Dispute with "soon to be ex" property manager

Jani asks:
(updated on Wednesday, September 25th 2013)

I am having a dispute with my soon to be ex property management firm over damages caused by the vacating tenant. The property manager had failed to note the damage on the final inspection report and has not recovered any funds from the tenant. I requested some of the management fees charged be refunded but in return they billed me for a Trade Me fee of $99 plus GST for the property. It may get send to debt collection as I haven't paid as firstly I haven't been sent an invoice and secondly it is not part of the property management fees schedule in my contract. Because I didn't pay it they have deducted the money from the account of another property that is owned by my family trust. Can a property management firm take money from one account (i.e. family trust) to pay a bill (let alone a disputed bill) owed by another account (i.e. property under my name)? There is nothing in the agreement I signed allowing them to do this.

Our Experts Answer:

There are two issues here. Firstly, your tenant is responsible for any damage caused during their tenancy, regardless whether it was noticed by the property manager in the final inspection. You still have the right to make a claim against the tenant in the Tenancy Tribunal to recover costs of repairing the damage. The property manager has a similar right while acting as your agent. Your property manager is not responsible to you for the damage caused by the tenant. The second issue is of greater concern. The property manager presumably has two management contracts – one for managing your property, and one for managing the family trust’s property. You and the trust are two different entities, and in fact you are two different clients. An agent is not allowed to recover debts of one client by taking from another client. If you don’t have two separate contracts (one for each client) then you have a less clear dividing line, and the property manager may well believe that you are the client in both relationships. There is no substitute for being clear from the very outset as to who are the parties to any contract. That applies equally to management agreements and tenancy agreements.

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