issue with my Property Management company fees during covid

Property Manager · Alpharetta, GA · Member since 2018 · 163 posts · 117 votes

Hi @David To, I'm sorry to report that your assumption is not correct. If a tenant isn't paying we're still charging the owner full management fees, here's the why.

We still have to manage that property. Fair housing, and about million other rules, mean we still have to perform maintenance, inspections, preventative maintenance, respond to calls, work orders, complaints, etc. Just because they don't pay doesn't mean we don't have to fix the ceiling fan. The work doesn't stop. Non-payment doesn't eliminate their rights as tenants, nor our responsibility on your behalf.

Also, we still have all of the management administration, accounting, even negatives, ledgers, tax forms AND just because no court will take an eviction case....jurisdictions vary, doesn't mean we don't still have to file dispossessory and keep all that eviction activity up to date to basically hold our place in line.

I'm sorry you're frustrated, you're not alone, this pandemic has impacted everyone... except Patrick Mahomes.

8 Reply

Brad HammondBusiness Member

Real Estate Agent · Portland, OR · Member since 2016 · 1k+ posts · 605 votes

5y

Hi @David To, let me start off by saying that this is a truly awful situation you are in. I know the feeling that you are bleeding money and it is awful. I don't use a property manager so I might not be the best qualified to answer this but it doesn't sound right to me. They should be looking at each property independently and not lumping them together under you. If anything they should be giving you some sort of break by having multiple properties with them.

However, look at your contract with them and see what that says. If it were me I would bring it to their attention and find a new property management company for the one property that is paying rent if they don't do anything for you.

Good luck, sorry you are in that position.

2 Reply

Greg WeikBusiness Member

Property Manager · Denver, CO · Member since 2020 · 263 posts · 327 votes

5y

Hi @David To, have you read your PMA (Property Management Agreement) to see if it specifically states this is allowed? Usually, a PMA pertains to a single property and the PMA will say whether or not the PM company can charge fees when rent is not being paid.

Normally, a PMA will state that the management fee is calculated as a flat fee on "rent collected" or a percentage of rent collected.

@Account Closed, honestly that's kind of BS on your part. Kicking a client while they're down. Just because you can do something, doesn't mean you should. You know full well that the $125 or so is going to mean a lot more to the client (who still has a mortgage and possibly repairs and turnover to worry about) than it means to your company.

We have a couple of tenants who also have not paid since about mid-summer, but we are working hand-in-hand with those clients to help them get through this storm. We are not charging them.

303-586-5560

Real Estate Solutions4.3379 Reviews

Website View Page

13 Reply

David To

OP

Newport Coast, CA · Member since 2014 · 95 posts · 73 votes

5y

I checked the lease agreement and it doesn't state anywhere if I have to pay management fees if the tenant isn't paying. In normal times, if a tenant doesn't pay, we would evict them right away within a month but under covid issue, this is a different situation. So I don't see it stating anywhere in the lease agreement about owner having to pay management fees if a tenant doesn't pay rent. So not sure how to resolve this.

Also to David K, this covid squatting tenant hasn't allowed us into the property and also rekeyed the place. And the property management company hasn't had to fix anything or do anything since March other than emailing them and getting a covid letter in response, etc. The tenant for the most part has ignored most communication through email and phone except when it was essential that she produced statement / PDF file of covid hardship.

1 Reply

Simon W.Business Member

Real Estate Consultant · Lehigh Valley PA & New York City · Member since 2013 · 1k+ posts · 670 votes

5y

All my years of real estate accounting, you don't take the management fee until income comes in per property. At the very least, you should be notified and have a mutual agreement to work out something.

As a property management firm, there should be some reserves in case situation like this happens, the owner at least will know it should cover mgmt fee for the opex for the firm.

If both owner and mgmt is in a disagreement, that just means it is time to move on.

Accounting Properties LLC

View Page

CFO LLC

View Page

7 Reply

Adam Martin

Rental Property Investor · Member since 2020 · 1k+ posts · 1k+ votes

5y

I self manage so am biased on what I think is right however what is legal is in your contract. If it states the fee is 125/month and doesn’t include outs for non payment or vacancy you are stuck with it unless they modify the contract or you leave. Do you also pay while it is empty. That said I don’t feel it is right and not something I would agree to, their main job is to ensure you got paid and they failed. Sure this is a crazy time but the end of the day if I don’t get paid you shouldn’t either but if You recover some of the back rent they should be entitled to their fees from what was recovered. Also keep in mind it is not passive and you still need to manage your manager how did it go this long where you didn’t notice.

2 Reply

Brianna Reynolds

Property Manager · Kansas City · Member since 2020 · 60 posts · 41 votes

5y

All of this. I'm sorry, your feelings are valid, however it just doesn't mean they get to stop doing their job just because rent isn't paid.

