Let's talk Management Fees

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One of the most common questions I get asked by a potential new landlord when it comes to Property Management fees is "what commission rate do you charge?"  Now whilst that is a valid question, when it comes to management fees there is more than just a "commission rate" that is charged, but more importantly there is a service to expect based on the management fees charged.

Every Property Management department is different both with the service they provide as well as the fees they charge.  To give you some guidance as to what management fees a Property Management department may charge, as well as to explain why these fees are charged (and what you should expect for the fees you're paying), I've prepared this article based on the Property Management fees we charge here at Property Excellence.

Commission rate

The "commission rate" is the percentage charged on the rental monies received for the property.  Here at Property Excellence, the commission rate covers the day to day management of your property.  This includes:

• Collection of rent
• Arrears management (here at Property Excellence, arrears management is carried out daily)
• Routine inspections included in the service package (as Property Excellence offers 3 different service packages)
• Disbursements included in the service package
• Issuing of notices to tenants if/when required (i.e. entry/inspection notices, rent increase notices, termination notices, notice of intent to sell the property)
• Arranging repairs and maintenance
• Following up on repairs and maintenance throughout the process of it being carried out until completion
• Carrying out regular rent reviews
• Carrying out the end of tenancy vacate inspection and attending to any end of tenancy rectification issues if/where necessary
• Birthday cards for tenants and landlords
• Christmas cards for tenants and landlords
• Tenant Christmas gifts for all tenants who are a week in advance with their rent leading up to our annual Christmas break - this includes the cost to purchase, wrap and hand deliver the gifts (not every Property Management department does Birthday cards, Christmas cards and Christmas gifts, these are just extra personal touches that we do here at Property Excellence)

New tenant letting fee

This fee is charged at the commencement of each new tenancy.  This fee covers the following:

• Responding to rental enquiries
• Showing potential tenants the property
• Processing applications received for the property (including reference checks, income/affordability checks, TICA checks - being a tenancy default database)
• Notifying the successful applicant once approved and arranging their tenancy commencement
• Carrying out and preparing the Entry Condition Report including photographs (depending on the size of the property, the Entry Condition Report alone can take 2 - 6 hours to carry out and prepare in detail)
• Preparing the Residential Tenancy Agreement
• Preparing acknowledgement and disclosure forms where applicable 
• Ensuring the tenant has paid their bond and first 2 weeks rent before the commencement of their tenancy
• Preparing the bond lodgement and lodging the bond with NSW Fair Trading Rental Bonds

Advertising fee

The advertising fee is exactly that... ADVERTISING your rental property to ensure a prompt turnover of tenancies.  Here at Property Excellence our advertising includes:

• Photographs of the property
• 360 degree tour of the property
• Highlight listing on realestate.com.au (meaning your property takes higher positioning than other Agencies listings)
• Listing on domain.com.au
• Listing on prex.com.au
• Social media
• New listing alerts to our database of potential tenants
• Open for inspection alerts to all enquiries received
• Notifying all unsuccessful applicants that their application for the property was not successful

Initial tenancy pack preparation fee

Here at Property Excellence all our tenants are provided with a tenancy pack at the commencement of their tenancy.  This pack includes:

• A hard copy of their signed Residential Tenancy Agreement
• An electronic copy of their Entry Condition Report in which they can add comments and photos to where necessary
• A hard copy of our PDF booklet A tenant's guide to renting through Property Excellence
• A hard copy of the NSW Fair Trading Tenant Information Statement
• Calendar
• Key ring with torch which we include with each set of keys provided to the tenant/s
• A welcome email including an electronic version of our A tenant's guide to renting through Property Excellence

Monthly administration fee

This fee used to be known as the "postage & petties fee".  So now that paper and postage is nearly a thing of the past, why is a monthly administration fee charged?  At Property Excellence, this fee goes toward covering the software and subscriptions that assist us in completing the admirative aspects of Property Management such as:

