Property management companies around the country have different policies on who keeps late fees paid by the tenant. Late fees are charged to tenants when they pay their rent late. Who keeps the collected late fees is a contractual matter between the owner and their property manager. Most management companies have a standard policy in their contract on this subject.
Some property management companies place collected late fees into the owners account and keep nothing.
Some companies add the total late fees into the amount of total collections and keep a percentage of the late fees at the same rate they charge the owner for rent collected.
Some companies keep all the late fees collected as a cost of handling the late payment on behalf of the owner.
Finally, some companies do a split. The most common split is to give the owner 1/2 of the late fees collected and 1/2 goes to the management company for the work they do to collect the rent and the late fee.
At HomePointe, we split the late fees collected 50/50 with our clients. We recognize that the late fees collected represent the added risk of having the late paying tenant and for fronting the funds to get bills paid without the tenant. Our company also takes on an additional burdon of collecting the late rent and late fees includling a monthly letter to the resident that carries a balance, 3 Day Notices to Pay Rent, extra communication, and possibly extra reports to our client when the rent comes in late.
There is no right or wrong here. It is up to the client to look at the entire package of services and fees and decide what works for them.
