property manager keeping 10% late fee

[Tim Bee]

The tenants debt is about $1600 and goes up by 10% every month because the property manager keeps the late fee.  Basically I am loosing 10% a month so it's like I (the owner) am paying the late fee.  I know I could evict and then sue bla bla bla....I probably would never get my money even if I win.  So my question:

Maybe just tell the property management company to waive the tenant's debt so I can finally stop having the late fee taken out every month?  If the tenant ever builds up another $500 or so in debt then I would evict.  Thoughts?

[Drew Sygit]

Why is the tenant paying late, or how did they get behind to begin with?

What is your PMC doing to pressure the tenant to get current?

What would you do differntly if you were getting the 10% late fee every month?

[Caleb Brown]

How far behind are they? I would just evict. I highly doubt they will catch up and pay any late fee on top. Not worth suing as you said, they wouldn't ever pay you

[Adam Bartomeo]

This sounds strange... You should only pay when revenue is collected. The tenant fees may add up but you shouldn't be paying until money is collected.

[Tim Bee]

Evictions cost about $1100 and then about a month of no rent and about 5 grand in rehab seems to be pretty standard from my experience.  The tenant is old and confused and thought they paid about 6 months ago but didn't.  They always pay on time besides that.  So if I don't wipe their debt I will be down about another couple grand over the next 12 months.  So the math is telling me to wipe their debt

[Chris Grenzig]

@Tim Bee it's not uncommon in a property management agreement for the management company to keep late fees or to split them. However, for us usually the late fee is $100 on the 5th and then another $5-10 per day they are late to incentive getting it in faster. When other managers do a percentage usually the percentage is of the monthly charge not of the outstanding balance, but it could be different where you are. 

If you're really intent on keeping the resident in place then I would just have a conversation with the manager and see what can be worked out, but if they're sticking to their agreement they signed with you, than you might have some decisions to make. 

[Sean O'Keefe]

@Tim Bee good question and looks like you got some great answers. 

I'm also based in the Bay Area. We work with a lot of real estate investors who give us intel on who the top property managers are. Happy to provide some unbiased feedback on what PMs to work with in CA.

[Tim Bee]

Thanks for your help.  I decided to wipe their debt and give them a second try.  We'll see what happens.  I hate evictions because the turn over is always expensive.  But if the debt gets up there again (1-2 grand) then they are gettin booted.  

[Theresa Harris]

So was the tenant late once and the PM added in the late fee, so even though they are paying on time each month, they never paid the late fee so the PM keeps adding it in and making it worse?  eg month 1 rent $1600, late fee $160, month 2 they pay $1600, but PM deducts $160 from the unpaid late fee and then adds another late fee of 10% (and presumably of the rent plus late fee so it increases each month)?  If so, that is just wrong especially as they are basically taking money from the rent you are owed.

[Tim Bee]

Quote from @Theresa Harris:

So was the tenant late once and the PM added in the late fee, so even though they are paying on time each month, they never paid the late fee so the PM keeps adding it in and making it worse?  eg month 1 rent $1600, late fee $160, month 2 they pay $1600, but PM deducts $160 from the unpaid late fee and then adds another late fee of 10% (and presumably of the rent plus late fee so it increases each month)?  If so, that is just wrong especially as they are basically taking money from the rent you are owed.

 Yes you are exactly right!  Tenant is paying perfectly....except their late fee.  So it is just quickly adding up over time.  It got up to about $1700 when I canceled their debt.  It sucks but another year of them not paying off their late fee is worse than me canceling their debt because I am loosing money every month.   Sucks.   But that's the contract I signed with the PM company.  

[Theresa Harris]

Quote from @Tim Bee:

Quote from @Theresa Harris:

So was the tenant late once and the PM added in the late fee, so even though they are paying on time each month, they never paid the late fee so the PM keeps adding it in and making it worse?  eg month 1 rent $1600, late fee $160, month 2 they pay $1600, but PM deducts $160 from the unpaid late fee and then adds another late fee of 10% (and presumably of the rent plus late fee so it increases each month)?  If so, that is just wrong especially as they are basically taking money from the rent you are owed.

 Yes you are exactly right!  Tenant is paying perfectly....except their late fee.  So it is just quickly adding up over time.  It got up to about $1700 when I canceled their debt.  It sucks but another year of them not paying off their late fee is worse than me canceling their debt because I am loosing money every month.   Sucks.   But that's the contract I signed with the PM company.  

 Good for you because it was costing you money and the PM should have figured that out.