Impaired Aging Parents Managing Real Estate
Who runs the store?
We’re seeing it more and more frequently now at AgingParents.com: elders as landlords who can no longer perform the administrative job. Sometimes it is the grown children who bring the problem to our attention. You see, Dad doesn’t maintain his houses that he’s rented for decades. If tenants complain, he does nothing. You see Mom failing to collect the rent of her retail business, a small mall. You notice that rentable space is empty and has been for some time. No attempt is made to rent them out. The children are alarmed. It could be a single rental home, a commercial building, a huge portfolio, or anything the senior owns. A cognitive decline was not to be expected. Nobody was paying attention and things go wrong.
Disabled elder unable to manage his properties
123rf.com
Financially successful people often invest in real estate, but for those who manage the real estate themselves, we see a lack of planning for how to step out of the management role. The same problem can arise when a property owner has a long-standing management company that is not held accountable for its work due to the owner’s cognitive impairment. Again, nobody watches the management. It’s a perfect opportunity for theft from the owner.
Real life examples
In one case, a wealthy man owned a rented apartment next to his house. The longtime tenant ruthlessly took advantage of the 85-year-old owner and simply stopped paying the rent. Living for free, he manipulated the owner into believing that the tenant would provide him with assistance in exchange for using the apartment, when in fact no such exchange took place.
In another case, the 87-year-old owner of an office building with long-term tenants took no steps to evict a very troubled tenant who had lived there for 20 years. The landlord hated her but didn’t exercise his right to simply not renew her lease. Instead, he waited for her to announce that she was leaving. He had another person interested in the space and willing to rent it, but he seemed confused as to what to do to secure this new lease. He managed the property alone.
Both elders, who were landowners, had adult children who could have advanced. In the first matter, the rented apartment, the eldest defended herself against the son’s attempts to intervene. The eldest had dementia but was functioning fairly well in other ways. He angrily resisted his son’s attempts to take over his financial affairs. He had previously hired his son to do just that. The freeloading tenant manipulated the elder into signing an agreement giving the tenant free rent for five years.
In the office building matter, the 87-year-old’s daughter was apparently not close to her father and ignored his confusion. She may have been prevented from getting involved by her father, who was stubborn and unwilling to admit he had trouble managing the investment. In both cases, the only way to prevent abuse and tampering was for a pre-appointed person to step in and take responsibility for managing the property. This works smoothly if the elder is cooperative. It creates a legal mess when the elder resists.
Cognitive Decline and Money Management
Research tells us that even in the earliest stages of dementia or other cognitive impairments, financial judgment is impaired. It’s the first skill to lose weight in a way, and it’s hard to spot at first. The elderly person with impaired financial judgment can carry on a normal conversation, and sounds and looks good. But if you ask them about the bookkeeping or bookkeeping, they probably can’t get it straight. The decline is subtle at first and gets worse over time. Something is wrong before a family member notices. This sometimes leads to a loss in value of the property and to loss of income.
What family members can do is be aware that as they get older their acuity for financially managing property (and other matters too) can wane downhill. If you’re aware of older parents’ real estate investments, it’s helpful to educate yourself and offer “just in case” help. Ask your aging parents to teach you about it, even if you already know a lot. This approach can appeal to one’s ego: asking for advice. Do this before you see any sign of a problem and you will likely be successful in preventing income and property losses from falling in value.
If you just assume mom or dad has been managing the family’s real estate investments for decades and everything is fine, you’re taking too much risk of keeping it that way. Age takes its toll. Most of us need help as we age, especially as we turn 85. By that time, one in three people will have Alzheimer’s disease. If you don’t like these odds, make your best efforts to get an interest in the properties they have before the investment loses its value due to lack of attention. Cheating is all too common. Predatory real estate agents, corrupt management companies, and dishonest renters can ruthlessly take advantage of vulnerable older people. Don’t let it happen in your family. If you see your aging parents being able to manage properties and they fight back when you step in, it’s time to seek legal advice so you can understand your options.