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Subject: When your property manager is pocketing funds and getting kickbacks
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ChrisE8
(New York)

Posts:225


11/14/2020 8:51 AM  
Has anyone ever caught a property manager pocketing funds or getting kickbacks from vendors?

If so, how did you catch it and what controls did you put in place to stop it?

Thanks.
MelissaP1
(Alabama)

Posts:9714


11/14/2020 9:23 AM  
You really want to nail this property manager for something don't you? Your selling your property let it go. It's NOT up to you to catch anyone anyways. It's up to your HOA board to do it.

Former HOA President
ChrisE8
(New York)

Posts:225


11/14/2020 10:05 AM  
Posted By MelissaP1 on 11/14/2020 9:23 AM
You really want to nail this property manager for something don't you? Your selling your property let it go. It's NOT up to you to catch anyone anyways. It's up to your HOA board to do it.




Thanks but when the property manager drove up HOA dues and there are concerns that the property manager was charging, and getting suppliers to charge, way more than they should have, that affects the sales price of my property.
MelissaP1
(Alabama)

Posts:9714


11/14/2020 10:28 AM  
Fact check. A property manager can NOT run up dues. That is a HOA decision.

Former HOA President
ChrisE8
(New York)

Posts:225


11/14/2020 10:34 AM  
Let's stop here. In this case, the property manager set the dues. Period. Thanks.
GregM14
(South Carolina)

Posts:25


11/14/2020 10:47 AM  
I know for a fact that our property manager does not receive kickbacks from vendors. This is because I personally sign every contract, find every vendor, meet with every vendor, and make all of the vendor related decisions. All our property manager does is issue the check.

I wish our property manager would do all of that, or even most of that, but she is too busy to effectively perform vendor management. So I do it as a board volunteer and it works out a lot better.
ChrisE8
(New York)

Posts:225


11/14/2020 11:26 AM  
Posted By GregM14 on 11/14/2020 10:47 AM
I know for a fact that our property manager does not receive kickbacks from vendors. This is because I personally sign every contract, find every vendor, meet with every vendor, and make all of the vendor related decisions. All our property manager does is issue the check.

I wish our property manager would do all of that, or even most of that, but she is too busy to effectively perform vendor management. So I do it as a board volunteer and it works out a lot better.




Perfect. Thank you.
JohnC46
(South Carolina)

Posts:10130


11/14/2020 12:50 PM  
Cheaters will cheat. No matter what system is in place cheaters will cheat. Yes there have been cases on PM's cheating same as there are cases of Ministers/Priests/Rabbis/Mullahs cheating. That said, they are few and far between.
SheliaH
(Indiana)

Posts:3577


11/14/2020 3:34 PM  
Posted By ChrisE8 on 11/14/2020 10:05 AM
Posted By MelissaP1 on 11/14/2020 9:23 AM
You really want to nail this property manager for something don't you? Your selling your property let it go. It's NOT up to you to catch anyone anyways. It's up to your HOA board to do it.




Thanks but when the property manager drove up HOA dues and there are concerns that the property manager was charging, and getting suppliers to charge, way more than they should have, that affects the sales price of my property.




In your last post, you said the property manager's error in not forwarding a lawsuit notice resulted in the plaintiff asking for a default judgment. You also said the buyer wasn't concerned about that, so why is this an issue?

You also said the sale closes in two weeks, so unless you or the buyer pulls the plug, its really too late to worry about the sales price now. I agree with Melissa that at this point it appears your best bet is to get out of this association and sell at the best price you can because a major shitstorm is brewing if what you say is true. It will cause a lot of bad feelings and who knows what else. Unless you plan to stay and help fix it, I say get out now and let the buyer and other owners deal with it.

Your posts indicate to me that you haven't paid attention AT ALL to how your community was being run and you're now shocked at what you're looking at. I don't know of you p,an to buy a rental property in another HOA community, but if you do, please take the time to ask some questions before you buy. Someone on this website once commented on communities that are heaven to look at but hell to live in and now you understand there's more at stake than simply collecting a rent check.







