How do you handle invoices if they should be charged to the Tenant?

Tenant Chargebacks

Occasionally we are forced to spend the owner’s money on repairs or invoices; the ultimate cost of which belongs to the tenant. When this happens the owner pays the expense on the front-end and we pursue the tenant for reimbursement. On the surface this may seem unfair but with a little examination we think you will agree with the policy. Here are some examples:

Broken Door Frame: We can’t tell the tenant “fix it yourself because you lost your key and broke the door to get in.” We must provide a secure property for the tenant. We have to do the repair, pay the vendor, and pursue the tenant for reimbursement.

Broken Window: We can’t say “your son broke it with the baseball….fix it yourself.” We must protect the property from the elements no matter what the cause, pay the vendor, and bill the tenant back for the expense.

Broken Railing: When the railing on the second level overlooking the two-story foyer is broken we can’t say, “your teenager broke it….fix it yourself.” We must secure the railing, pay the vendor, and pursue the tenant for reimbursement.

Turning the Utilities off: Utility companies have quite a lot of power. They do what they want and you cannot argue with them about what’s right and wrong. They just do what they want and find ways to justify their behavior calling it ‘public policy’, which means they are regulated by state government and that’s just the way it is. Often we tell them to take utilities out of our name because a new tenant moved in and they refuse to do it. If the tenant has not ordered them on in their name the utility can say, “It creates a health hazard to turn them off” so they won’t. We have to send letters to the tenant threatening them with fines. When the bills come in we have to pay them out of the owner’s account, and, similar to a work order for maintenance, we chargeback the bill to the tenant, and after sending a notification letter we will pursue the tenant for reimbursement. This can go on for several months before we get it corrected. In the meantime, the owner covers the cost and waits for reimbursement from the tenant. It’s an administrative hassle for us and a financial inconvenience for the owner. After more than 25 years of doing this in California, we still have no way to eliminate this challenge. NOTE: If the Tenant will have a utility chargeback each month, as listed on their Rental Agreement, we have a system to create a recurring reminder to chargeback the utility to the tenant.

Question: How do we determine if the tenant ‘broke it’ or was at fault?

Answer: We usually rely on the contractor to tell us how it was broken. Sometimes it is obvious: sometimes it is not. How the window was broken is always ‘from a wind storm’ according to the tenant. It’s hard to prove it was the neighbor’s kid with the baseball. We always assume ‘they broke it’. Proving that to a judge during a collection process, or withholding it from their security deposit, is often impossible.

Question: How does RPM press the tenant to reimburse the expense?

Answer: Like collecting rent, we have certain steps we must go through to get the tenant to pay what they owe. We build fines in the lease for failure to pay monies due. We send certified letters demanding payment with charges attached.

There are three other things we can do to collect outstanding charges.

First, we can ding their credit with the credit bureau. As a direct member of the credit bureau we are able to report ‘late payments’ and put negative marks on their credit. This usually wakes them up, as most tenants want to keep their credit in good condition. When we threaten this action they usually pay what they owe. If their credit is bad this threat has no affect.

Second, we can default their lease and threaten to evict them. This is the brass knuckles approach and we would never do it without your written permission. If you decide to take this action you may get your wish as they may move out. A vacancy is usually a lot more expensive than some outstanding charges but it is an option.

Third, we can take the unpaid balances out of their security deposit when they move out. This ultimately gets the owner their money back for the repair or invoice but it may be a long way off. In the meantime you're out the money and usually unhappy. Property managers have rules to live by if they expect to stay in business and out from under lawsuits. Pressing tenants for what they owe is a tenuous position to be in and we have to walk a careful line. Pulling the tenant into the street and beating them up is not a strategy we can use. All we can do is what we have listed above. As frustrating as that may be to the owner we only have certain tools at our disposal for these situations.

We always remember we are representing you in this process and your interests are our greatest concern. Our job is to use all the tools available to us and invite your participating in the decision making process.