Lease renewal fee after one year lease?

Member since 2024 · 3 posts · 3 votes

I am attempting to work with a property manager but I'm seeing a read flag and would love some input.

This company wants to charge a 1 month placement fee for a new tenant, which I am totally fine with but also is saying they would charge me that fee AGAIN when the tenant renews their lease the following year. This does not seem standard to me, and maybe illegal? Any thoughts?

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Nathan GesnerBusiness Member

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Real Estate Broker · Cody, WY · Member since 2010 · 28k+ posts · 41k+ votes

Quote from @Andy Ramos:

It is not illegal, but it is unreasonable.

The leasing fee covers all the work associated with moving the old tenant out, supervising the turnover, marketing, screening applicants, getting them under contract, moving them in, etc. It's the bulk of our work on any lease, which is why we charge a large leasing fee.

Lease renewal requires very little work, usually 1-2 hours. It's fair to charge for this additional work, but it's not nearly as much as placing a new tenant and shouldn't be as high.

I charge 50% of a month's rent for placing a new tenant. I charge a flat $200 for a lease renewal.

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Theresa HarrisPro Member
Member since 2019 · 15k+ posts · 11k+ votes
2y
Quote from @Drew Sygit:

@Lynn McGeein, @Theresa Harris, @Sam Applegate

Curious as to why all of you think a one-month Placement Fee is too high?

Let me re-word your question-why should the placement fee be 3x as high for a $1500 property than a $500 property? Charge a flat fee whatever that number is. I'm sure PMs lose money on properties that are $500 a month. My PM charges a flat fee, so regardless if the rent is $1000 or $2000, the PM does the same work and charges the same amount. I know there is work involved (and expenses) with getting a good tenant.
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James Wise
Real Estate Broker · Cleveland Dayton Cincinnati Toledo Columbus & Akron, OH · Member since 2013 · 30k+ posts · 20k+ votes
2y
Quote from @Bob S.:

Quote from @Sean O'Keefe:

@Andy Ramos hmm .. based on working with our clients and getting intel on stuff like this. I'd negotiate the fee on tenant renewal or find new property manager.

I am not aware of any pm co that will " custom build" pricing for a client.

Yea, custom fees for every client? Na bro. Take a hike with that crap is what any legitimate PM company will tell you.
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Bob S.
Real Estate Consultant · Cleveland · Member since 2020 · 6k+ posts · 3k+ votes
2y
I know clients that have 50 properties and others that have two properties with a PM company. They pay the same fees. Now will be client with 50 properties. Get a break here and there on repairs absolutely. But it as far as feast structures go typically the same.
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Michael SmytheBusiness Member
Real Estate Agent · Metro Detroit · Member since 2023 · 4k+ posts · 3k+ votes
2y
@Jeremiah Dunakin are you saying that landlords should just give tenants "take it or leave it" renewal amounts?
That was easy to do for the last 12 years with rent rates increasing, but no longer!
What research have you done on rental Days On Market?
-Do you know their up nationwide 38% since 2022?
-Do you know rents are FALLING in parts of Florida, California, Texas, etc?
To properly renew a lease with a tenant, several tasks SHOULD be done:
1) Evaluate the property to make sure tenant is taking care of it and you want them to stay.
2) Do a market analysis of rental rates.
3) Determine target rental increase amount
4) We present all this to the tenant, as we assume they're looking at rental rates on Zillow, etc.
5) We then ask the tenant what adjustment they think is fair and then negotiate rent amount and lease term (we always try to go for 2 years).
6) New lease sent electronically to sign.
All of this takes time, hence a Renewal Fee.
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Drew SygitBusiness Member
Property Manager · Royal Oak, MI · Member since 2012 · 12k+ posts · 9k+ votes
2y
@Theresa Harris hope you know I'm not trying to pick a fight, just trying to understand the thought processes of others and learn:)
So, appreciate your response!
You do have a logical point, but here's my counter:
- Why does it cost more to order a hamburger at 5 Guys versus McDonalds?
- Why does it cost more to change the oil on your car at a dealership versus a quick lube?
- Why does a 2 liter of pop/soda cost more at convenience stores versus grocery stores?
- Why does it cost more per sq ft to paint a Class A property versus a Class C property?
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Drew SygitBusiness Member
Property Manager · Royal Oak, MI · Member since 2012 · 12k+ posts · 9k+ votes
2y
@Lynn McGeein would you place a tenant in an MLS listing only offering 5-10% of a month's rent?
Guessing not.
Also going to guess most of those listings are just "token listings" so the PMC or agent can tell their clients they have listed it on the MLS for maximum exposure, but either:
1) Really don't want to share whatever amount they are charging the owner
2) Have negotiated such a small amount with the owner that there's nothing to really share.
It'll be interesting how this all changes with:
1) NAR settlement on commissions
2) Slowing real estate market with DOM increasing. Will owners be willing to pay higher Placement commissions/fees to get their vacancies more attention to fill them faster?
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Jeremiah Dunakin
Member since 2022 · 186 posts · 192 votes
2y
Quote from @Michael Smythe:

@Jeremiah Dunakin are you saying that landlords should just give tenants "take it or leave it" renewal amounts?
That was easy to do for the last 12 years with rent rates increasing, but no longer!
What research have you done on rental Days On Market?
-Do you know their up nationwide 38% since 2022?
-Do you know rents are FALLING in parts of Florida, California, Texas, etc?
To properly renew a lease with a tenant, several tasks SHOULD be done:
1) Evaluate the property to make sure tenant is taking care of it and you want them to stay.
2) Do a market analysis of rental rates.
3) Determine target rental increase amount
4) We present all this to the tenant, as we assume they're looking at rental rates on Zillow, etc.
5) We then ask the tenant what adjustment they think is fair and then negotiate rent amount and lease term (we always try to go for 2 years).
6) New lease sent electronically to sign.
All of this takes time, hence a Renewal Fee.

