Who keeps late fees?

By
Services for Real Estate Pros with HomePointe Property Management, CRMC

Property management companies around the country have different policies on who keeps late fees paid by the tenant.  Late fees are charged to tenants when they pay their rent late.  Who keeps the collected late fees is a contractual matter between the owner and their property manager.  Most management companies have a standard policy in their contract on this subject.

Some property management companies place collected late fees into the owners account and keep nothing. 

Some companies add the total late fees into the amount of total collections and keep a percentage of the late fees at the same rate they charge the owner for rent collected. 

Some companies keep all the late fees collected as a cost of handling the late payment on behalf of the owner.

Finally, some companies do a split.  The most common split is to give the owner 1/2 of the late fees collected and 1/2 goes to the management company for the work they do to collect the rent and the late fee.

At HomePointe, we split the late fees collected 50/50 with our clients.  We recognize that the late fees collected represent the added risk of having the late paying tenant and for fronting the funds to get bills paid without the tenant.  Our company also takes on an additional burdon of collecting the late rent and late fees includling a monthly letter to the resident that carries a balance, 3 Day Notices to Pay Rent, extra communication, and possibly extra reports to our client when the rent comes in late.

There is no right or wrong here.  It is up to the client to look at the entire package of services and fees and decide what works for them.

Posted by

Robert A. Machado, CPM, MPM

HomePointe Property Management

Sacramento, Yolo, El Dorado, and Placer Counties

We manage residential and commercial property.

916-429-1205 x 105

rmachado@HomePointe.com

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Rainer
160,380
Dwayne West
Atlanta Real Estate - Canton, GA
Canton Georgia Real Estate
I have always been told it is a split 50/50 from other landlords I know of in North Georgia and the Atlanta area.
Mar 15, 2008 11:26 PM #1
Rainmaker
174,766
Mark A. Moore
RE/MAX Alliance - REMAX - Virginia Beach, VA
ABR - Virginia Beach Real Estate

Hi Robert, 

My company's policy it to keep late fees.  I recently had a client argue over this.  They said a previous company gave the owner the late fees.  That property was in a bad area and they often received late fees, they were a money maker for them.

The property I manage for them (a triplex) had one late fee in 2.5 years.  This happened to be the owner that I discounted my commissions for.  I told them I would give them any late fees but go up to 10% commissions at the next renewal.

I think 50/50 is the best idea.  I am fortunate as I do not have many late payments. 

 -Mark

Mar 19, 2008 08:04 AM #2
Rainmaker
251,847
Robert Machado
HomePointe Property Management, CRMC - Sacramento, CA
CPM MPM - Property Manager and Property Management - Sacramento Area
Dwayne and Mark:  I agree with the 50/50, it seems to keep everyone happy.
Mar 19, 2008 06:49 PM #3
Anonymous
Jeff

I recently found that my property management company not only keeps late fees, but if late fees are not paid by tenant, they withhold rent due me.  For instance, if the rent is $550 and the tenant pays the $550 late with late fees of $30 ... but does not pay the late fee of $30, the property mgmt. company pays me $520 for that months rent and say they are trying to collect the late fees and will give me the $30 after they collect the fees.  So, in effect, I am paying the tenant late fees.  I discussed it at length with the property manager and they are unwilling to budge on the agreement.  Does anyone else think this is ridiculous?

Mar 29, 2011 12:32 AM #4
Rainmaker
251,847
Robert Machado
HomePointe Property Management, CRMC - Sacramento, CA
CPM MPM - Property Manager and Property Management - Sacramento Area

That is not our policy.  Everything the management company does is by agreement with their client.  I would consider changing companies.

Apr 04, 2011 10:08 PM #5
Anonymous
Dave

Having the property management keep the late fees would be justified if the owner is paid by the property management on a fixed schedule instead of waiting for the tenant to make payment.

Dec 05, 2011 12:02 PM #6
Rainmaker
251,847
Robert Machado
HomePointe Property Management, CRMC - Sacramento, CA
CPM MPM - Property Manager and Property Management - Sacramento Area

Dave,

The property management company is not the rent payer.  How can they guarantee rent payments to the owner if the tenant does not pay?  

