Who is entitled to the late fee?

17 Replies

We rented out our house for three years, using the services of a local property manager. It wasn't disclosed to us until near the end of the lease that the tenant was late 25 times, and no late fee was ever collected. (late enough to warrant a late fee). The property manager did not have to pursue the tenant to collect the rent.... it just arrived late.

Our lease agreement included a late fee and time structure, clearly spelled out, if the payment was received (from the tenant) late. Our contract with the property manager did not indicate who is entitled to the late fee if it is collected.

In retrospect, had the late fee been collected, who would have been entitled? the homeowner? or the property manager?

We may soon be pursuing this in court, so your responses are appreciated.

That is really up to the contract, most times I see the PM collect this "for their extra bookkeeping". Take note to ask lots of questions before picking your next PM.

Late fee comes to me but some people do have it go to the property manager. I feel like if you get paid more if someone is late you don't care if they are late. I tell the tenants there is a late fee and that it is part of rent due and if they don't pay at the time I take it out of the security deposit (and it is in the lease). However I always know when they are late as I don't get paid on time. If they were allowed to be late 25 times then there could be an interpretation that it is acceptable to do so. Some people suggest sending an invoice if they don't pay.

How were they late that many times and you did not notice. Did you get paid on time? Probably not worth court cost but don't know your state.

should go to the owner

In my contract the late fees go to the property manager. And so long as the property manager is getting me the agreed rent I'm fine with that.

There must be other things going on here...can't see why you would even begin to think of suing someone over late fees. If it wasn't addressed in your agreement/contract with the property manager and he/she had no contractual obligation to collect it....you're out of luck. In most PM agreements, late fees go to the PM and do so for a variety of reasons. It's time consuming to chase down tenants. The PM might have to make multiple trips to the property. Where was the property? If it's inner city you were very lucky to even get the rent for 3 years. The property manager didn't get a paid anything extra for chasing your tenant around for 3 years. Everyone is so quick to run to the courts...and guess what....it's a utter waste of time. Principles are very expensive and you might be right but suing gets costly. Plus, getting a judgment is only 1% of the process...collecting on it is the other 99%. Just bear that in mind. I've been the PM and the investor and been on both sides of the issue. I just want the rent paid...if the PM gets a late fee, I could care a less. I actually pay my PMs a bonus if the rent is paid on time for 6 or 12 months. Happy Investing!

My PM gets it. Clearly written in the contract.

Might consider who suffers from a payment made late and who's duty it is to collect it.

When are payments due the owner, is it much later than under the mgt agreement past the lease payment date?

The reasoning behind a late fee is not as a punitive measure to the debtor but the additional expense in collection, accounting and administration required by the creditor. So, who incurs that additional expense"? Who has the greatest loss, the PM within 10 days for collection or the owner after 15 or so days in covering a mortgage payment?

My "program" advanced payments to the owner/note holder, they payment made then became mine so I was due any late payment or bad check charges.

Negotiate it and come to an understanding before you set up management. :)

I agree with @Andy Luck there is more going on here. Sounds like sloppy management since the agreement doesn't spell out who get the money (assuming the manager wrote the agreement not you). Absent something saying they are yours, since it went on so long, I think the court would say the PM was due them. I've been wrong before and will be wrong again though.

Thanks for the quick responses. And yes, there is

more... a lot more. I was hoping for a simple

answer to the question about the late fees. I

didn't want to come off as someone out to bash

property managers. I also didn't want to start off

with a long complex scenerio.

Unfortunately, it isn't spelled out in our contract

with the property manager who gets the late fee.

You may ask why it matters if a late fee was

charged or action wasn't taken against a perpetual

late renter. The company that sent us overseas

really watches out for the financial well being of

the employees that take these assignments. If a

suitable renter is not found, the company pays the

mortgage until one is found. A late paying renter

sends up a red flag. Action could have been taken

to get the delinquent tenant out and a reliable one

in. (side note: the company no longer requires the

employee to sell or rent out their house, probably

due to too many problems such as ours)

The Property Manager (company)

We chose this PM since he was recommended by a

neighbor who took an international assignment (as

did we) and was satisfied with the service he

received. In addition to this PM, we also

interviewed 2 more, and made our decision after

reviewing the info to the best of our ability. We

had never been a renter, or a landlord before, so

we learned on the fly.

While we were living in Germany, we received email

statements every month from the PM. There was a

date next to the payment, but we really didn't

notice it. It appeared payment was on time, since

there were not comments or late fees included.

