Talking to property management companies. do they get to keep late fees?

[Anna Sam]

Hi I am talking to property management companies to manage a property I own in central florida. 

One of them had a clause in their agreement that they get to keep the late fees. 

I thought that was pretty weird since they are in the business of collecting rent. wouldnt it be like rewarding for goal not achieved?

Hence was wondering. 

If you have any property management companies whom you could refer kindly share. 

kindly share your thoughts/suggestions. Thanks

[Richard F.]

Aloha,

It is more a matter of what is locally customary with other PM's. We have always paid the late fee to the Owner, although we do keep the % of income from it per our contract. Same goes for any Laundry income received...

[Clay Lehman]

It depends on the property management company.  I would ask what they do to earn that fee.  It is also important to look at their whole population of fees side by side.  I heard someone say, good property management isn’t cheap and cheap property management isn’t good.  Full disclosure, I am a property manager.  Happy to discuss in more detail directly.

In terms of it being weird that they retain the fee because they are in the business of collecting rent, there is a great deal of work that goes into pursuing late rent.  As a property owner, you want someone aggressively pursuing your rent.  That typically takes staff and infrastructure.  You want to be careful assuming that all PMs respond to late rent the same way.  So, PMs that retain the late fee should be doing work to earn that fee, beyond the typical rent collection efforts.

[Tyler Gibson]

Quote from @Anna Sam:

Hi I am talking to property management companies to manage a property I own in central florida. 

One of them had a clause in their agreement that they get to keep the late fees. 

I thought that was pretty weird since they are in the business of collecting rent. wouldnt it be like rewarding for goal not achieved?

Hence was wondering. 

If you have any property management companies whom you could refer kindly share. 

kindly share your thoughts/suggestions. Thanks

 Central Florida is a pretty broad description where exactly in Central FLorida is the property? I work with a lot of different property managers in Central Florida but depending on your specific location I may have a suggestion for you.

[Drew Sygit]

@Anna Sam have you considered you're being myopic about late fees?

Reward for goal not achieved? Life happens and there are so many reasons tenants don't pay on time that no screening process will filter out. 

The hope of every PMC is that tenants pay on time, there's little to no maintenance, and tenants stay forever. Less problems means more profit!

Chasing late paying and nonpaying tenants is NOT profitable for PMC's. So, keeping part or all of late fees helps offset the extra costs.

[Phillip Austin]

Late fee structures will vary from company to company. Most reputable companies are either going to split the fees 50/50 or take 100% of the late fees and it's for the reasons @Clay Lehman mentioned. Tracking down a delinquent tenant takes time, money and resources. 

Furthermore, the larger the management company, the more likely they are to keep 100% of the fees. They have hundreds, maybe thousands of properties and tenants they are tracking down each month which may include multiple calls, emails and possibly posting notices at properties. This becomes a revenue stream for the company that could produce thousands of dollars each year.

[Will Fraser]

@Anna Sam, howdy!

I'll not jump on the dogpile here, as most good points have already been raised.

I will contend with the idea that property managers are rent collectors.  Were that the case then we should all be SOL thanks to the glorious ACH transfer.

In reality, that is a small piece of the role, and it fits within the total package of stewardship, which is perhaps a better and more wholistic thing to expect of your manager.