May 20, 2013 7:24 AM   Subscribe

What kind of rights does the owner of a home have when they agree to rent out their home through a rental management company?

People of Metafilter who are lawyers but aren't my lawers and aren't giving me legal advice, I have a question for you.

What kind of rights does the owner of a home have when they agree to rent out their home through a rental management company? This is in Virginia. I've searched and found plenty of information about legal issues relating to tenants and landlords, but nothing specific to this situation, where the property management company doesn't actually own the property being managed.

The renters aren't paying their full rent, and so the property managment company isn't paying the owner the full rent, making it a challenge for the owner to pay the mortgage.

My somewhat self-serving understanding of how the law SHOULD work is that even though the renters might not be able to pay their rent, that shouldn't mean the property management company doesn't have to keep up their end of the bargain. But I'm probably wrong. Educate me!
posted by emelenjr to Law & Government (10 answers total) 1 user marked this as a favorite
What does your contract with them say about it?
posted by emilyw at 7:25 AM on May 20, 2013

What does the landlord's contract with the property management company say?
posted by DarlingBri at 7:26 AM on May 20, 2013

The property management company should be taking steps to evict the tenants YESTERDAY!

But, it should all be outlined in your contract with them. I would doubt very seriously that you get 100% of your rent if your tenants aren't paying. BUT, the whole concept behind having a property manager is that they do the dirty work on evicting the tenants. sure eviction is happening and read your contract.
posted by Ruthless Bunny at 7:29 AM on May 20, 2013

Response by poster: Thanks, folks. I should have mentioned it's not my property in question. I'm asking for a friend. My fiancee and I just moved into a new home and we're not renting it out anytime soon.
posted by emelenjr at 7:35 AM on May 20, 2013

Your friend needs to read the contract, this eventuality is almost certainly covered in the contract. The management company may have an offering whereby they 'guarantee' the rent but they most certainly would get paid extra for that and it does not necessarily mean that they will pay the difference until they have recovered the money from somewhere else so it's not necessarily a quick process. If your friends cannot pay the mortgage they need to talk to their lender/find the money from somewhere else until the tenant situation is sorted...
posted by koahiatamadl at 8:03 AM on May 20, 2013

Best answer: Yeah, this is pretty much going to be a 'read the contract' situation. There's a lot of law on landlord / tenant issues, so without a copy of the lease, we could dig up information for you if we knew where the house was, if you were looking for information from that perspective. But landlord / property management company stuff is going to be pretty much based on what's in the contract, there isn't going to be a lot of official government regulations that cover how those two entities relate to each other.
posted by jacquilynne at 8:03 AM on May 20, 2013 [1 favorite]

100% it depends on the contract. However, in my experience, it is extremely common for the contract to have a clause that basically says the Management Company will pay the landlord when paid by the tenants, and that that Management Company will only pay the landlord what they receive from the tenants.

This way if the tenants pay late or underpay, the Management Company won't be required to make payment prior to receiving the tenant's payment and the Management Company won't be required to make up any shortfalls in the rent.
posted by Arbac at 10:18 AM on May 20, 2013

I can't even imagine a world in which a property management company would do this. They'd last about six months before going out of business. It's not mortgage insurance.

You could certainly have a lawyer scrutinize the contract for loopholes, but it would take a massive accident for there to be one.
posted by Lyn Never at 10:29 AM on May 20, 2013 [1 favorite]

I'm a landlord (but I manage my own properties). If a property management firm is unable to collect full rent from tenants, they should be proceeding to eviction post haste, because if they don't, they should be fired. The property management company is legally an employee/agent of the owners, and only controls what the contract says they control. I wouldn't normally expect a property manager to have flexibility to do "work-outs" with tenants (if that's what's happening) unless expressly authorized by the owner. I'm pretty surprised that the firm isn't coming to the owners each month and asking them how to proceed.

I would assume at least one of the following:
a) you're not getting the whole story;
b) the property manager is unprofessional, terrible, and deserves termination under whatever contractual means are available;
c) the owner is wishy-washy, unsure of their rights, unwilling to press for resolution.

If c) they really needed a lawyer already and shouldn't have gone into this without a clear understanding. If b) they need a lawyer now but may be able to get better performance with a more professional firm.

One of the aspects of c) is that no matter how you manage it, yourself or through a service, empties happen. It's a fact of life in rental property; there is never a guarantee a unit will be occupied. There should be a slush fund somewhere saved up to cover months in which no rent is collected. Someone without the resources for a slush fund is putting themselves at unnecessary financial risk and should consider selling the property.
posted by dhartung at 5:33 PM on May 20, 2013

In my experience, the property management does not guarantee the rent is paid if the tenants don't pay it.

They do have to move to get the tenants to pay it (or to be evicted and replaced with tenants who will pay) ASAP though.

They likely will (not be paid their cut of the rent)/(some other penalty as specified in the contract - read it - during this time. Otherwise, the penalty is you moving to another property management company.
posted by Ashlyth at 9:17 AM on May 21, 2013

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