Rent Collections 101
Below is a primer on the differences between renting from a property management company vs renting directly from a property owner and how each impacts rent collection policies.
The biggest difference is r-e-g-u-l-a-t-o-r-y compliance, which a licensed brokerage must maintain since a brokerage typically collects and distributes money on behalf of other people. These monies are known as "trust funds" which are held in trust accounts.
A broker must ensure that the balances in the trust fund accounts are equal to the liability owed to all the owners of the trust funds.
One of the biggest threats to upsetting the balance is the returned rent check. Bounced checks create a shortage and can place a broker at risk of non-compliance with CalBRE.
For these reasons, a broker is expected to allow sufficient time for rent checks to clear before processing payments to their clients. This adds additional time to getting property owners paid and increases the importance of timely payments. In the unfortunate event that a check bounces, the entire process is affected in a much bigger way than when a property management company is not involved.
Late Payments, Weekends and Holidays:
Rent is due on or before the 1st and considered late after the 1st. Late fees of 10% are common and apply to funds received after the 5th. These fees are intended to discourage late payments AND to defray the extra handling required to manage delinquent accounts. In most cases, there's a mortgage and/or bills to be paid and a property owner looking for tenant rent to cover them.
As the middle party, a broker cannot take shortcuts and must allow the necessary turn around time it takes for processing. He or she must guard against shortages and protect the interests of all parties to the trust funds at all times; this is a challenging position to be in!
Weekends and holidays prolong turn around time making things all the more time sensitive.
Allegiant Property Services, Inc. provides online payments for Residents and a 24hr. drop box for after hours, weekend or holiday payments if paying in person. Another option Residents may elect is to use the automatic bill payment services through their own banks. Rents collected from the drop box before 9am the following Monday will be posted without a late charge. After 9am, the late charge is applied.
Because weekends and holidays add to processing time, Residents are encouraged to pay online or use bill pay services whenever possible. Payments sent by mail should be sent on or before the first ---or delivered no later than the Friday before if paying in person.
A parting word about "Regulatory Compliance."
Bottom line is that a property manager who manages property for a fee simply has no wiggle room or flexibility to offer courtesies for late payments. As a middle agent the risk is too great and is the reason why most property management companies have strict rent collection policies. It's a big deal because it's a matter of legal or regulatory compliance and service to clients.
Though a late payment or bounced check may damage the trust factor between a tenant and the property owner, it won't place him/her at risk of non-compliance as it does when a middle agent is involved, and less likely to be as big of a deal.