• Trust accounting / receipting of rent / payment of invoices / disbursement of monies & issuing of statements
• Arrears management
• Inspection reports
• Advertising 
• Prospecting for potential tenants
• Applications
• TICA (tenancy default database)
• Tenancy forms (tenancy agreements, notices)
• Issuing work orders for maintenance
• Keeping track of maintenance being carried out in order to follow up on the progress of the maintenance
• Contractor compliance (trade licenses, insurances)
• Property compliance (smoke alarm compliance, water efficiency)
• Regular maintenance authorisations (pest control, air-conditioning servicing, gutter cleaning)

Additional disbursement fee

Here at Property Excellence, our service packages include varying numbers of disbursements throughout a month, being where we disburse the rental monies paid for your property less any fees and invoices to you and provide you with a statement including copies of any invoices for that disbursement.  This fee is charged in the event that a landlord requires additional disbursements throughout the month, other than what is included in their service package of choice.

Additional routine inspection fee

Here at Property Excellence, our service packages include varying numbers of routine inspections per 12 month period (2, 3 or 4 routine inspections).  This fee is charged in the event that a landlord requires additional routine inspections to be carried out throughout the course of a 12 month period, other than what is included in their service package of choice.  

Please bare in mind, the maximum number of routine inspections allowed at a rented property in NSW is 4 in any 12 month period, in accordance with the Residential Tenancies Act, and as such Property Excellence will only carry out a maximum of 4 routine inspections in any 12 month period.

Lease renewal fee

This fee covers the lease renewal process, including:

• Liaising with both the landlord and tenant regarding renewals of fixed term lease agreements
• Preparing the lease renewal (new fixed term Residential Tenancy Agreement)
• Issuing the new fixed term Residential Tenancy Agreement to the tenant for signing and executing once returned
• Following up with the tenant to ensure the new fixed term Residential Tenancy Agreement is signed and returned
• Updating the fixed term details in our records to ensure it remains accurate at all times

Arrangement of refurbishments and improvements fee

Arranging refurbishments and improvements is entirely different to repairs and maintenance.  Examples of refurbishments and improvements include:

• Renovating the kitchen
• Renovating the bathroom
• Full internal or external painting
• Replacing floor coverings throughout
• Installing cooling or heating options that weren't already included in the property

Arranging refurbishments and improvements can be quite time consuming.  Some of the tasks involved include:

• Arranging quotes / meeting with trades onsite to run through the scope of works involved
• Liaising with the landlord and tradespeople regarding the quotes
• Monitoring the progress of the works being carried out
• Calculating and negotiating rental reductions where the property is tenanted and a rental reduction is deemed fair and reasonable
• Inspecting completed works and taking photographs for the landlord's records

Due to the increased work load and time involved in arranging refurbishments and improvements, Property Excellence charges an hourly rate for the time spent providing this service.

Disaster / emergency management fee

Thankfully not often, but sometimes a disaster or emergency, such as flood or fire, may occur in which additional time is required in managing any issues at the property as a result of the disaster or emergency event.  An example of the work involved, as per our flood management & rectification process includes:

• Contacting every tenant to ascertain whether the property they are renting was impacted
• Contacting every landlord to advise whether their investment property was impacted
• Inspecting every impacted property, including photographs of any issues that have arisen as a result of the event
• Providing inspection reports with photos to landlords of affected properties
• Arranging any post flood rectification works/repairs required 
• Liaising with landlords, tenants and trades throughout the entire process
• Calculating and negotiating rental reductions where the property is tenanted and a rental reduction is deemed fair and reasonable
• Issuing termination notices to tenants if the property they are renting is no longer "fit for habitation" due to the event
• Assisting in re-housing tenants if the property they are renting is no longer "fit for habitation" due to the event
• Finalising the tenancies of those tenants who were required to vacate due to the property they are renting no longer being "fit for habitation"

Due to the additional, and timely, work involved in managing any issues at a property as a result of the disaster or emergency event, Property Excellence charges an hourly rate for the time spent providing this service.

Arrangement of quotes where more than 2 quotes for the works are requested by the landlord

Here at Property Excellence we understand that some repairs and maintenance jobs can be costly (for example replacing air-conditioners, replacing hot water systems, re-waterproofing & re-tiling showers) and as such our landlords may like quotes arranged for comparison for those more costly repairs.  As such, all our service packages include arranging 2 quotes for larger/costly jobs where a landlord would like quotes.  