Nope, not saying that all. Not even close.my thought is this.
1. Who sets your rates you or PM. If it is you why pay the PM. If it is the PM what are they doing for the preceding months. They get paid to “Manage the property”
2.Determing market rates for your area is not complicated. We can add all kinds jargon and analysis. However unless things drastically change I know how much my rents will go up or down. A Quick Look around about five minutes of seeing vacancies what’s available,what neighborhoods, bed and bath count, if it’s remodeled how long it’s been available and what’s being charged goes a long way, also I ask the guys at work what they pay. It’s a very informal process. Look at tax bill and insurance factor in inflation and it can tell me how much I can charge or not charge.
3. I ask my wife if there are any changes we need to make in contract changes. We modify the changes and electronically send it. If they accept we usually meet face to face to sign it and go over any changes in contract. That meeting is generally less than 15 minutes.
4. I would think if someone has a decent grasp of thier market and they are fair about increases they can be pretty close to take it or leave it. If landlord is unreasonable and tenant is unhappy then so be it. However if landlord is providing a good service to someone and they do not like it, landlord should have no problem finding someone who does a appreciate a reasonable fair house
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Theresa HarrisPro Member
Member since 2019 · 15k+ posts · 11k+ votes
2y
Quote from @Drew Sygit:

@Theresa Harris hope you know I'm not trying to pick a fight, just trying to understand the thought processes of others and learn:)
So, appreciate your response!
You do have a logical point, but here's my counter:
- Why does it cost more to order a hamburger at 5 Guys versus McDonalds?
- Why does it cost more to change the oil on your car at a dealership versus a quick lube?
- Why does a 2 liter of pop/soda cost more at convenience stores versus grocery stores?
- Why does it cost more per sq ft to paint a Class A property versus a Class C property?

I didn't assume you were looking for a fight (I'd just walk away if you were :)). Things do cost different things depending on where you go (ie if you go to different PM, they charge different prices because some offer different services and different qualities of service-using your first example 5 Guys vs McD. So I would expect PM1 to charge a different price than PM2, but if I was with PM1 and had a rental that was renting for $1100 and another renting for $1800 (which I do), I wouldn't expect to get charged less for the $1100 property than the $1800 when it comes to finding a tenant. I know that then goes counter to the paying 9% of the rent each month for PM (but you're not going to point that out, right? LOL, though size of the house is related to rent and the number of things that can go wrong).
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Lynn McGeein
Real Estate Agent · Virginia Beach, VA · Member since 2012 · 2k+ posts · 1k+ votes
2y
Quote from @Drew Sygit:

@Lynn McGeein would you place a tenant in an MLS listing only offering 5-10% of a month's rent?
Guessing not.
Also going to guess most of those listings are just "token listings" so the PMC or agent can tell their clients they have listed it on the MLS for maximum exposure, but either:
1) Really don't want to share whatever amount they are charging the owner
2) Have negotiated such a small amount with the owner that there's nothing to really share.
It'll be interesting how this all changes with:
1) NAR settlement on commissions
2) Slowing real estate market with DOM increasing. Will owners be willing to pay higher Placement commissions/fees to get their vacancies more attention to fill them faster?

Yes, I have placed tenants over the years, and they never paid higher than 10% of first month's rent. That's very common here, with the occasional $250 or $500 offered instead. I only do it if I'm assisting a sales client find housing after a sale or helping a client's family member find a rental, definitely not worth focusing time on but if needed during a sale, I'll assist. But they don't need to pay more here as our area has always had strong rental demand, and some slowing would likely be a good thing as it's been nuts. I do not think rental commissions are part of the NAR commission settlement.
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Drew SygitBusiness Member
Property Manager · Royal Oak, MI · Member since 2012 · 12k+ posts · 9k+ votes
2y
@Lynn McGeein I believe ALL commission charged to sellers are part of NAR settlement.
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Account Closed
Member since 2024 · 1 post · 0 votes
2y
This fee is typically assessed to cover the administrative costs associated with the renewal process, which may include conducting market analyses, communicating with tenants, and preparing new lease agreements.
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Corby GoadeBusiness Member
Investor · Boise, ID · Member since 2014 · 3k+ posts · 3k+ votes
2y
Just because you don't like it doesn't make it illegal. In some markets, this is a standard term, in others, it's not.
That being said, if you aren't getting good vibes from the PM or you don't trust them, why does it matter what someone says on BP? You should only work with people you like and trust.
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