PM charge late fee but no reasonable reason

PM charge late fee but no reasonable reason

Member since 2020 · 37 posts · 11 votes

After pm forwarded my case (tenant did not pay rent) to collection agency, the judgement claim balance is $7,569.33. The debtor will make $200 monthly payments until paid off.

1/3 of the $200 goes to the agency, and 2/3 goes to my account and within this 10% of 2/3 goes to PM as service fee. Simple and fair.

First month received that $200 and was distributed as above, Everybody happy.

Second month received $200 on time and PM break down that amount and claim there is $45 late fee, and all that $45 goes to PM account. Means I received less then I expected. So, I sent email asking PM why there is late fee existing? And they replied:

"Hi ,the total judgement not only includes physical damages that you had to pay initially to secure another tenant but also includes outstanding rent balance if any and late fees if any and any other charges that may have been charged against the previous tenant. The $45 is most likely a late fee.

So, as the funds are received from the Attorney, they are applied to all charges in arrears. Eventually you will receive funds less the 1/3 collection fee from the Attorney forwarded to you."

After sent them third email and finally got reply but that did not answer my question. Any idea what PM trying to do? Why not just following the distribution of the first month?

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  • Adam BartomeoBusiness Member
    Real Estate Broker · Cape Coral, FL · Member since 2015 · 2k+ posts · 1k+ votes
    2y

    It sounds like your PM gets the full amount of the late fees, unethical from my standpoint but it is common. It also sounds like they want "their" fees paid ahead of yours. Again, from my standpoint unethical but still common. They are probably aware that the tenant will stop paying at some point in the next 2+ years and they want to recoup their money ASAP. You will have to look through your PMA to get a better understanding how this works for your scenario.

  • Member since 2020 · 37 posts · 11 votes
    2y

    @Adam Bartomeo thank you for your information. The agreement didn't mention about how to handling the late fee that helped by collection agency. Usually, PM take 10% of the late fee in normal circumstance. 

    One thing I don't understand is the late fee is belong to landlord and PM take portion of it as service fee. PM is helping landlord collecting payment from tenant ideally. How could PM take the whole cake??

    I just received second email from PM saying:

    "Hi , looking at the account , there are late fees for July and August. These were some of the existing unpaid charges submitted to the Attorney and before the Judgement took place. Funds collected as the result of the collection judgement are applied beginning with the charges in arrears. Late fees are flat fee charges while the 10% will be against any unpaid rental amounts.

    It appears that the actual unpaid rent has been satisfied now, this is why those funds collected were applied to the late fees next. Soon the funds collected will be paid to you less, the 1/3 Attorney fee, without the flat fees or the 10%."


    After took some time of understanding this email. My question is why there were some existing unpaid charge before judgement took place? The judgement claim balance is $7,569.33 then focus on this amount, should not mention any more number. Keep it simple....

  • Member since 2020 · 37 posts · 11 votes
    2y
    Quote from @Adam Bartomeo:

    It sounds like your PM gets the full amount of the late fees, unethical from my standpoint but it is common. It also sounds like they want "their" fees paid ahead of yours. Again, from my standpoint unethical but still common. They are probably aware that the tenant will stop paying at some point in the next 2+ years and they want to recoup their money ASAP. You will have to look through your PMA to get a better understanding how this works for your scenario.

    "It also sounds like they want "their" fees paid ahead of yours." this is where I don't agree. This is not their fee, PM is just helping landlord collecting payment. Why the whole late fee goes into PM's pocket? Should just take 10% to be fair. In fact, there should have no such late fee existing after judgment decision made.


  • Adam BartomeoBusiness Member
    Real Estate Broker · Cape Coral, FL · Member since 2015 · 2k+ posts · 1k+ votes
    2y

    @Peter Sik

    The first step would be to read your agreement to understand what the actual charges are. The PM keeping the entire late fee is a common tactic in our industry and part of the reason PM's get a bad rap. I review all potential charges with my owners, and we only collect the commission percentage on late fees. Being fair has nothing to do with what is going on here... it will all come down to the agreement that you and the PM signed.

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