Should Management Fee be passed onto tenants?

by Readers Question

11:15 AM, 30th August 2016
About 2 years ago

Should Management Fee be passed onto tenants?

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Should Management Fee be passed onto tenants?

We have a small portfolio of BTL properties one of which incurs an annual Management Fee which we have paid for the past 10 years, but we are now wondering should this have been an expense passed on to our tenant as she is clearly the ones who has benefited from the services provided? cheque

As an aside we have had the same tenant for the past 7 years and have not increased her rent since March 2009 so it is now, I would imagine, well below the market level.

What do other landlords do?

Many thanks

Denise



Comments

Neil Patterson

11:20 AM, 30th August 2016
About 2 years ago

Hi Denise

I may be wrong and someone else may itemise it differently, but normally the rent is priced so as to cover this additional cost with leasehold flats.

I also think you have many justifiable reasons to show a tenant why you may need to increase the rent paid, not least Clause 24 if you have a BTL mortgage.

Sean Graveney

11:40 AM, 30th August 2016
About 2 years ago

I agree that the management fees should be factored into the rent assuming market rates can accommodate.

I disagree that the tenant is 'clearly the one who has benefited from the services provided'. Have the management services never benefited you (and the price of your asset) such as marketing the property, vetting the tenants, ensuring tent is collected, carrying out routine repairs, liasing with contractors, providing certification, negotiating on deposits? If not then why don't you do all of these things yourself?

Graham Bowcock

12:04 PM, 30th August 2016
About 2 years ago

Denise

Just to reaffirm what others have said, this charge is not about the tenant but the property and no doubt includes a sinking fund and some element of structural repairs which are for your long term benefit.

The service charge is really a matter for you as the leaseholder.

The issue of rent is separate and if you have not increased it for seven years there is probably an opportunity to do so. Rents generally have been rising and most tenants are accepting of the need for an increase if well presented. Our policy is not to go over the top but suggest a new rent which is more likely to be accepted without upsetting a good tenant. Most tenants will see rents have risen and would not look to move; on the other hand as a landlord you do not really want to lose your tenant which inevitably incurs costs and some void period. The need to be pragmatic is key.

You may be able to recover part of the service charge through the rent but the tenant does not need to get involved.

Hope this helps.

Graham

Steve From Leicester

13:11 PM, 30th August 2016
About 2 years ago

The Management Fee you are talking about is (I assume) the bill charged to the leaseholder of a flat for upkeep of communal areas, building insurance etc.

This is your legal responsibility, not the tenant's, and should be paid by you. When working out whether a leasehold property is a viable investment or not the service charges are one of the things a landlord needs to factor into their sums.

I'm an agent managing 500+ properties by the way.

On the issue of a rent increase, decide what would be a reasonable rent, check that an increase to this level is permissible within the terms of the tenancy agreement that you and your tenant are bound by (some say that it won't increase by more than a certain percentage in any 12 month period), and then politely but firmly give the appropriate notice. You don't need to offer an explanation.
.

Denise G

22:52 PM, 30th August 2016
About 2 years ago

I am indeed referring to a management fee charged by the comapny who cut the grass, mends broken walls, trims or fells trees that block light, maintains lighting etc - for whch residents of the houses are obliged to pay an annual fee of around £150 (if memory serves me right) plus additional amounts spilt between the residents on the estate whenever larger jobs are undertaken.
As an aside we bought the property without our solicitor ever pointing out our obligation to pay such a fee - and we inherited a debt of some thousands left by the previous owner which apparently according to the terms of the contract we are legally obliged to pay

Neil Patterson

8:11 AM, 31st August 2016
About 2 years ago

Hi Denise,

Have you put in a complaint to your solicitor about not picking up on the debt?

Denise G

8:30 AM, 31st August 2016
About 2 years ago

no because it was in 2007?

H B

21:11 PM, 31st August 2016
About 2 years ago

Reply to the comment left by "D D" at "30/08/2016 - 22:52":

If you wish to put the rent up by £150 p/a to account for the fee then do so, but the management fee is your responsibility.

Adrian Jones

9:24 AM, 1st September 2016
About 2 years ago

Reply to the comment left by "D D" at "31/08/2016 - 08:30":

When did you realise you had "inherited" this debt?

Denise G

10:44 AM, 1st September 2016
About 2 years ago

We were horrified when the huge bill arrived about a year after the purchase (so around 2007-8) to find out we'd inherited the debt. We then spent many months - even years - telephoning and writing to and fro to the company (Urbanpoint) arguing that we couldn't owe them most of their bill as we'd not owned the property back when most of the bill referred to. They never rpley to our letters, you can never speak to the same person twice until in the end we were infomed that legally we do owe it according to the terms of the contract. After a few more years of them ignoring our letters, sending ever increasing demands and 'forgetting' telephone conversations plus some input from the Residents Group (other owners on the estate having had similar issues) we agreed a compromise settlement figure which we paid - but everytime we have any communication with Urbanpoint since we are back to Square 1 dealing with a different person and so the demand letters still keep coming despite our having paid the agreed settlement amount and also paying the annual figure due moving forward since then.

To be fair Urbanpoint have now at least started to address some of the property maintenace issues on the estate after many years of them doing nothing at all - hence why we are now paying the annual amount

We do have copies of all of our written communications with Urbanpoint

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