Real-estate regulators cracking down on unethical managers

• Since July 2013%2C more than 20 Arizona real-estate agents and property managers have lost their licenses%2C been indicted by the state or told to stop handling properties for other owners.
• Judy Lowe%2C Arizona real-estate commissioner%2C is cautioning investors to check out property managers%27 licenses and experience before hiring them.

The many investors who snatched up metro Phoenix homes during the downturn could be making a tidy profit by renting them out. Unless they hired the wrong property manager.

Since July 2013, more than 20 Arizona real-estate agents and property managers have lost their licenses, been indicted by the state or told to stop handling properties for other owners. Among the accusations: stealing rent money from owners and tenants, failing to keep accurate records for landlords and operating a management business without a license.

The state's top real-estate regulator is cautioning investors to check out property managers' licenses and experience before hiring them.

"Investors from out of state and out of the country hired people to take care of their properties, find tenants and collect rents without checking to see if those people knew anything about property management," said Judy Lowe, Arizona real-estate commissioner. "The abuses involve a lot of homes and a lot of money from property trust accounts."

She said dishonest property managers are disappearing after taking money from trust accounts funded with the rents and security deposits from property owners' tenants. Their departure leaves investors with big losses and no lease documents or information on who is renting their houses.

In the past year, almost a dozen Arizona property-management firms have been ordered to stop doing business.

More than 100,000 Valley homes have been purchased and turned into rentals since 2009. Big institutional investors have portfolios of more than 1,000 rental houses in the area.

Those investors either have their own property-management firms or work with established management companies.

Tom Simplot, CEO of the Arizona Multihousing Association, said his group has been dealing with "bad players" in property management since the recession and has many discussions with Real Estate Department representatives.

"Lowe recognizes that the professional management industry is not the issue," he said. "The problem revolves around real-estate agents and property owners who don't have the expertise, background or financial stability."

Arizona law requires anyone who acts on behalf of another property owner and is paid to find tenants and negotiate leases must be licensed by the Real Estate Department.

Licensed real-estate agents can't act on their own as property managers and must work under a licensed designated broker, a certification that requires more education and training.

Dawn Anderson of Maricopa Properties was indicted in late March by the Arizona Attorney General's Office on charges of theft, forgery and fraud after more than $270,000 owed to owners of homes she managed went missing. Renters also lost security deposits. An investigation by the Real Estate Department found Anderson used part of the funds for trips to Hawaii and New Orleans.

Anderson could not be reached for comment. Her phone has been disconnected, and her office closed a year ago when the Real Estate Department ordered her to cease and desist. A sign on her former office window told owners and renters they were victims of fraud and to contact the police.

In May, five people were ordered to stop operating as property managers in Arizona.

An investigation by the Real Estate Department found Rosita Lopez and Jesse Lee Gunderson of Phoenix-based Golden Globe Investments/Century 21 All Star Realtors had taken $471,000 of their property owners' money and invested it in real estate under another name.

The two were ordered to immediately stop all property management. The Real Estate Department has recommend revoking their licenses, and the Arizona attorney general is investigating the case.

Neither could be reached be reached by phone or e-mail.

Maria Lynn Fox-Embrey of Avondale-based Property Source Realty was ordered by the state regulator to stop any rental, leasing or property-management operations after a Real Estate Department investigation alleged she wasn't keeping accurate records for clients and mismanaged accounts so there was a shortfall in money owed to both homeowners and renters. The amount of the shortfall is still being investigated.

Fox-Embrey was subpoenaed by the real-estate regulator, but she did not appear at a April investigation interview. Fox-Embrey did not respond to phone calls or e-mails.

Wendy M. Douglas of Bullhead City-based Lake Ridge Realty was required to stop handling any leasing or property-management business, according to the Real Estate Department. The agency's audit of her business alleged she wasn't keeping accurate records and mixing money between clients' accounts. It also accused her of providing false information for her real-estate license renewal.

Douglas did not return phone calls.

Sugee Gammon of Queen Creek-based G & I Management was managing properties without a state license. "I gave the properties back to the owners," she said. "I settled that with the Real Estate Department and am not managing them anymore."

None of this year's cases has cost owners and renters as much as the Rathbun Realty case in Tucson. In April 2013, the Real Estate Department investigated the firm, which managed 800 homes, and found it was missing $1.8 million in its property management trust accounts.

The state agency first issued a cease-and-desist order and then revoked the licenses of designated brokers George Glover and Cassandra Arnold.

Rathbun was ordered last summer to pay $950,000 to creditors after a Chapter 7 bankruptcy hearing.

Lowe said when the Real Estate Department issues a cease-and-desist order, officials usually recommend a civil penalty and revoking the person's real-estate license. The department then hands over the investigation to the Arizona Attorney General's Office for a hearing or prosecution. Real-estate agents can appeal early in the process and request an administrative hearing.

It's difficult for the state agency to track and investigate the unlicensed property-management firms, which why Lowe recommends property owners review the licenses of agents offering management services before agreeing to do business with them.

"If a property manager isn't licensed, those investors have little recourse, and many people are setting up Arizona property-management firms without getting a license," Lowe said.

Checklist for investors

• Make sure they are licensed. Go to azre.gov to look up real-estate licenses.

• Request copies of leases and credit reports on tenants.

• Require regular property account statements.