2 Reply

David To

OP

Newport Coast, CA · Member since 2014 · 95 posts · 73 votes

5y

Well, I'm just trying to get feedback / opinions of other people and so far it seems to be.

TO Brianna Reynolds, property manager ain't exactly doing much right now since the covid squatter has rekeyed the property and the only communication has been through email when she provided us her official covid hardship. Other than that, nothing has been to the property so really, the property manager hasn't had to do much since covid hit since the tenant has refused to answer emails / phones. So it's like a vacant property at the moment.

2 people in favor of the Property Management Company still getting paid

4 people in favor of me

I'm going to see which is the majority by the end of this weekend, and if it favors me, I will start researching on how to manage my own properties and will do it myself starting next year and get rid of the property manager.

David To

1 Reply

Account Closed

Property Manager · Alpharetta, GA · Member since 2018 · 163 posts · 117 votes

5y

@David To you can take my vote away. I’m not sure what I was thinking when I was typing earlier. Property Manager’s still have to do all the work, but no, no management fee to the owner. Only on rent collected.

I think everyone in this post empathizes with the pain you’re feeling..

2 Reply

David To

OP

Newport Coast, CA · Member since 2014 · 95 posts · 73 votes

5y

I'm not overly concerned about paying money to the property manager. I'm angry not because of the lost of money, but the principal / fairness of how a business is run. Basically,

1) covid squatter has been receiving unemployment insurance (including the extra $600 / month from the feds for 4 months, but now reduced to $300 / month from feds ) but still refused to pay a single penny

2) and Property manager hasn't had to do much at all since covid strike (what can anybody do when the tenant rekeyed the property and refused entry due to covid and nothing needs to be done on the property or has been reported since)

Yet Property Manager is still collecting management fees which I wasn't aware of until now (my bad since I didn't carefully pay attention to the monthly automatic deposit) going into my checking account by deducting from Property 1 money that is still coming in

I don't agree to the business principle of taking money from one property and paying yourself for the other property. At the very least, give the owner a discount.

1 Reply

David To

OP

Newport Coast, CA · Member since 2014 · 95 posts · 73 votes

5y

I meant $600 / week and now $300 / week in extra benefits in California unemployment insurance.

0 Reply

Joe SplitrockPro Member

Moderator

Rental Property Investor · Sioux Falls, SD · Member since 2015 · 9k+ posts · 18k+ votes

5y

@David To

My guess is if you call the Property Manager and explain why you feel them taking your money is unfair, they will refund and stop doing it. Those who say the property manager is working, that is kind of BS. If they were working, they would be collecting rent or getting the tenant out of the property. I realize it is out of their control (to a degree), but I don't see how any respectable property manager could argue they are entitled payment, when the tenant hasn't paid in 8 months.

5 Reply

Drew SygitBusiness Member

Property Manager · Royal Oak, MI · Member since 2012 · 12k+ posts · 9k+ votes

5y

Legally, you have to refer to your management contract, which hopefully, is very clear about the PMC collecting when a tenant isn't paying.

There will be one of two answers:

1) It states they can charge you if the tenant isn't paying. It doesn't hurt to still challenge the charges though! We would feel a bit guilty charging you if we are truly doing nothing. Of course, we haven't stopped trying to find ways aaround the eviction moratorium, but that's another story.

2) If it states they cannot charge you if the tenant doesn't pay. First, don't assume your PMC is trying to scam you. They may have programmed an auto-charge in their software that neither you or they caught until now. So, contact them asn ask them why they are charging it. If they insist they are entitled to it, hear them out and make your decision to terminate them based upon their answer.

FYI - we have the opposite problem with several properties with unpaying tenants. We're working extremely hard to find legal challenges to the CDC's Tenant Affidavit to still evict the tenants, yet we're getting no compensation. So, we've had internal discussions that we might have to start charging our clients a flat fee of some type.

[email protected]248-209-6824

Logical Property Management4.9460 Reviews

Website View Page

0 Reply

Jared Garrison

Rental Property Investor · Kalamazoo, MI · Member since 2020 · 35 posts · 40 votes

5y

@David To

Is this property in CA? Can you evict based on breach of lease? (Unauthorized changing of locks, not allowing reasonable access)

I had to evict a tenant during COVID, but I had to do on the grounds of damage to property (and there was extensive damage)

2 Reply

James Wise

Real Estate Broker · Cleveland Dayton Cincinnati Toledo Columbus & Akron, OH · Member since 2013 · 30k+ posts · 20k+ votes

5y

Originally posted by @David To:

Okay people, let me get your opinion on this. I have a property management company that I'm with for over a year now. Problem is this:

1) Property 1 (management fee: $150.00 per month)

2) Property 2 (management fee: $125.00 per month)

So tenant on Property 2 hasn't paid anything since April due to covid and I cannot evict due to eviction moratorium.