ChrisE8
(New York)

Posts:225


11/14/2020 4:11 PM  
Thanks. I had been asking questions about the property manager for years, but anyone who asked questions was literally yelled at by the property manager. Now the screw-up with the lawsuit, and some other developments, have caused the board to question the property manager, too. So while it's late in the game, finally people are seeing the nonsense.

The governing documents, which I read carefully, are all written by the property manager and give owners basically no rights.

Some other owners have alleged that one person on the board was paid a kickback by the property manager, but I have zero evidence of that and will not assert that. But that's how bad this is.
MelissaP1
(Alabama)

Posts:9714


11/14/2020 6:04 PM  
So your listening to other people and saying the documents were written by the PM? I highly doubt the PM wrote the documents. They are PUBLIC documents on file at the local courthouse. Most likely filed by the Developer or the HOA. The PM has nothing to do with these documents as they are NOT members of the HOA nor are held to the documents. They are NOT member of the HOA.

It still makes me think that your HOA isn't as owner owned as you portray if the PM is on the board and writing documents....

Plus stop already with blaming everything on the PM. Get over it. Sell the property and stop being a HOA member. Unless your willing to participate in your HOA, then make the HOA business yours. Otherwise, it's the new owner/member prerogative.

Former HOA President
ChrisE8
(New York)

Posts:225


11/14/2020 6:21 PM  
Posted By MelissaP1 on 11/14/2020 6:04 PM
So your listening to other people and saying the documents were written by the PM? I highly doubt the PM wrote the documents. They are PUBLIC documents on file at the local courthouse. Most likely filed by the Developer or the HOA. The PM has nothing to do with these documents as they are NOT members of the HOA nor are held to the documents. They are NOT member of the HOA.

It still makes me think that your HOA isn't as owner owned as you portray if the PM is on the board and writing documents....

Plus stop already with blaming everything on the PM. Get over it. Sell the property and stop being a HOA member. Unless your willing to participate in your HOA, then make the HOA business yours. Otherwise, it's the new owner/member prerogative.




The property manager wrote the documents. He (the CEO) is a lawyer and he is listed on the cover of the bylaws as the author. I had a search company do a search and retrieve the bylaws from government records.

MelissaP1
(Alabama)

Posts:9714


11/14/2020 6:39 PM  
So if he is CEO is he CEO of the Property Management company or the HOA? Plus CC&R's and Articles of Incorporation are Public documents. The by-laws are INTERNAL to the HOA. So having a hard time trying to figure out the PM relationship with the HOA in full.

Just sell the property and stop with PM drama. No one benefits.

Former HOA President
TimB4
(Virginia)

Posts:17026


11/15/2020 4:19 AM  
Chris,

You want to stop it?

Don't allow the property manager to award contracts.
Don't allow the property manger to accept bids.


The Board should have all bids mailed to a PO box the board (not PM) controls.
The Board should read and evaluate all bids.
The Board should then award the contract.
ChrisE8
(New York)

Posts:225


11/15/2020 4:51 AM  
Posted By TimB4 on 11/15/2020 4:19 AM
Chris,

You want to stop it?

Don't allow the property manager to award contracts.
Don't allow the property manger to accept bids.


The Board should have all bids mailed to a PO box the board (not PM) controls.
The Board should read and evaluate all bids.
The Board should then award the contract.




Excellent. Thank you.

Melissa, thanks as well for your posts. (In this case the bylaws were recorded in land records- maybe that’s a NC thing.)

Thanks again.
LetA
(Nevada)

Posts:1047


11/15/2020 10:19 AM  
Posted By GregM14 on 11/14/2020 10:47 AM
I know for a fact that our property manager does not receive kickbacks from vendors. This is because I personally sign every contract, find every vendor, meet with every vendor, and make all of the vendor related decisions. All our property manager does is issue the check.