The point of the late fee sharing is to cover the extra work and extra risk, this seems like a shared thing.

Dec 08, 2011 11:52 AM #7
Anonymous
edu manzano

My property manager is charging $55 for late fees. They already keep $300 once giving me the balance which was not enough to cover the rent due to me for that particular month. Now, they evicted my tenants who has unpaid rent of two months. The property manager said that there is about $600 of unpaid late fees. The tenants has security deposits of $2100 which the property manager holds. 

I have a suspicion that the property manager will deduct the unpaid management fees(that's okay), the cleaning and repairs(that's okay) if any AND the unpaid late fees(not okay).  This will in effect,  that I will be paying the late fees because the tenants were always late in paying rents to my house. Is it legal? Obviously, this is a lopsided rule to their advantage. I don't mind if they keep ALL the late fees if I am paid all the rents.

Nov 12, 2012 01:50 PM #8
Rainmaker
251,847
Robert Machado
HomePointe Property Management, CRMC - Sacramento, CA
CPM MPM - Property Manager and Property Management - Sacramento Area

I agree with you on that one.  First you get paid, and if anything is left the manager can take the late fees.  But, you should review your agreement with them, that is the ruling document for both of you.

Nov 13, 2012 10:54 AM #9
Anonymous
edu manazno

Wow! Thank you for the quick response.

Anyway, the lease agreement between the tenants and the manager includes the $55 late fees provision. That's fine. It's between them.

On the other hand, our 'management agreement" provides that, "if the lease contains late fees charge, AGENT(property manager) SHALL BE ENTITLED to such fees as additional compensation for the additional time and expenses of collecting the delinquent rental payment. AGENT shall keep any fees received  from residents for credit check charges. - copied word for word from our agreement

I'm looking for a specific wordings that I will be penalized and ultimately be responsible because the rents DUE TO ME were not paid on time. Of course, it's going to be weird and add insult to injury, if there is any. They were the one who screened these tenants and okayed it for my approval. I don't even know how those tenants look like, if white, black, etc.

BTW, do you know what California department or agency which I can call to get more information about property management rules/laws? I know yours is an opinion only but at least I found an ally.

Thank you, Robert

 

Nov 13, 2012 04:01 PM #10
Rainmaker
251,847
Robert Machado
HomePointe Property Management, CRMC - Sacramento, CA
CPM MPM - Property Manager and Property Management - Sacramento Area

Edu,

When a property manager places a tenant, they are not responsible for what that tenant does.  You chose the property manager and paid them per your agreement.  But that does not guarantee that the tenant will pay or follow the rules.  Landlording is a risky business and there will be good and bad things happening all the time.  You took on the risk, the manager is simply working for you under the conditions of your agreement. 

The California Dept of Real Estate is the governing body for the industry in California. 

Nov 14, 2012 09:12 AM #11
Anonymous
edu manzano

So, in your "opinion", the property manager can appropriately deduct from security deposit and keep the amount of late fees they charged the tenants because the latter was always late paying the rent due to me, based on that provision outlined in my response which says "they shall be entitled . . . ?" Your answer will be my basis if I still have to call that CA department.  Thanks again. - Edu

Nov 14, 2012 01:14 PM #12
Rainmaker
251,847
Robert Machado
HomePointe Property Management, CRMC - Sacramento, CA
CPM MPM - Property Manager and Property Management - Sacramento Area

Now the subject has changed to security deposits.  With tenant approval you could possibly use the security deposit for late fees.  If the tenant disagreed, a judge may say that the security deposit can only be used for rent, damages, and cleaning. 

I am not  attorney and do not have all the facts or sides to this story.  I think you better talk to your attorney and get some advice based on all of the facts.  Good luck!

Nov 15, 2012 11:07 AM #13
Anonymous
edu manzano

"Now the subject has changed to security deposits."

 

I did not. This is the gist of my first post.

Nov 16, 2012 11:25 PM #14
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Robert Machado

CPM MPM - Property Manager and Property Management - Sacramento Area
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