But my property manager is still collecting rent from tenant on Property 1 and continues to charge me the full $125.00 on Property 2 by taking the money from Property 1.

Is this valid reasoning to you? If tenant on Property 2 isn't paying, then the Property Management company shouldn't be getting any money either (or at the very least, I would pay them a reduced fee of only $50.00 per month or so). Why should I have to bear the burden of the cost and have money taken from Property 1 to pay for Property 2 so that the Property Management company gets their due and I the home owner get left out in the cold?

Let me know your thoughts. Because I didn't realize this was happening until just now and now I'm very mad and thinking of getting rid of this Property Manager at the end of year and finding someone else or doing it myself.

What do you think is fair? What do you think I should do? Get rid of Property Manager?

David To

"Why should I have to bear the burden of the cost?" Lol dude you own the property. Welcome to being a business owner. That's like asking your mechanic why you should have to bear the burden of the cost to fix your car. Get outta here with this mindset.

2 Reply

Filipe Pereira

Property Manager · Windsor Locks, CT · Member since 2016 · 1k+ posts · 1k+ votes

5y

@David To -

I'll preface my reply with:
1. Asking "What does your contract say?"

2. I am a property manager in CT - so take that as you will in accepting / rejecting my response.

Ok, now that we have that out of the way:

You should fire your property manager. Yesterday.

As a property manager I also see myself as a partner to the property owner. If the property owner isn't making money, because of rent not coming in, neither should I. It's really pretty simple, yes you are a business and you need to be able to sustain expenses, but so is your property manager and therefore so should they (be able to sustain expenses). Just as it isn't your fault that covid-19 came along, it also isn't your property manager’s. Sounds fair, right?

Your property manager views you as a revenue source right now, not as a partner.

And that’s where your issues lie.

as long as you are doing everything you need to be doing as a property owner, including not skimping out on repairs as they come up, your property manager should be willing to put their butt (and sometimes their income) on the line as well. That is what a partnership is.

This is a prime example of why property management companies get a bad rep around here. When something goes right, they want to take all the credit, but when something goes south, they want to act as if they have nothing to do with it and still collect their fee. It’s preposterous.

At the very minimum, the PM should have made an effort to settle with you on their fee given the circumstances, because like I said, Covid is not either of your fault's. Perhaps that's 50% off, or switching to a maintenance related only pricing method until things are normal again.

5 Reply

Grant R.

Rental Property Investor · Fort Wayne, IN · Member since 2019 · 132 posts · 51 votes

5y

@James Wise incorrect, sir. The regular monthly fee charged by a PM is for tenant availability/response and rent collection/distribution. It does not cover maintenance costs; not even a new alternator ;)

Repairs, maintenance, etc. are all paid by the owner and are EXTRA costs. It's not like the fee covers the ceiling fan or the electrician to fix it when it burns out from age.

If the PM isn't doing anything but auto-drafting money from another unit, it's time to call them and find out why. Hopefully it's a mistake in the system. Either way, ask for a refund. If they're good to you, stick with them. If not, give them their 30 days and start shopping around.

Best of luck!

2 Reply

Account Closed

San Jose, CA · Member since 2015 · 4k+ posts · 3k+ votes

5y

I vote that the PM was wrong. There should have been communication. Because of your surprise, I'm going to assume there is nothing in your contract that says the PM can take money from one property to pay fees on a different property.

In law, if for instance your contract wasn't clear on this, a judge would ask what sounds reasonable to a reasonable person. This doesn't seem reasonable to me, especially since there was zero communication or agreement. I would never do something like this without a clear agreement that it was okay to do so.

Another thing in contract law that's great, is that if the contract is vague on something, the court rules against the person who wrote it. The reasoning behind that, is that it discouraged people from writing vague terms in contracts that they can then profit by.

I fired a PM one time for doing something similar, only worse - taking money without communication, abusing terms in the contract. The contract included a clause that said I'd have to pay them a fee to break the contract and they tried to force that issue. I said if they don't agree to simply break the contract, then I'd be suing them for my losses and asking for punitive damages. So, their choice - we call it good and no contract break fee, or they take their chances in court where they were possibly going to lose a lot more, including their reputation.

Some business people are shysters. Not saying here that all PMs are crooks, but it does happen. Personally, I'd fire this PM and find a better one or self manage, if you can. I don't think this is a Covid issue. I think it's an integrity issue.