I wish our property manager would do all of that, or even most of that, but she is too busy to effectively perform vendor management. So I do it as a board volunteer and it works out a lot better.





It don't stop the vendor from giving the PM a cut from the back end.
JohnC46
(South Carolina)

Posts:10130


11/15/2020 10:54 AM  
Posted By LetA on 11/15/2020 10:19 AM
Posted By GregM14 on 11/14/2020 10:47 AM
I know for a fact that our property manager does not receive kickbacks from vendors. This is because I personally sign every contract, find every vendor, meet with every vendor, and make all of the vendor related decisions. All our property manager does is issue the check.

I wish our property manager would do all of that, or even most of that, but she is too busy to effectively perform vendor management. So I do it as a board volunteer and it works out a lot better.





It don't stop the vendor from giving the PM a cut from the back end.




Cheaters cheat.
ChrisE8
(New York)

Posts:225


11/19/2020 2:23 AM  
UPDATE

My sale is closing next week.

The property manager has been sued for fraud and breach of fiduciary duty by several former board members. They mailed a copy of the complaint to owners.
AugustinD


Posts:4421


11/19/2020 7:22 AM  
Posted By ChrisE8 on 11/19/2020 2:23 AM
UPDATE

My sale is closing next week.

The property manager has been sued for fraud and breach of fiduciary duty by several former board members. They mailed a copy of the complaint to owners.
-- Good luck on the closing.

-- Is this latest lawsuit on account of the property manager failing to turn over service of the other lawsuit to the current board and current HOA attorney?
ChrisE8
(New York)

Posts:225


11/19/2020 7:55 AM  
Posted By AugustinD on 11/19/2020 7:22 AM
Posted By ChrisE8 on 11/19/2020 2:23 AM
UPDATE

My sale is closing next week.

The property manager has been sued for fraud and breach of fiduciary duty by several former board members. They mailed a copy of the complaint to owners.
-- Good luck on the closing.

-- Is this latest lawsuit on account of the property manager failing to turn over service of the other lawsuit to the current board and current HOA attorney?




Thanks. That's mentioned, but the main thing is an allegation that the property manager "converted" tens of thousands of dollars from the HOA.
JohnC46
(South Carolina)

Posts:10130


11/19/2020 8:30 AM  
Chris

So what is your question?
ChrisE8
(New York)

Posts:225


11/19/2020 8:31 AM  
Posted By JohnC46 on 11/19/2020 8:30 AM
Chris

So what is your question?




Please see the first post in this thread.

Is it not acceptable to give updates?
JohnC46
(South Carolina)

Posts:10130


11/19/2020 8:33 AM  
Chris

I saw the original question so what I am asking is why are you beating this to death? Close the sale and be gone. Let the remaining owners worry about it.
AugustinD


Posts:4421


11/19/2020 8:42 AM  
Posted By ChrisE8 on 11/19/2020 7:55 AM
the main thing is an allegation that the property manager "converted" tens of thousands of dollars from the HOA.


For the interested reader who, like myself, did not know exactly what the implications are of the tort of "covnersion," from https://www.legalmatch.com/law-library/article/theft-by-conversion.html:

What is Theft by Conversion?
Theft by conversion occurs when a person lawfully obtains possession to the personal property or funds of another, and then converts the property into funds for their own use and without the person’s permission. This usually occurs in connection with a rental agreement, wherein the owner lends property to the defendant, who then keeps the property without returning it, or sells the property and keeps the profit for themselves.

Theft by conversion is therefore usually dependent on some sort of lease or usage agreement between the owner and the defendant. In some cases, theft by conversion occurs when a person invests funds in a manner that is contrary to the lender’s instructions regarding the funds.

