Letting agencies and property managers generally make their revenue from fees charged to landlords (and tenants) for services such as rent collection and tenancy setup.
A property management fee may be applied each time rental income is collected, or even each rental period when it is applied, and is charged to the actual property, not the landlord. However, the result is the same - it appears on the landlord's account for payment, although it is typically just deducted from rental income.
Management fees are charged when rent is received in the following ways:
- Payment of rent from the tenant to the agency
- Allocation of benefit payment received from a local authority to a tenancy
- Payments made directly from the tenant to the landlord
Define a management fee
The default management fee is defined against the property, and will then be applied to each tenancy which is set up in that property.
When adding a rental property a management fee can be specified in the Management Details section of the form. The nature and value of the fee will depend on the agency's management fee configuration. Normally this is applied as a percentage of rent collected (default is 10%), with the fee due immediately. The fee has an associated effective date, but the initial fee will apply for all dates unless a later one is specified.
Modify the management fee
If the management fee needs to be modified then it can be updated via Property > Management > Management Fees. The management fee may vary over time, and a schedule of fees may be set up to apply different rates as the tenancy progresses. A management fee may also be removed if it has been defined incorrectly. All of this can be done from the property management fees page above.
When adding a new fee, or modifying an existing one, you must specify the date from which the new fee rate will take effect. This date will be used to calculate the fee due on the rental income on the date it is received, and is not related to the period to which the rent is applied for.
Be careful though! In all cases, if the management fee value or rate is changed the all affected management fees which were charged based on that schedule will have to be recalculated and reapplied. If no payments have been made out the landlord and those fees have not yet been paid then this may be completely transparent to the landlord, but if these fees have already been paid (either partially or in full) then credits or additional correctional fees may be applied to the landlord's account which may be confusing. So, take care when making retrospective changes to management fee rates.