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PMG operations not the typical ‘HomeVestors business model,’ lawyer says

Most investors buying houses through the Macon HomeVestors franchise don't know Macon. But they know a deal when they see one.

Charles Rutland, who runs the Macon HomeVestors franchise, Professional Realty Group, with his wife, Monya, said most clients live in expensive housing markets and are drawn to Macon because they can buy houses here for as little as $10,000. They hail from Atlanta or states as distant as California and Nevada, where the Rutlands travel to offer presentations about their business model. Investors learn about the Rutlands' services through investment clubs, the Internet and social networks.

After buying houses, the owners frequently hire the Rutlands' related company, Professional Management Group, to renovate and manage them as rental property.

But some of these absentee landlords contend that PMG failed to complete renovations properly, pass along rent payments promptly or take good enough care of the houses.

Some investors own rental property elsewhere. But for many of them interviewed by The Telegraph, their Macon purchases were either their first, or the first outside their local real estate market. Some of them visit to look at the houses first. Others select houses using descriptions the Rutlands provide.

Investor Frank Wimberly said it's the buyer's responsibility to check out the deal beforehand. He's been happy with HomeVestors and PMG.

But California-based investor Sean Clemens, who bought a one-bedroom house from the Rutlands after being told it had two bedrooms, said he didn't closely investigate the Rutlands and the properties they were selling because he trusted the HomeVestors brand.

The Rutlands are among only a handful of HomeVestors franchise owners who cater to out-of-town investors or who renovate and manage property for third parties, said Bonnie DePasse, HomeVestors' vice president for legal.

She said HomeVestors would rather see investment by local residents. Setting realistic expectations is tough from 3,000 miles away, DePasse said.

"Right now, I'm not thinking it's working out real well," she said. "I would prefer my franchisees didn't get involved with property management and rehab. ... That's not the HomeVestors business model."

DePasse said the HomeVestors corporate office has received complaints about the Rutlands from a disgruntled former employee as well as four investors or investor teams.

The problems were mostly related to PMG's renovations, not HomeVestors, she said. Nevertheless, the company sent an inspector to check the quality of renovations at some PMG properties. DePasse said they looked fine, but she is encouraging the Rutlands to negotiate with dissatisfied clients.

"I don't like it when I get customer complaints," she said. "It raises a flag. ... You watch more carefully."

PMG is not registered with the Georgia Secretary of State's Office as required. City license records show that PMG had its first Macon business license in 2004, and that the license switched to HomeVestors/PRG in 2005, said Adah Roberts, the city's finance director. City records show that neither business had a license from that time until March 2008, when PMG bought a license after inquiries by Macon police in February.

Charles Rutland said he believes PMG had a license every year but 2007, when he forgot to buy one. Rutland said HomeVestors/PRG never had a license, because city employees had told him years ago that businesses of its type were exempt from the requirement.

Roberts, after conferring with city attorneys Thursday, said both the Rutlands' businesses are required to have licenses for every year they operate.

RENT PAYMENTS Many investors who spoke with The Telegraph said Professional Management Group collected rent but sent it to them late, sometimes months late.

"We'd go months trying to get invoices or checks from them," said Darren Helms, whose house on Village Green Lane was managed by PMG. "The property management company will make you or break you. They were breaking me."

Michael Cornwell, an Atlanta doctor who purchased 10 houses through the Rutlands, said he heard "the check is in the mail" so many times that he started mailing himself letters to see if they would arrive. (They did.)

Cornwell says PMG owes him rent. In a police report filed last April, he asked the Macon Police Department to investigate Monya Rutland, alleging the theft of $4,500. Monya Rutland said Cornwell actually owes PMG for work performed at his property.

No charges were filed at the time, but a new investigation begun in February also is re-examining that complaint, Macon police investigator Enrique Hogan said.

The Rutlands had explanations for some of the investor complaints.

They say they send out rent checks every month. But they switched the timing of those monthly payments, which displeased some investors, Monya Rutland said.

Other investors who now claim they tried in vain to reach PMG have not always made communication a priority, Charles Rutland said.