AugustinD


Posts:4421


11/19/2020 8:46 AM  
Posted By ChrisE8 on 11/19/2020 8:31 AM
Is it not acceptable to give updates?
From where I am sitting, it is not only acceptable, it is welcomed. Seems like I read about a HOA manager embezzlement scenario about once a year in my internet travels. Reporting on such events helps keep directors and Owners alike on the alert.

I personally know of one property manager from the 2000s who got busted for embezzlement. His company managed like a dozen or so HOAs.
DavidF22
(New York)

Posts:73


11/20/2020 11:19 AM  
Posted By ChrisE8 on 11/14/2020 8:51 AM
Has anyone ever caught a property manager pocketing funds or getting kickbacks from vendors?

If so, how did you catch it and what controls did you put in place to stop it?

Thanks.





I think this stuff goes on all the time in the property management business. It's very hard to prove, but there are signs. If you criticize a contractor with whom the management company has had a longtime relationship, the property manager might get upset or offended. If the property manager does little or nothing to combat legitimate overcharging on the invoices, that's a sign. If the property manager only recommends a small group of the same vendors. If the property manager doesn't strongly encourage competitive bidding. If the property manager drives a nice Mercedes.

What can you do? Watch the balance sheet like a hawk, and ask specific questions and request invoices when you don't understand an expense. Ensure the Board conducts competitive bidding and don't rely solely on the management company's contractor recommendations. Watch the property manager's reactions to the situations above and if they don't seem normal to you, then something's probably going on. Time to try another management company.
JohnC46
(South Carolina)

Posts:10130


11/20/2020 2:08 PM  
Our PM does not work with any specific vendors. They certainly know vendors and when asked, they have given us names of some but we have yet to use any of them. We have always used vendors we found and we always have at least 3 bids. Our major expense is landscaping as we (the HOA) pay for all landscaping. We had the same vendor for 4 years but he raised his price by 30%. We got 5 bids and chose one, which was not the lowest. Our next major expenses are PM and utilities so out association is not financially complex.

I will disagree with David that embezzlement goes on all the time but I do agree with him that it is up to the BOD to keep an eye on things. Our PM handles all our money (except the Reserves) and the BOD gets a 30 page Monthly Financial Report which at least two of us (Pres and me, the Treasurer) review. We see every penny coming and going.

Have I seen cases of embezzlement? Hell yes. One can find anything on the Internet. It is systemic in the PM business? I say no. The usual cries of such are from disgruntled owners with no proof. They only know they are pissed at their BOD.
MelissaP1
(Alabama)

Posts:9714


11/20/2020 2:35 PM  
Keep in mind that Property Management can mean different things. A Property Manager for a HOA is generally a "general contactor" of sorts. They are a paid contractor to handle certain tasks like paying bills, handling contractors, collecting dues, and other various HOA requests.

There is also Property management companies that are hired to manage someone's home for rental purposes. Someone pays them to manage their property on their behalf like collecting rent, maintenance, fielding renters, and other tasks. It's more for those owners who don't want to deal with rental property other than owning it.

A few cases this can be the SAME entity. The Property Management may be large to have a separate area for managing homes that may also be in the SAME HOA they manage. Which is kind of what may be going on here for the accusation of "conversion". The PM may be getting sued but not necessarily the HOA. This is something to consider as again it may not be something needing to be "revealed" to potential buyer. Something covered in another post.

Former HOA President
ChrisE8
(New York)

Posts:225


11/20/2020 3:07 PM  
Posted By JohnC46 on 11/20/2020 2:08 PM
It is systemic in the PM business? I say no. The usual cries of such are from disgruntled owners with no proof. They only know they are pissed at their BOD.




The only thing that I would suggest might be systemic in the PM business is that property managers won't work as hard as an owner to keep costs low. I've used property management firms for rental properties, and repair bills were generally much higher than the lowest price for the repair that I could find on my own.