0 Reply

Trent Werner

Real Estate Broker · Portland, OR · Member since 2019 · 21 posts · 21 votes

5y

@David To I believe you have a valid reason to ditch your management company if they are charging you when the tenants are not paying rent. The PM company that I work with has not been charging owners a management fee if the tenants are not paying rent. You have a right to be irritated with this fee. Sorry that you are having to deal with this! Good Luck,

Trent

2 Reply

Theresa HarrisPro Member

Member since 2019 · 15k+ posts · 11k+ votes

5y

Greg's point was to look at the wording of how much is charged. Does it say a percent of the rent collected or does it say a percent of the rent? If the former and they aren't collecting rent from the property, then their percentage of no rent collected is nothing.

The fact that the tenant rekeyed the unit and they don't have access can be used as reason for eviction as that is a violation of the lease even in covid times. Your PM shouldn't have let them get away with it. I would call and talk to the PM and tell them to deal with it now. My guess is they probably haven't inspected the place either.

0 Reply

Anthony Marin

Rental Property Investor · Newark, NJ · Member since 2017 · 88 posts · 75 votes

5y

@David To

It sucks that you're going through this but right now there are a lot of owners in this exact situation. This really comes down to what it says in your property management agreement. Owners should NEVER sign a PMA with flat fees. It should always be a percentage of the rent collected. The property managers most important job is to collect rent and keep the apartment occupied. Collecting a flat fee every month doesn't align the interests of the property manager and owner.

We are in this together with our clients and wouldn't feel right collecting full payments while our clients are really struggling.

2 Reply

Steve Maginnis

Property Manager · Charlotte, NC · Member since 2012 · 135 posts · 156 votes

5y

There are two topics here. One of legality and one of morality. Morally, yes, I understand that keeping the management fees in light of the situation seems that the PM is kicking the owner while he is down. Yes, this is the owner's business. However, the PM has a business to run also. If 25% of their tenants are not paying rent due to Covid-19 related issues, then that means their income also suffers if they do not collect fees on these properties. Profit margins are not that high, so every bit counts. As a PM, I am working even harder on these properties. I have to constantly stay in touch with the owners for updates. Owners want me to call to verify they are in whichever program, they want me to stay in touch with the tenants to ask for any funds to be paid(most programs urge tenants to pay what they can, when they can), we may still have maintenance/repairs/HOA violations, etc. to deal with. Plus, we have to stay up to date on all the current guidelines. We are able to file eviction still in some cases. We just cannot file the Writ until after first of the year(if that is not later extended).

From a morality standpoint, I do agree that the owner is already hurting by not receiving rents that would normally go towards their mortgage. Every bit can make a big difference. With all the Covid programs protecting the tenants, who is helping the owners? It is unfortunate, but I think we may get some help next year. Unfortunately, it may be after they see many foreclosures, and will be too late for many.

Whether right or wrong, if your management agreement does not provide for them to take the fee if the tenant does not pay, then they should not take the fee. Bring this to their attention, and if they do not credit the fees, then file a complaint with the Real Estate Commission. Our agreement provides for a minimum of $50 or our percentage. So if the normal fee is $125, we would still charge the $50. This is minimal to help cover the amount of work we still perform for the property. Best of luck.

0 Reply

Calvin Lin

Investor · Raleigh, NC · Member since 2015 · 81 posts · 210 votes

5y

If the tenant re-keyed without authorization isn't that a violation of the lease, which now you can use to bypass the covid no-eviction law? Also not letting you or the PM into the apartment should be another violation.

0 Reply

Aaron Frances

Chicago, IL · Member since 2016 · 61 posts · 11 votes

5y

@David To does anyone know if rekeying is viewed as illegal? I almost feel like this is a form of theft on a grand scale to lock an owner out of a property they own. Talk to an attorney and see if you can pursue a cash for keys with grand larceny as the leverage. If it makes sense to an attorney it may be worth exploring. I'm very compassionate to people who are experiencing a hard ship but the tenants have taken it to a whole other level of nasty. Good luck with your situation.

0 Reply

Arta Montero

Member since 2019 · 182 posts · 45 votes

5y

@David To I had hired Real Property Managment solutions in Portland, OR and I paid close to 10k (1000k just to break contract) and they were charging me close to 1000/ month on random repairs as replacing a light, unpolished a tub after I paid them close to 7k to get house move ready and they said it was in great condition.

In addition the tenant had stopped paying them, but starting paying me. The tenant may not be paying because property management.

I had called real property management to discuss and could never talk to the owner Dan Hays and his answer when I broke the contract was that I am a bad landlord and have a bad property.

This is my horror story with property management. 150 would seem nothing to me but wondering if their handling is not helping with tenant not paying.

I knew property management can be bad but didn’t know could be this bad. I hope I had worst case scenario

1 Reply

issue with my Property Management company fees during covid

issue with my Property Management company fees during covid

Most Popular Reply

40 Replies