The contract with the tenant was for 3 years. We

found we were returning home 6 months before the

tenant was contractually required to leave. About

5 months before we were to return, we inquired with

our PM if the tenant would be willing to leave 6

months early. We received an email from the PM

that they would move out by 31 July. We could

move in Aug 2 (after cleaning was done).

Three days before we are to fly home (and our

belongings are on a ship), the PM tells the tenant

won't move out. (the PM never got it in writing).

Then he tells us they want 3 months rent for their

troubles. Had the tenant requested compensation

when we originally made the request, we could have

come to some agreement.

It's at this time the PM emails us and tells us the

tenant would like us to give positive payment

history so they can get another place. And now

includes the info that they were late 25 times.

The PM told us that 'he' paid the money until the

tenant finally paid. (had we known this, we would

not have permitted this to happen. We knew going

in that the tenant had had a bankruptcy in the

past, but we are forgiving people and willing to

give people a chance)

So, we return scrambling for a place to live. The

tenant doesn't leave for another month and a half,

and also stops paying rent. The PM tells us not to

pursue eviction since then the tenant would just

pay up and stay for the remainder of the contract.

In the end. they didn't pay for the last 3 months

and left us with a $950 water bill (water is billed

to occupant).

AND.. our property manager sent us inspection

reports indicating the home was being taken care of

even though the yard was trashed and damage was

done in the house. It is clear that the PM rarely,

(or never) physically inspected the property and

house.

The damages to the house, rent, and water bill were

way more than their security deposit. So, we are

out over $10,000.

I have since found through a lawyer, that the

tenant had 3 bankruptcies (we knew about one), has

a state tax lien, and a line of creditors trying to

collect. Also they had been previously evicted,

something our PM didn't tell us.

What I find totally ironic (from some research)....

is they seem to have an expensive cottage, have a

boat, and could (I'm assuming) afford an expensive

wedding at an exclusive club for their daughter

just months before moving out.

So, we are trying to recover as much as we can. We

are not rich, so we returned very short on cash

(unable to buy some essential things we got rid of

prior to moving, like a riding mower, snow blower,

etc. things that we planned to purchase on our

return.) Money we did have went to replace the cars

we sold prior to moving and other expenses related

to moving back into the house.

The money owed to us is not enough to justify an

attorney (attorney fees will eat up a lot of what

we should get). I will probably take the PM, and

the tenants to small claims court.

After that, I will be filing a formal complaint

with our state real estate licensing board. Hope

the PM gets severly disciplined, then he won't

likely be able to inflict harm on other's like he's

done to us.

Whenever there was a problem (washer went out, we

bought a new one; electrical issue, we paid an

electrician even though it was the power provider's

issue; clogged drain- paid for a plumber even

though it was baby wipes from their grandchild). We

took care of it. We never had any communication

with the tenant - it was all through the PM. But

we would bend over backwards to have a good

landlord/tenant relationship. But instead, we got

screwed.

So, as Paul Harvey would say 'that's the rest of

the story'.

Sorry about the formatting.. I typed it in notepad prior to posting here.

Jermaine here

We manage our own properties but I am yet to get a good explanation from a pm why thay should get any late fee, I thank it is my property I pay for the major breakdowns and in any case that is there job to collect the rents.

William the owner of the property should get the late fee less the property managers percentage. Holler at me if you need a new property manager in Plymouth. I manage 100 properties in Southeastern Michigan.

The way my PM does it they get 10 % of all rents collected......including late fee....works out better for me when they do pay late.....

@William Tippy sorry to hear that you (like many others) went through a bad property manager who allowed bad tenants in your rental.

Originally posted by @William Tippy :


Holy wall of text batman! But ending with a Paul Harvey quote is ALWAYS appropriate in my book. To answer your question though it's all up to you and your contract, and how likely you think it is that they will pay you if you request it.

Thanks all for the discussion and feedback, very helpful for me as this issue just recently surfaced for us. Sounds to me like either way is appropriate, there are valid arguments both ways, it completely depends on what you negotiate with your PM.

Originally posted by @William Tippy:


Sorry about the formatting.. I typed it in notepad prior to posting here.


 

Might want to seek legal counsel, as you are seemingly in a gray area. It woudl appear that the PM acted unethically, but you need to determine if he did anything illegal to justify you collecting damages. Sorry to hear about all this happening to you.

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