In the case in this thread, the PM has been accused of "converting" tens of thousands of dollars from the HOA. The complaint that was filed with the court and mailed to owners includes various exhibits of checks, bank statements, etc. that are designed to support these allegations--e.g., if the property manager was accused of "converting" $10,000, the exhibit shows checks and bank records to support a claim of $10,000.
KerryL1
(California)

Posts:7660


11/20/2020 6:17 PM  
HOA property managers that folks here should consider should be formally certified by their professional entities. I guess CAI is one of them. I takes a lot of coursework to get and keep certification. There at least 2-3 such property managers on this forum.

The firm that manages rental properties, Chris, are a completely different breed.
MelissaP1
(Alabama)

Posts:9714


11/20/2020 9:05 PM  
Question? Does the HOA own or acts like it owns a property? Have seen this occur in some HOA that "think" they can use a foreclosed property as rental. It's not exactly "legal" but some view an empty property as an opportunity to rent it out till bank formerly forecloses.

It is a rare situation but have seen other posters here post similar situations. Sounds great on paper but in reality it's a very very bad thing. The thought process that the HOA can "collect" rent to make up for the loss of unpaid dues. Which isn't being paid by the bank. Once the property is sold at auction by the bank the dues often times are then paid up. The bank if it gets wind of the rent illegal rent collections will then go after the HOA or whomever was collecting the money.

This conversion case doesn't exactly ring "PM stole money from HOA and made it their own". It wants to come out that way but my gut says something else is going on.

Former HOA President
ChrisE8
(New York)

Posts:225


11/21/2020 6:46 AM  
Thanks. I don't see any assertions that the HOA owned a property and rented it out.

The complaint is that the PM had tens of thousands of dollars of payments from the HOA, all done without board approval, and with the PM signing the HOA's checks, payable to itself and other companies that it controlled and which then paid the funds to the PM.
ChrisE8
(New York)

Posts:225


11/23/2020 3:23 AM  
UPDATE

Other owners have filed their own lawsuits against the property manager.

I have sent in the documents to the closing lawyer to sell this place at the closing this week so I'm basically done. Thank goodness.
AugustinD


Posts:4421


11/23/2020 6:59 AM  
Posted By ChrisE8 on 11/23/2020 3:23 AM
UPDATE Other owners have filed their own lawsuits against the property manager.
By any chance are either the HOA or other directors also being named as defendants in these suits?

I see the North Carolina Nonprofit Corporation Act at NC 55A-7-40 gives a number of the specifications for a derivative action. This situation certainly seems to me to beg for such.

I hope you have an insider who will keep you apprised of what happens to the PM.
JohnC77
(Washington)

Posts:245


11/23/2020 1:11 PM  
Posted By DavidF22 on 11/20/2020 11:19 AM
Posted By ChrisE8 on 11/14/2020 8:51 AM
Has anyone ever caught a property manager pocketing funds or getting kickbacks from vendors?

If so, how did you catch it and what controls did you put in place to stop it?

Thanks.





I think this stuff goes on all the time in the property management business. It's very hard to prove, but there are signs. If you criticize a contractor with whom the management company has had a longtime relationship, the property manager might get upset or offended. If the property manager does little or nothing to combat legitimate overcharging on the invoices, that's a sign. If the property manager only recommends a small group of the same vendors. If the property manager doesn't strongly encourage competitive bidding. If the property manager drives a nice Mercedes.

What can you do? Watch the balance sheet like a hawk, and ask specific questions and request invoices when you don't understand an expense. Ensure the Board conducts competitive bidding and don't rely solely on the management company's contractor recommendations. Watch the property manager's reactions to the situations above and if they don't seem normal to you, then something's probably going on. Time to try another management company.



Hell, if I had known this is how we were supposed to be conducting business, I would have cashed in a long time ago.
ChrisE8
(New York)

Posts:225


11/24/2020 12:14 PM  
UPDATE

Turns out that the property manager's CEO, who served on the HOA's board, was the sole recipient of bank records (they were mailed to him) and signed checks on the HOA's account, as an authorized signatory on bank records, without HOA board approval.
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