Who keeps late fees?

By
Real Estate Services 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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late fees
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Anonymous #10
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

 

November 13, 2012 04:01 PM
Rainmaker
251,166
Robert Machado
CPM MPM - Property Manager and Property Management - Sacramento Area
HomePointe Property Management, CRMC

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. 

November 14, 2012 09:12 AM
Anonymous #12
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

November 14, 2012 01:14 PM
Rainmaker
251,166
Robert Machado
CPM MPM - Property Manager and Property Management - Sacramento Area
HomePointe Property Management, CRMC

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!

November 15, 2012 11:07 AM
Anonymous #14
Anonymous
edu manzano

"Now the subject has changed to security deposits."

 

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

November 16, 2012 11:25 PM
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Rainmaker
251,166

Robert Machado

CPM MPM - Property Manager and Property Management - Sacramento Area
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