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Residential Property Management/Homeowner and Property Management dispute


QUESTION: A major real estate chain was my property manager for a single family house I own and was renting out in Virginia. My tenants purchased a house 3 months prior to the lease was to expire. As the owner, I offered the tenants a $500 discount off the $1700 month rent to buy out their last 3 months (April-June)of the lease. This was defined in an addendum written by the realtor as an "early termination fee" of $3600. Also written in the addendum was the tenant would like all or the remainder of their security deposit, $1700, sent to me to cover the $3600.

My agreement between myself and the real estate company states that my agreement with them to represent me "is terminated by either party with 30 days written notice to the other, or upon the Owner's reoccupancy of the Property." We regained occupancy of the house on March 31. There is also a clause in my agreement with the real estate company that states, "Charge a fee of N/A for the cost of any non-management services provided."

I informed the agent that my tenants would mail me $1900, since I had no legal ties to their agency after March 31st, and the other $1700 would come from the security deposit. The agent did not dispute or redirect me to have my tenant mail all checks through her company. When I received the last check it was deducted $246. I was told that they charged me 3 months of 6% of the $3600 and not sure why they took and additional $40. They called it a "what if" charge. What if my tenants never sent the final $1900 then I'd want them to go after them legally.

My contract with them says they can "charge a management fee of 6% of all gross rentals collected by the agent." They only collected $1700 and charged me 6% of $3600.

Can they charge me a management fee for months they won't be managing? Can they charge a management fee for money they think they will be getting? Can they charge me a management fee on an "early termination fee" that is not defined as rent?

ANSWER: Hello Christine,

I am glad to help, if I can. I must say that I am not an Attorney and cannot give legal advice on the legality of a contract. I also am not licensed in your State of Virginia, so of course I am not aware of what your laws are. That being said, I would have to read your contract with the property manager to see what all the terms are...naturally, or how else could I form an objective opinion?

If the money went straight to you, then they would not have been able to deduct any fee. Once a property management company receives any funds that are associated with or in lieu of rent, they are most often considered "rent" monies...since it is a settlement of rents due. Most people do not realize what value a property manager brings to the table until they find out all that has been done on their behalf. I have 10 employees, with top employees drawing $4,000 a month in wages plus bonuses and an expensive full benefits is not cheap to run a business like this. So when money come through our books, it goes to our collections person first, then to our assistant accountant who logs the funds into the record online using "Rent Manager" software (which costs us $800 a month). Then the funds are processed by pulling our fee out and any other outstanding debt due us for payment of utilities, cleaning etc., prior to transferring funds to our PayLease or Payment Services system to pay owners.

NOBODY wants to pay for something that they do not understand, or do not feel was justified. We understand that, we also have felt the same is a normal reaction when a bill comes in that is unexpected. I do not know what the full terms and conditions of your contract is with the PM company, of course, however I hope this has helped you to see that we all charge fees when we have to process funds which are in lieu of rent.

This is Rent Week, from the 1st to the 8th of every money. Today is Saturday the 3rd of May and I have three of my accounting staff in our office today, just so we can process our owners funds as fast as possible to get them paid. We understand that they have a mortgage to pay.

I would ask that you try to talk with your former PM company and see what they can tell you.

As for fees? The average fee nationwide is 10% of a months rent for top notch property managers, although there are some smaller and more hungry companies that will charge less.... did you say 6% ..?? Really nice for a property owner, just not sure how such a low fee could allow them to give  full service to the owner. We found out over 20 years ago that most owners who get a discounted fee from a new (or hungry) PM company will expect the same level of service.

Best regards,

Donald J. Leske II & Emiliana R. Leske
Managing Broker / Accounts Manager

BBB A+ Rated
10909 Portland Ave. Suite-L, Tacoma WA 98445
Office: (253) 531-1010 | Fax: (253) 531-5358 | Cell: (253) 241-6695 & - Rentals & Property Management

---------- FOLLOW-UP ----------

QUESTION: Thank you for your response. It is very helpful.

What is your opinion or experience with charging your fee for money you have not yet collected?

The company only received $1700 for this payment and charged me 6% of $3600 and then an extra $40. That seems shady to me. When I thought I was going to get $1700 I received a check for $1454.

For my scenario, I received the other $1900 after the final inspection from the tenant directly. But what if I hadn't and my tenants failed to ever pay me the other $1900, the company still took their 6% without collecting the money.

Thanks again!

Hello Christine,

Yes I must agree. We NEVER charge a fee for money not collected. It happens sometimes that a tenant will pay an owner directly, which is unfortunate for us since we cannot feel justified in charging our fee. It is a service we provide and our only source of income is for providing that service. Similar to an Attorney, we have a fiduciary duty to provide these services and to look out for the best interest of our clients, the property owners, whereas tenants are considered as customers not clients.... and they come and go, yet we are always honest with them also and show a good level of concern and care.

In a nutshell, we do not charge a fee unless we have performed a service and collected funds on behalf of the owner. They may feel slighted or cheated of their fee, but ....really? They should not have charged you for work that they did not do IMHO. [In my humble opinion.]

I would like to see you write them a letter, with a cc/copy note at the bottom where they will see it to; BBB, Chamber of Commerce; ATTY General of your state; Department of Licensing if they are licensed and whomever else that they do not want involved in this matter. Tell them  that you think they have charged you for services that they did not render and ask for a specific refund, to avoid the cc/copies being mailed out. You just are asking for fair treatment.

Kind regards,

Don Sr.

Donald J. Leske II & Emiliana R. Leske
Managing Broker / Accounts Manager

BBB A+ Rated
10909 Portland Ave. Suite-L, Tacoma WA 98445
Office: (253) 531-1010 | Fax: (253) 531-5358 | Cell: (253) 241-6695 & - Rentals & Property Management

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Donald J. Leske II


Advocate for Landlord & Tenant Rights. Based in Washington State as a Licensed Real Estate Broker and Property Manager. I am a Landlord but I am not a Lawyer. Ask any question dealing with the rental of residential properties, including; 1. Evictions. 2. Maintenance & repair issues. 3. How to set a fair rental price. 4. When to hire a property manager. 5. Selling and how to determine value. 6. Basic tax questions and Legal issues ok, but most will be referred to a professional in that field.


I have 30 years experience in Property Management with about 560 clients, plus I own my own Real Estate Brokerage ( with expanded experience & training in Short Sales, Foreclosure negotiations and rental property management. I write an informal online Real Estate News Magazine and am a member of NARPM, National Association of Residential Property Managers and have been quoted by News Agencies.


Rated and reviewed Editorials, Advice and short Articles at Trulia, Active Rain and All Experts online. Advice Contributor contributor
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ABR Certified, State of Washington Licensed Agent & Broker. Past member of BBB, Chamber of Commerce and Board of Realtors.

Awards and Honors
2003, 2004, 2005, 2006 Presidents Gold Award for high achievement, John L. Scott Realty. - "Shining Star Award" 2006 - 03/04/05/06 All Star of the Year Award for excellence.

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