Arranging quotes can be timely, and as such if a landlord would like us to arrange more than 2 quotes for the works required, Property Excellence changes a fee per additional quote requested.  

Please note, some tradespeople charge for their time in quoting also, which we understand and respect as their time too is valuable.

NCAT (NSW Consumer & Administrative Tribunal)

First things first, what is NCAT?  NCAT, being the NSW Consumer & Administrative Tribunal, is a Tribunal system which facilitates resolutions in matters such as:

• Termination of tenancies
• Monies owing for tenancies including rental arrears or rectifications of end of tenancy issues (cleaning, damages, etc.)
• Disputes regarding repairs and maintenance required at a property if they have not been carried out in a timely manner

NCAT is not something that we here at Property Excellence need to often attend, as we pride ourselves in our high quality of Property Management and conflict/issue resolution skills, however NCAT is sometimes necessary, and when it is required, it is a process we ensure we invest adequate time and attention to.  

The fees incurred/charged throughout the NCAT process may include:

• NCAT application fee - being the fee charged by NCAT when submitting an application
• NCAT preparation & attendance fee - being the hourly rate charged by Property Excellence (or your alternate Managing Agent) for the time spent preparing the application and supporting documents and representing you, the landlord, at the NCAT conciliation & hearing

Following the NCAT matter being heard, depending on the circumstances and the orders made at the NCAT hearing, other fees may be incurred/charged such as a Sheriff's fee (being charged by the NSW Sheriff's Office) for executing a warrant of possession, meaning carrying out an eviction at the property.

Assisting with insurance claims

Either throughout the time of managing your investment, or on occasions when we take over the management of an investment property from another Managing Agent, there may be times when we assist you with an insurance claim.  This could be for:

• Damages to the property / repairs required as a result of storm, flooding, fire or malicious damage / break and enter
• Loss of rent as a result of the property being vacant due to works required from an insured event
• Tenancy matters such as rent default, malicious damage by a tenant, theft from the property by a tenant

Ways in which we may assist could include:

• Attending the property and taking photographs for the insurer
• Meeting with the insurance assessor/s at the property
• Meeting with any tradespeople at the property
• Arranging quotes and/or repairs
• Providing any necessary tenancy documents to the insurer such as the Residential Tenancy Agreement, Entry Condition Report, routine inspection reports, termination notice/s, vacate inspection report, correspondence or NCAT orders

Due to the additional, and timely, work involved in assisting with insurance claims, Property Excellence charges an hourly rate for the time spent providing this service.

Finalisation of management fee

Now I bet you're wondering why we would charge a fee to finalise the management of your property.  Just say you've sold your property to an investor with a tenancy in place.  Some of the work involved in completing the "change of ownership due to selling process" on our end includes:

• More often than not, the Managing Agent carries out what is known as the "adjustment of rent" on behalf of both parties.  This is where we calculate the rent up until settlement date, allocate that monies to you, the landlord/vendor, and then allocate the rental monies paid past settlement date to the purchaser
• Arrange access to the property for the pre-settlement inspection (as well as access for pre-purchase inspections throughout the selling process)
• If in the event the management is changing to another managing agent once settled, we prepare the change of management documents for the new managing agent which includes the tenancy documents (i.e. tenancy agreement, entry condition report, change of bond lodgement form, rental ledger/s), provide the notice to the tenant advising of the change of management and transfer the monies paid past settlement date to the new managing agent.
• We ensure all transactions balance for trust accounting and audit purposes, then once the change of ownership/management is complete, we archive ALL documents pertaining to the management and tenancy/tenancies and ensure the documents are stored in accordance with the requirements under the governing legislations.

Who knew there could be so much work involved when the property sells and ownership changes.  For this reason, Property Excellence charges a standard flat fee for the time spent providing this service.

Arrangement of works to bring the property to a rentable condition

At times, Property Excellence takes on management of properties which for one reason or another have reached the point of no longer being "fit for habitation" - see our fit for habitation article for more information on whether your property is fit for habitation.  

Much the same as arranging refurbishments and improvements, there can be a lot of work involved and time spent on carrying out this service.  For this reason we charge a fee (hourly rate) for the time and work involved in arranging any repairs and maintenance required to bring the property back to the condition it needs to be rentable.