposit and keys to Aaims Property Management, Ms. Mussler told me that I was under a contractual obligation to pay out her existing contract, or she would not release the aforementioned items. I then explained that she had breached the contract by continuously failing to pay me the rent on time, and because she had failed to complete the quarterly inspection. I told Ms. Mussler that it was also illegal to withhold funds from the tenant, in accordance with the North Carolina Tenant Security Deposit Act (6). Ms. Mussler finally turned over the security deposit to Aaims Property Management and decided to cut all ties with me and to not go after the contract payout.
After all was said and done, I filed a formal complaint against Ms. Mussler’s brokerage license with the North Carolina Real Estate Commission, as well as with the Better Business Bureau. I also informed the District Attorney that was prosecuting her tax evasion case of what was going on. Ultimately, “Judge Carl Fox sentenced Ms. Mussler to six to eight months in prison, but suspended the sentence. She was placed on supervised probation for 48 months. She was also ordered to pay $19,574.61 in restitution and a $1,000 criminal fine, and perform 100 hours of community service (5).” Also, the North Carolina Real Estate Commission concluded investigation of the case and revoked Ms. Mussler’s license and told me that I was not the first to complain.
I’m not quite sure what happened to Ms. Mussler since then, but I can only hope that she has learned her lesson and that she will stay under the radar for a while. My current property management company has been great. They do all of the quarterly inspections, rent is never late, and they always inform me as soon as possible is something is amiss. I am glad that I learned the lessons when I did to check out brokers more carefully. I should have taken more time to investigate Ms. Mussler before hiring her to take care of something so important and valuable. I’m just glad I learned this all too important lesson so early in my experience and before something larger was at stake, or before I got too invested.
(1) Aaims Property Management. 2006. www.rentrentrent.com
(2) Property Management System. 2008. www.fairplay.us
(3) Property Management Licensing Report. IREM Legislative Staff. June 2007.
(4) Business Law—The Ethical, Global, and E-Commerce Environment, 13th Edition. Mallor, Barnes, Bowers, Langvardt. 2007.
(5) Eatery Owner Fined for Tax. TMC News. May 31, 2008. http://www.tmcnet.com/usubmit/-eatery-owner-fined-tax-/2008/05/31/3474530.htm