Pre paying PM fees

Sure, the agent may have to reimburse some fees if the owner asks for part of the commission back and then wants to repay it when the rent is collected afterwards. But if it is an ongoing management and the rent will be collected from the bond/insurance then both parties may agree to only adjust it for any missing rent after the issue is resolved to keep it simple.

I am not assuming there is landlords insurance, I said that if the landlord has insurance then it will work out fine as the rent arrears will be covered. Obviously these small details will need to be accounted for when they do happen but cannot be considered beforehand.

So likewise if the owner prepays their fees and the management agreement is terminated they should have their overpaid fees refunded. How the fees are accounted for with tax will need to be considered with their accountant.

 

Are you saying that you would charge the commission on what the insurer has to pay because you couldn't collect it?

 

That's standard world wide practice

 

Yes normally because it is classified as rent still and would have normally been paid by the tenant but was paid by insurance company in this case.

There is usually more work involved in these circumstances, so most agents want to get paid for their work too.

 

Who classifies it as rent?

It's not rent, it's compensation to the landlord for the lack of it.

Why should a PM claim commission from a landlord who already pays the insurance premium to protect himself from a dud tenant the PM selected?

 

Insurance classifies it as rent, and so do you for tax purposes.

Either way you want to look at it, if it is money you would have got from rent normally and paid the agent their commission for that as well, then they have worked for it and are therefore entitled to their commission.

Your reasoning would be like your employer not paying your wage this week because one customer didn't pay for services but paid them the week after. Does that sound fair to not be paid your wage because of that?

Also, it is almost always the landlord who chooses the tenant.

 

@chylld, Just so I understand this, you prepay all the PM fees in 1yr advance and your PM sends you monthly invoice for the next year.....you mentioned you are capitalizing these costs by borrowing it? I thought one needs private ruling where capitalizing interest is concerned as part IV can be issue....

 

No interest captialising involved. What Chylld means is he (or she) borrows to pay these expenses.

 

Well, you can paint it any colour you like, but if you haven't got your name on the policy, you haven't got your finger in the pie.

 

Stop it, you've been proven wrong.

 

Please show me where I have been proven wrong.

 

I'm not going to argue with you, its empirical. You're trying to argue water isn't wet. If you continue this I'm just going to assume you're trolling.

 

Thank you for your reply.

I am saddened that a professional business needs to stoop so low, with a personal attack, to state that they assume that I am trolling.

If you think that I am trolling you can always hit the"run to mum" button at the bottom of the post.

You said that I have been proven wrong, I asked you to show me where.

You haven't.

Why not?

 

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Terry is correct, only capitalising IP expenses not interest as there are some strict criteria surrounding the latter.

The agent invoices me early in each month for that month's management fees, then I pay those fees out of the IP LOC. I do it monthly, not yearly as others are discussing.

 

I had a client (NSW) in this boat. The PM tried it on but Fair Trading agreed that a PM cant have a contract for a building that was destroyed by fire. Hence it was not enforceable to charge a commission. The insurance is compensation for loss of rental income and is akin to rent but is not rent.

However for a dud tenant and lost income on a LL policy for unpaid rent I would agree the PM has a right to their commission. The LL policy is paying the rental income arrears and the agent agreement remains in play.

 

Thank you for your opinion.

Interesting to note it was only liked by those who wish to exploit it.

 

i honestly feel like pre paying pm fees in general is a bad idea. sure there are some rare cases where it could make sense for tax reasons. but you are paying your pm in advance for a year! thats crazy you loose all leverage. unless it's with a big firm and they have a standard clause where you can a refund of the money if they give poor services.

 

You don't have to pre-pay for a year. You could try for 6 months maybe.