Are you charging the correct fees in accordance with your management agreement?
I have had the privilege to go into the behind the scenes of thousands of businesses throughout my career. The number of agencies which have incorrectly charged management fees or not implemented and charged the additional fees as per their management agreement is astounding.
I have been into businesses where I find they have suddenly stopped charging a fee i.e. administration fees because the property manager doesn’t believe in it or has changed software or something has happened (a wrong box was ticked) and the business owner and/or senior property manager has not picked up on this.
I know business owners are time poor and I completely understand that you are busy running your business, looking after employees, your clients, your customers, your finances and your personal life as well. It is difficult to be on top of every single fee that you are meant to charge. Employees are also time poor and there is a heavy reliance that the software will just charge the fees, but this will come down to user input.
Having a two-check system with new managements is a great way to ensure that the fees in the management agreement are chargeable in the property management software.
From time to time, it is important to check that you are still charging the correct fees and that if any fees differ, such as a management fee reduction for a period have been corrected i.e. the agency has a promotional deal of 0% commission rate for 3 months but hasn’t changed this back to the correct payable commission rate after that period.
A SIMPLE WAY TO FEE AUDIT
- Set up an excel spreadsheet
- Have your form 6’s ready to go
- Add the client, property address and form 6 fees to the spreadsheet
- Once all the Form 6 fees are added cross reference the fees with what is set up in your software program
- Note any discrepancies and work out whether the Form 6 or the Software program is wrong
- Note an audit of fees should be conducted a minimum of annually
WHAT FEES SHOULD YOU BE CHARGING
- Management Fee – this incorporates your rent collection and management of the property fee.
- Let Fee – this is generally a week or two’s rent for leasing the property
- Advertising Fee – with the increasing cost to advertise properties online, you should be charging a fee to promote the property online.
- Administration Fee – generally this previously covered the cost of postage and petties, but now everything in digital many question where it still should be charged. You still incur expenses for digitally processing statements, including internet and software.
- Lease Renewal Fee – a fee for negotiating a new lease.
- Maintenance Fee – a fee for arranging maintenance and repairs at the property.
- Court/ Tribunal Appearance Fee – a fee charged for your time appearing in court or at the tribunal.
- Routine Inspection Fee – a fee for conducting regular inspections at the property to ensure it is being maintained by the tenants and in general.
- End of Financial Year Fee – a fee for the preparation of the EOFY statement.
- Renovation Fee – a fee for coordinating and conducting a renovation on damaged or dated properties.
HOW TO WORK OUT WHAT FEES TO CHARGE IN YOUR LOCAL MARKET
Go too high and you will miss out on clients and go too low and you will be considered the budget agency. It is important you understand your competitors and know what the local market is not only charging for management fees, but also the additional fees they charge as well. Fees could potentially be your point of difference when it comes to standing out and marketing your services to your potential market.
- Seek an independent Consultant – speak to someone who knows the local market and what fees other agencies are charging. A consultant can help you come up with a fee structure that is going to be financially rewarding for your business.
- Secret shopper – where you go around and find out what all your competitors are charging in your local area. You could have family or friends do this, or enquire yourself. Some agencies are happy to offer full transparency and even have fees outlined on their website in some cases.
- Test the waters – you’ll have a very basic idea of what to charge and you might just want to test the waters and come up with your own fee structure. This can be risky early on and you may miss out on a lot of business if you go too high or too low.
When it comes to charging fees for your services it all comes down to the delivery of those services. The better the customer experience the less you’ll have to have conversations about fees and discounting them. You’ll get paid for exactly what you deliver which is what we all want at the end of the day.
Written by Tarsi Hynes, Director of The Tarsi Way