Todd Ortscheid of GTLRealEstate talks about why an additional commission is charged on maintenance and repairs over and above the standard monthly management fee.
We manage a broad range of properties, and maintenance and repairs are a huge source of our expenses. We do not really make any profit in overseeing maintenance and repairs, but we do need to cover our costs; so, we thought of going about that in certain ways that are most fair and transparent to everybody. Older and more run-down properties are a much bigger source of the work we do because they require more maintenance and repairs. On the other hand, brand-new houses and properties that are just a few years old do not entail a lot of repair work, so we very rarely need to send vendors to them. We didn’t think that lumping everything into one big management fee that covers everything, including maintenance, would make a lot of sense, because then the owners who don’t really get a lot of maintenance done on their properties are basically subsidizing the owners who get tons of work done on their properties.
We thought it made more sense to break it out. Things that don’t deal with maintenance and repairs like the basic management, rent collection, and evictions are covered by the standard monthly management fee, while maintenance and repairs are charged with a percentage-based commission on top of the invoice amount. That way, the only people who are paying for maintenance and repairs are the ones who require it.
Some management companies do it in other ways. Some charge a flat fee for every maintenance and repair they do. Some management companies do not disclose that they are marking it up, so they will bill you directly from the property management company and won’t ever tell you that they are adding an override percentage on top of that. And a number of companies have an in-house maintenance unit. While some of them will disclose that it is an in-house maintenance company, others will not. They might also give it another name and will not let you know that it is under the same umbrella corporation that owns the management company. So, what they do is they include their commission in the invoice that they charge from the repair company and they get their money that way.
That’s not how we like to go about these things, as it is not a transparent way of doing business. We always tell our clients that there are no hidden fees. Everything we charge you, you know about, and it’s right on the second page of your management agreement for you to look at. We feel that this is the most fair and transparent way of conducting business.
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