For example, Kim and Danny Gatling of Greensboro, N.C., complained that Danny Gatling's investment group not only didn't receive rent payments for occupied properties, but it hadn't even been informed when there were tenants.

However, Charles Rutland had a series of rent checks returned because Gatling closed a post office box without informing PMG. In e-mails sent throughout the year, Gatling never mentioned that he wasn't receiving payments, Rutland said. Rutland provided an e-mail that shows Gatling acknowledged his address change only about six months after it happened, when Rutland says he started receiving returned checks.

Rutland said he has not reissued the checks because Gatling, whose attorney recently sent a letter demanding the money, wants them written to a different company than the one PMG contracts with.

RENOVATION QUESTIONS

Investors also said that Professional Management Group failed to complete renovations in the 60- to 90-day period promised.

Investor Edna Griffin, for example, said she traveled to Macon twice from Sacramento, Calif., when she believed her renovations had been finished. In fact, they took about six months longer than estimated — half a year without rent payments to offset the mortgage payments.

This led to some sleepless nights.

"I'm still floating, but it's sinking fast," Griffin said late last year. "If I hadn't had some in reserve, I would have been at the bottom already."

Monya Rutland said she kept Griffin informed, and that Griffin caused some of the setbacks herself by delaying payments to contractors.

A police report was filed in February by investor Valeriea Womack of Kathleen. In her statement, she said she provided the Rutlands' company with a $30,000 account in June 2006 to use for renovations on a house she purchased on Monroe Street in Macon.

The statement she gave police alleges that the Rutlands' company withdrew all the money without doing any repairs. Visits to the property and police photos show that part of the house's roof has collapsed and walls are rotting.

During an interview, Womack said the house was one of seven that she and her husband bought in Macon, Fort Valley and Perry through HomeVestors. She said they all needed renovations, but in her opinion, the final product sometimes didn't reflect the amount of money invested.

Charles Rutland said the Womacks actually bought nine houses and financed their renovation as a group. Because the Womacks still haven't paid for some completed renovations at other properties, he said, they actually owe the Rutlands money. Rutland also denied that his business had access to a bank account set up by the Womacks.

"The money we received from them — every single dime — went into the renovation of the properties they owned," Monya Rutland said.

Womack said Monya Rutland told her that a contractor took money for renovating the Monroe Street house and then filed for bankruptcy without doing the work. Monya Rutland acknowledges this, but the Rutlands say the amount was "nowhere near $30,000."

According to Womack, more than a year ago, Monya Rutland said she would make good on the lost funds and take over the mortgage for three of the Womacks' houses, but this never happened.

Monya Rutland said many options, including mortgage payments, were discussed but not agreed on. She said the Rutlands planned to subtract whatever money was lost to the contractor from the total amount that the Womacks might owe.

Womack said she and her husband, a childhood friend of Charles Rutland in Pleasant Hill, faced foreclosure and struggled to maintain their good credit. They had hoped that their investment would help fund their children's college education and church missions. Meanwhile, for more than a year, Womack's husband has been working in Kuwait as an Army contractor.

"What hurts me the most is we trusted them. My husband is not only protecting his family but fighting over there to protect our freedom," Womack said. "When you grow up with somebody and you think they're somebody you can trust and that they're out to do something good in society ... But for them to do what they did — wow, it's like night and day."

Investor Steve Bumbaugh of Chicago filed suit in October 2006 against Professional Realty Group and the Rutlands, alleging that they intentionally misappropriated $28,100 he provided for renovations that he contends were never made on two properties.

Bumbaugh claims he lost more than $320,000 as a result.

Charles Rutland declined to comment on the lawsuit.

Some investors complain that PMG completes cosmetic renovations such as painting and carpeting, but not substantive improvements such as rewiring and installing central heat and air.

"You expected one thing for what you paid, and you ended up with ... shoddy plumbers and electricians," said investor Pam Mayo of Atlanta.

Monya Rutland said some investors seem to think repairs are cheaper than they are.

Charles Rutland said PMG spends all the owners' investment on the houses, and the Rutlands don't pocket any for themselves.

"It's the death knell of any kind of ongoing business to do that," Monya Rutland said.

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