Why is there a commission charged on repairs?

 

 

Scheduling, coordinating, and following up on repairs is a large part of the work we do to manage our clients' properties. So some clients sometimes feel that this work should be included in the monthly management fee and not charged as an additional repair commission. There's a reason that we don't do this, however.

We have many properties that we manage that are almost brand new and require virtually no maintenance for years at a time. On the other hand, we manage properties for some investor clients that were purchased in bad shape and that are many decades old that require a lot of up-front work and ongoing maintenance. While we could lump our commission for repairs into the monthly management fee and just bump it up a couple of percent for everyone across the board, we don't believe that this would be fair to our clients. Those clients who have new properties with no maintenance would be paying a higher commission every month to subsidize the clients who have properties that need lots of repair work.

So instead of doing this, we feel it is most fair to keep our monthly management fee at a reasonable level to cover just our costs of non-maintenance work, such as rent collection, move-out inspections, evictions, etc., and keep our commission for repairs and maintenance separate, so that only the owners who are actually having to have that work done are incurring that cost. 

Now, all property management companies are doing this in one way or another, because it just isn't possible to handle maintenance and repairs without charging something for it to cover their costs. There are many ways that management companies charge for repairs:

  • Many of them do as we do and disclose it up front and put it in their management agreements as a commission. 
  • Others charge a flat fee for maintenance supervision for every work order. 
  • Others have their own in-house maintenance personnel and charge a markup on what they pay their own people.
  • Others are a bit more circumspect about it, to put it nicely, and just inflate the vendor invoice amount to cover it without ever telling the owner. 

In our view, the most honest way to go about it is to use competitive outside vendors, charge a reasonable repair commission on their invoice amount, and disclose it upfront to the owner. We also prefer the percentage-based commission over a flat fee, as we feel that's most fair. After all, an owner who only needs a routine toilet repair that costs $85 shouldn't be paying the same flat fee for that work order that an owner is paying for a large scale renovation that is a lot more work.

Our general philosophy on the fees and commissions we charge is to be upfront about all of them, disclosing everything in the management agreement so that there are no "hidden fees" and no owner ever feels that they are being kept in the dark on what exactly it's costing them to have their property managed. Our philosophy is also that owners shouldn't be paying for something that they aren't using. After all, nobody likes having to pay for a $150 cable TV package that includes 200 channels when they only watch 10 of those channels. So we prefer to keep our management fee low to cover the basics, and only charge for other services when they're needed. We feel that this is most fair to our clients.