My property manager has charged me management fee for an insurance claim

[saiman]

Hi all,

Bit of a left field one...

I have just noticed my previous property manager has charged me their management fee (percentage of rent) for loss of rent insurance claim they received from EBM that they paid into my account. I have also noticed they have charged me the same rental management fee for depositing bond (due to loss of rent) into my account.

Is this standard practice or is something dodgy going on here???

 

[INVSTOR]

Some PM's (a minority!!) charge a management fee for ALL income including water usage reimbursement, court cost reimbursement, etc. It sounds like yours could be one.

 

[yahoo]

Yes standard here in WA. Check your contract.

 

[D.T.]

Thats a bit harsh. Check what contract says and raise it with them if you didnt agree to that.

 

[handyandy]

Ours charge for anything that is called rent.

So if bond is covering rent then they collect a commission.

Cheers

 

[DaveM]

Sounds pretty standard. If the tenant had paid rent and you had not had to claim on insurance then they would have collected their management fee on that rent... so rental claims via insurance are not really any different.

 

[Kinnon Bell]

I'm assuming here because I don't know the actual rules but if you lodged a claim for loss of rent because you weren't getting paid rent then the PM would not have been getting paid as well because there was nothing for them to take their fees out of? So then you were paid the claim covering X amount of weeks rent so then the PM takes their fees owed to them?

Or am I completely off the mark?

 

[brettc]

Hi all,

Bit of a left field one...

I have just noticed my previous property manager has charged me their management fee (percentage of rent) for loss of rent insurance claim they received from EBM that they paid into my account. I have also noticed they have charged me the same rental management fee for depositing bond (due to loss of rent) into my account.

Is this standard practice or is something dodgy going on here???

It's certainly what I would expect as normal. As others have said, the recovery of the loss of rent is no different to the rent that would have been paid to you had the tenant paid it themselves. In fact if you were not liable for their management fee on this it would be appropriate for the Insurer to deduct the fee you would normally pay from the claim, and only pay you the net amount. You should never "profit" from an insurance claim by receiving more than you normally would, you should only recover your loss, which is the net amount.

 

[DavidMc]

It's certainly what I would expect as normal. As others have said, the recovery of the loss of rent is no different to the rent that would have been paid to you had the tenant paid it themselves. In fact if you were not liable for their management fee on this it would be appropriate for the Insurer to deduct the fee you would normally pay from the claim, and only pay you the net amount. You should never "profit" from an insurance claim by receiving more than you normally would, you should only recover your loss, which is the net amount.

Initially does sound dodgy but Brett's explanation makes sense to me.

 

[saiman]

It's certainly what I would expect as normal. As others have said, the recovery of the loss of rent is no different to the rent that would have been paid to you had the tenant paid it themselves. In fact if you were not liable for their management fee on this it would be appropriate for the Insurer to deduct the fee you would normally pay from the claim, and only pay you the net amount. You should never "profit" from an insurance claim by receiving more than you normally would, you should only recover your loss, which is the net amount.

My other property managers have never charged me for claims so I thought I'd question it. My intention was never to "profit" from rental arrears claims, however, I will now think twice for future incidents whether I should lodge the claim myself or through a property manager.

There was a small malicious damage component as a part of my claim which was lumped as "rent" on my statements and percentage charged accordingly though...

 

[DavidMc]

There was a small malicious damage component as a part of my claim which was lumped as "rent" on my statements and percentage charged accordingly though...

Now that is dodgy - I'd ask them to remove it.

 

[mattysavager]

I used to charge management fees on insurance claim proceeds, even if the money was not only for rent.

In reality, the agent would have done additional work, outside of the standard management of the property, in getting the claim submitted. I presume the agent submitted the claim and you didn't do this directly?

If the agent has done work, submitting the claim, organising repairs for damages as part of the claim etc, then they would be entitled to a commission on the proceeds, in my opinion.

Different story if the agency is collecting a commission from the insurer, by acting as their authorised representative, then the commission should just be on the rental component - If the agency organised the policy for you, then they are likely receiving a commission from the insurer.

Matt

 

[Scott No Mates]

Different story if the agency is collecting a commission from the insurer, by acting as their authorised representative, then the commission should just be on the rental component - If the agency organised the policy for you, then they are likely receiving a commission from the insurer.

Matt

The commission on selling the policy has no relationship with the policy holder's claims. The insurance company pays someone to sell their policies, end of transaction - you do the same if you go through a broker or if your strata manager arranges insurance for a block of flats etc.

As for charging a % on a claim, lost rent recovery is a given. Claims for damage, where the lease provides that it becomes a debt and recoverable as rent then comms are payable, if the debt doesn't get defined as rental and that there are no other terms in the management agreement for sundry charges or project management etc I would be seeking clarification.

 

[lee.omare.com.a]

It's likely your real estate agent is legally entitled to commission from the claim of lost rent as it is "rent". The real estate agent is being pretty cheeky though.
I'd suggest just asking for it back as a gesture of goodwill considering it's likely the agent found and approved the problematic tenant. That being said it takes a reasonable amount of effort on the agent behave to collect on the claim. It's your call. Cheers

 

[geoffw]

It might be argued that if the property manager had done a better job the insurance claim woul not have been needed- or at minimum, might not have been so big.

 

[Scott No Mates]

I'd suggest just asking for it back as a gesture of goodwill considering it's likely the agent found and approved the problematic tenant.

It's not the agent who approved the tenant, they recommend based upon reference checks and the owner approves. There is no liability on the agent unless they failed to check out the tenants.

 

[Joe D]

It's not the agent who approved the tenant, they recommend based upon reference checks and the owner approves. There is no liability on the agent unless they failed to check out the tenants.

Give me a break! Talk about slopey shoulders and no responsibility ..........

The Owner might have to approve but the PM has done all the checks and made the recommendations. If the tenancy doesn't work out then fair enough, 5hit happens, but the PM has to accept some responsibility.

 

[mattysavager]

The commission on selling the policy has no relationship with the policy holder's claims. The insurance company pays someone to sell their policies, end of transaction

My experience is different. I have been an 'authorised rep' agent for Terri Scheer, and earned a commission. I would lodge claims with Terri Scheer on behalf of clients, and not charge them for my time, as I had earned my commission from TS, and wanted to continue that relationship. If I was asked to submit a claim to an insurer that I hadn't sold - I would charge for time, as I did not have a relationship with that insurer.

I'm not saying that this is how the OP's management company operates, but it's something to consider.

Matt

 

[mattysavager]

If the tenancy doesn't work out then fair enough, 5hit happens, but the PM has to accept some responsibility.

In many cases, the PM takes the blame for things that they cannot control.

Investors need to keep in mind that (maybe optimistically?) no PM would recommend placing a bad tenant in a property. It becomes more work for the agent, and often reduces the agents income, if the Owner ends up out of pocket.

I also agree with Scott No Mates that Owners approve the tenants. I couldn't tell you the number of times I had prejudiced clients who refused applicants because they were foreign, or students, or had a baby, or were gay, or had a cat - instead choosing an applicant purely because they were married and middle-aged (a demographic the client related to).

Most of the tenancies that turned pear shaped under my watch were with people who were married and middle-aged.

Negligence aside, I think they 'slopey shoulders' comment is a bit unfair.

Matt

 

[D.T.]

Most of the tenancies that turned pear shaped under my watch were with people who were married and middle-aged.

On a percentage basis? Isnt that because they're the most common?