Litigation + Valuation Perspectives

Demystifying Valuation, Economic Damages + Forensic Accounting

Property Management Fraud

A former Tucson real estate agent was indicted on more than 20 counts related to real-estate fraud. The agent began operating a property management company in 2008 after suffering declines in his personal income due to the real estate crash which hit Arizona. By 2012, numerous clients had filed complaints with the Arizona Department of Real Estate contending they were no longer receiving rent payments from the agent and that he was not returning calls. An estimate of losses to clients is in excess of $60,000.

A Coolidge, Arizona man was convicted of fraud and theft charges related to personal use of client deposits and other funds in 2011. State prosecutors had accused the former councilman of taking somewhere between $55,000 and $283,000 to pay for personal expenses including telephone bills, shopping sprees and trips to Las Vegas.

In April 2013, a Maricopa County property management company closed its doors after a “cease and desist” order was issued by the Arizona Department of Real Estate (ADRE). An investigation by the ADRE led to findings of multiple violations including the misuse of trust funds and faulty paperwork. The owner of the property management company was indicted one year later on theft, forgery and fraud schemes. It is estimated that client losses are approaching $300,000, much of which were used for personal expenses including trips to Hawaii and New Orleans.

Property managers are required to have a real estate license in the State of Arizona. But that license does not mean they have been properly trained in property management. The 90 hours of in-class training required for a real estate license hardly cover property management issues such as receipt and handling of rent and security deposits, use of trust accounts for the deposit of those funds and reconciliation of those trust accounts.

If you are in need of a property management firm, protect yourself with a few simple steps:

  • Verify they hold an active real estate license in the state
  • Inquire as to level/years of experience in handling trust accounts
  • Require monthly accountings to be submitted timely
  • Search for licensing and disciplinary records

If your property manager is not responding to your concerns, has treated you unfairly, or you have experienced a financial loss, file a complaint with the Arizona Department of Real Estate.

By Melissa Loughlin-Sines, ABV/CPA, CVA, CFE, CFF

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  1. J. Cohen says:

    Your comment is timely. I have been defrauded by a property manager. She will not return calls and claims she sent the money to the bank. The bank has responded. This is a violation of trusts and client funds should be accounted for. We have to use whatever resources available. Supposedly this individual is a paralegal and knows that justice can be slow. What should we do?

    • admin says:

      Thank you for your question and interest in our blog. You should file a complaint with the Arizona Department of Real Estate or other appropriate real estate licensing department in your state.

      Melissa Loughlin-Sines, CPA, CFE, CVA, CFF, ABV

  2. Munmun Nishi says:

    Reading this article I learn many thing about Property Management Fraud.This is very important for us.I think that your blog is the best.
    Thanks for sharing this article.