Insurance Loss of Rent payout

11 Replies

When you file a claim for a rental property and receive loss of rent reimbursement, is your property manager entitled to their percentage of share? If yes, it does not seem very fair because they don't pay any out of pocket deductible.

What are your thoughts?

You're going to need to refer to your contract for this. It could easily be argued either way. Did they perform any management duties during the time the unit was vacant?

Since you purchased the insurance to cover your losses, that is what the insurance should do. The PM could have purchased insurance to cover their losses. 

What caused the loss of rent? If the building was uninhabitable I’d lean more towards no. The PM wouldn’t have gotten paid if you didn’t have insurance so they should benefit because you bought insurance. 

If you took what they would get paid and removed the deductible and maybe the premium would there be anything left? If so I might be tempted to give them that. 

@Greg M.

Thank you so much for the reply! Our contract with PM says they are entitled to management fee should a loss of rent is reimbursed. However, we have a high deductible which left us with 3k during the time it can't be rented out, yet they want their percentage for the full coverage.

My opinion is they wouldn't get anything if we didn't pay deductible, in which case we split 3k leftover from reimbursement minus deductible.

@Bill Brandt

Thank you so much for your reply! Loss was due to a water leak, and drying and repair had to be done right away. PM coordinated with the repair crew because we're a few hours away from our rental. They also coordinated with cancelation and relocation due to this damage.

I think they should get some amount for the work they did but I feel that they're asking too much for full percent from the total rent reimbursement, which again, would not be there if we didn't pay the deductible in the first place.

The fairest off the top of the head I can come up with is they pay the same percent of the premium and the deductible that they hope to get from the collected rent. 

If they refuse to compromise at all I MIgHT be persuaded not to make the claim at all. Saying it will cause my insurance rates to go up in the future. Let them know that’s your plan if you can’t come to a compromise on the management percent. 

I assume you love the past performance of this PM or you’d be looking for a replacement already. 

@Bill Brandt

Hi Bill, thanks for your input! Because of the urgency and cost of water damage issues, we've already made the claim so insurance said to me "it's up to you and your manager, our policy contract is between us and you the home owners". And yes, other than the nickle and dime thing they do to us, we're happy with their work.

These things don't happen very often and they're really not losing much since they have a number of homes to manage and make money from, as opposed to us, paying the deductible and all (and recent washer dryer, fridge upgrade). I took 2 days off of work just to talk with the insurance company and figure things out.

I did mention to PM that they could be paying a part of the premium and deductible in order to be granted the loss percentage which of course they disagree... I'm planning on writing a post on this after our claim is finished so that everyone on the forum can learn from our hardship, less effort and time wasted if it brings any lesson to anyone. Thank you a lot!

@Yue Lehman sounds like you signed a contract that says they are entitled to it.  In your post a few up where you mentioned that you went on to say ...however.  No, there is no however.  You signed a contract so the answer to your question is yes, they are 100% entitled to it. 

As to the other topic, is it fair or not, well, doesn't matter, you signed a contract.  If you are expecting them to do any work for you during this time then yes, it is also 100% fair.  Can't expect people to work for free.  If they are not doing a single thing, like nothing and you are handling all repairs, lawn, utilities could be argued it isn't fair.  But a bit late for that as you signed the agreement. 

If a client suggested to me that we should pay part of their insurance premium or their deductible I would have a conversation with them and if they insisted simply drop them as a client.  That is an outrageous suggestion.  

Look, I get you are not happy with the situation you are in but you did sign the agreement.  Talk to them and if you are good client (or was before this whole thing became a thing) maybe they will work with you.  If not, then maybe it is time to part ways and you find another manager.  

Just remember, grass isn't always greener.  If you are a great client and they are a great manager I am sure you two can compromise.  But if they are looking for the straw that breaks their back and the agreement with you, this might be it and same for you.  If you are not happy with them this might be the last straw for you and you can find another company.  

This event might bring you too closer or tear you apart, either way, hope it works out for you.  Insurance losses are never easy for either party.  

@Scott M.

Thank you so much for your input. They have been great in the past and am sure will be in the future for the management work. It just seems that the contract language really puts them in a safe spot whereas us the homeowners are taking all of the risk. High deductible or low deductible, which comes with low premium or high premium, all are put on our shoulders while the PM is entitled to the reimbursement. Guess the world isn't fair.

Any suggestions regarding possibly revising the contract for the future? I understand that PM usually have their standard contract with owners, but are they subject to revision?

@Yue Lehman   And after the PM spends years caring for the property and the tenants I suppose you will give them a portion of your profit on the sale right?   Or is that part of the world not fair either?

Fair seems to be an important word to you.  So, be fair to them and live up to your end of the agreement and pay them the what, $300 we are talking about?  I think you said you somewhere you were getting 3K from the insurance co for loss of rents and managers generally get around 10% so all of this is over ~$300?

And yes, you, the property owner are the ones taking the risk.  This is after all your investment property.  Why would anyone else take risk on YOUR investment?  The work for you.  They are not your investment partners are they?  

As for how to move forward, you left out a very important answer, are they working for you during this time?  Or are you handling everything?

If you say they are working for you and you expect them to work for free then I would suggest you drop it, pay them and move on.  If they are doing nothing and you hare handling everything then have a conversation with them and see if you can come to an agreement somewhere in the middle.  But I would in no way use the arguments you are using here as they are preposterous. 

Now, I will say that their cut should be based on cash you actually get.  So if you are getting 3K, they should get a cut of that, no more.

As for moving forward you can suggest they cut that part out and see what they say and negotiate it.  This is not likely to happen again so prob. not a big risk for you either way.  

@Scott M.

I wouldn't fuss about $300... and I'm not trying to not pay them at all because I think they did a good job coordinating everything.

They're not an investor partner so no they do not get any share at time of sale. What does not seem fair to me is that we, the home owners pay for a deductible when something happens in order to file a claim, the PM does not pay anything but are entitled to the loss reimbursement.

They take a high percentage (over 20%) as it is a short term rental. And like I said, we like their work and they are good at what they do, we've been happy with them otherwise and do think they deserve a payout as well, just not agreeing with the amount. I think they could share a portion of the deductible but in your previous response you disagree which also makes sense. They have been actively managing throughout this time.

By now I've learned to pay and move on, and have really good insurance and understand the contract.

Thanks again for your input. I appreciate different opinions and points of view.