PM collects utilities & takes a cut

[Lois S.]

We bought a small multi-family bldg out of town, & have a property manager that we've used for other properties.  Some tenants are holdovers from the previous owner. There are some small utility charges we pay in each unit that the tenants are billed for. The amounts are not included in the rent amount stated on their leases.  Also, there's a coin-op laundry room that generates a small amount of income. 

I just realized that the PM is including these utility charges & laundry income in the "rents" that are used to calculate their management fee. The management agreement states that the fee is XX % of RENTS collected.  Clearly, reimbursement for utilities isn't really income. it's a wash.

Before I call the propty mgr, I wanted to check on this:

Is there a standard practice among property managers regarding taking a % of non-rent money collected?

Thanks

[Will Fraser]

Howdy @Lois S., this is indeed a dicey situation.  IF the utility amounts are direct reimbursements for the utility payments (i.e. the $46.57 gas bill is billed to the tenant and collected along with rent) then it seems clear to me that this would not be included under the management fee, but if there are any value-add components to it then it's less clear.  For example:  if the PM is dealing with the coin op laundry or doing any value-adding on the rent collection or brokering side then there may be a case for this being subject to the management fee, but the most prudent and long-term best next step would be to have a clarifying conversation with the PM about it.  They may be able to explain it excellently or they may not even realize it's happening (due to auto-disbursement policies in their PM software, etc)