Owning a rental property can be both rewarding and challenging. As an owner, one of your primary concerns is ensuring a steady stream of income. That’s why it can be surprising to some property owners to learn that some property management companies might still charge them even when the property is vacant.
The Common Practice: Management Fees During Vacancies
The majority of property managers typically charge a monthly management fee. This fee can either be a percentage of the monthly rent or a predetermined flat fee. This might seem standard when a property is occupied and generating income, but what about when it’s vacant?
For many property managers, this fee remains consistent regardless of the occupancy status. This essentially means that landlords can still accrue liability, finding themselves having to pay out without any rent coming in. It’s crucial for landlords to factor this into their calculations and budgeting, especially if the property remains vacant for an extended period.
The Texas Association of Realtors (TAR) Management Agreement
In Texas, a widely accepted agreement for single-family rentals is the “Residential and Leasing Property Management Agreement” promulgated by the Texas Association of Realtors (TAR). This agreement is explicit in its stance on management fees during vacancies.
The text from Paragraph 11, entitled “Broker’s Fees,” clearly states:
“A vacancy in the Property or failure by a tenant to pay rent does not excuse payment of the minimum management fee. Management fees under this Paragraph 11A are earned daily and are payable not later than the last day of each month.”
This means that even if there is no tenant or if a tenant isn’t paying rent, the landlord is still liable for the management fee. While our management company typically does not charge a fee during vacancies, every management company is different. It’s always possible to negotiate, especially if you have concerns about prolonged vacancies. It is important to note that the TAR form allows a “minimum management fee” to be set for properties that aren’t generating income, which can be a reduced amount or even zero.
Always Understand Your Agreement
It’s paramount for property owners to thoroughly read and understand their management agreement. Being clear on every aspect can save you from unexpected fees and expenses down the line. Remember, while there might be standard agreements like the one from TAR, each management agreement can be unique. It’s not only about understanding what you’re signing but also realizing that negotiation is possible.