Placement fees vs no placement fees
Cartref Properties provides rental property management services specializing in managing rental properties in strata corporations. When clients ask about our service they are always asking what is the cost to find a tenant and manage the property. We have two main fees. The first fee is a tenant placement fee and the second is the monthly management fee.
The tenant placement fee is normally equal to half of one full month’s rent of the property. Tenant placement includes advertising the property, receiving inquiries about the property and reviewing potential inquiries, showing the property and screening tenants. It has multiple steps involved in the process.
The monthly management fees are based on a percentage of the monthly rent. Each management company offers a different percentage amount for their management fees.
We have also seen management companies who don’t charge a placement fee, they charge a higher monthly fee. Our question is which is better for your property.
Let’s compare two properties rented at $3,000 per month. A traditional lessing fee would equal $1500 for the tenant placement and is a one time fee.
If one management company charges 6% for a monthly fee it would be $180 per month.
If the other company charges 10% for a monthly fee it would equal $300 per month. The difference would be $120 per month. If you calculate the difference of $120 per month it would take 12 and a half months to equal the placement fee of $1500 for that property. What this means is for every month your tenant resides at your property past the 12 and half months you are paying a $120 extra in management fees.
Our experience is that tenants stay in their rental properties on average for 24 to 36 months. For a tenant who resides in the unit for 24 months that equals an extra $1380 in management fees during that tenancy. If the tenant resides in the property for 36 months that would equal an amount of $2820 in additional management fees during that tenancy.
When interviewing which property management service provider you are choosing we encourage you to review all the fees you may encounter during the management of your property.
Cartref Properties can assist you, call today to discuss your needs. You can find more information about us at: www.cartrefproperties.com
Every Action has a reaction
Newton’s 3rd law: Action and Reaction, For every action (force) in nature there is an equal and opposite reaction.
How does this apply to rental housing in BC?
Housing is not quick and easy to build. It takes time to build a house, longer to build townhouses and even longer to build apartment or condo buildings. The cost of building housing is expensive and continues to increase not only due to government taxes or fees. The building material costs, or building requirements over the years have changed. Many older apartment buildings in BC don’t have sprinkler systems or fire alarm systems in the buildings. All new condos and townhouses have built in fire safety equipment increasing costs to build and repair.
With recent inflation rates the federal government has increased the interest rates increasing the cost of housing for new purchasers and for homeowners with variable interest rates. An action the BC government took to try and combat the housing issues in BC is to remove strata corporations rights to restrict rentals in their buildings. The theory for this is to increase the number of rental units in the market place which should reduce the price of rental housing. The question is does that really work?.
What we are seeing is with the higher interest rates, and a larger number of new rental products coming to the market these factors are making it less profitable for the landlords. With the profit margin reducing this is causing some landlords to sell their rental product reducing the number of rental properties from the market. This may be what the government wants as well, if a person can purchase instead of renting they may consider this a success. With the current high interest rates many purchasers are not qualified to buy and continue to search for rental properties. The end result is we are losing rental properties from the market at the same time we are adding more, ending up with the same number of rental properties in the market. Each action has an opposite reaction.
Cartref Properties can assist you, call today to discuss your needs. You can find more information about us at: www.cartrefproperties.com
Subletting and assigning in BC
Are my tenants allowed to sublett or assign their rental unit?. The answer is not a simple yes or no. Yes they have the right to sublett or assign, though they must obtain the landlords permission first.
What is subletting and what is assigning? There is a difference. Subletting is when a tenant allows another party ( a sub tenant ) to have exclusive use of the rental unit and pay the rent for part of the term of the tenancy.
For a sublet a new tenancy agreement is reated between the tenant and the subtenant
tenant. The original tenant becomes the landlord to the sub tenant and they have enforceable rights and responsibilities. A sub tenant can only have the same rights as the original tenant, a new agreement may not contradict the original tenancy agreement. The original landlord and the sub tenant don’t have a contractual agreement. The original landlords continue to deal with the original tenant. It is expected the sub tenant is not a permanent situatiaon and the original tenant would return to the tenancy. An assignment is when a tenant finds a party to take over the tenancy so they can get out of an agreement, usually a fixed term tenancy.
The standard RTB agreement states that a tenant must obtain written permission from the landlord to sublett or assign a tenancy agreement. Generally these two terms are used for leaving the property during a fixed term tenancy agreement. If the term is longer then 6 months the landlords must not unreasonably refuse to sublett or assign the tenancy. Even though the standard agreement has asection on the sublett and assignment it is prudent to add in your addendum more clarity on the sublett and assignment process.
It is not a requirement for the landlord to grant permission for the sublett or assignment, though if they unreasonably refuse then a tenant may have a claim against the landlords with the RTB.
Cartref Properties can assist you, call today to discuss your needs. You can find more information about us at: www.cartrefproperties.com
Fixed Term or no Fixed Term?
What are the benefits to having a fixed term lease for your tenants.
I hear many landlords indicate there are no benefits to having a fixed term lease for your rental property. The benefits may lean more favourably to the tenants in certain areas, though there are benefits for landlords as well.
The main benefit to the tenant during a fixed term lease is the tenants have the right to stay until the term expires. This provides them with some stability where they live until the end of the term. Their rent is unable to be increased until the term expires.
In BC there are provisions on ending a fixed term lease. When a tenancy is started by a fixed term lease the landlord and the tenant must agree to one of two ways the lease is formed. The first being at the end of the fixed term the tenant moves out. In BC the only reason this clause can be used is if the owners or close family members are moving into the property when the lease expires. This clause eliminates institutional owners from having a clause where a tenant must vacate at the end of the term. If the owner or family is not moving into the property then the tenancy automatically becomes a month to month tenancy at the end of the fixed term.
After the original fixed term expires, the landlord and tenant are able to agree to a new fixed term lease, it doesnt have to become a month to month tenancy.
Some of the benefits to the landlord for having a fixed term are, tenants are providing a commitment to stay at the property for a specified time frame. If the tenant elects to leave the term early they may be held responsible for unpaid rent during time the unit was not rented. This can be a portion of the month it doesn’t need to be the full month. In this situation the landlord has an obligation to mitigate their loss, which means they must diligently try to find a replacement tenant.
During a fixed term tenancy it is less likely the tenant will provide one month notice to vacate due to the potential of being required to pay for time the unit is not rented. It is more likely they will stay to the end of the tenancy. This reduces turnover rates, which can be favourable and unfavoruable to landlords. Searching for new tenants is a time consuming process.
In all tenancy agreements landlords should have a liquidated damages clause. A liquidated damages clause outlines the cost associated with terminating a fixed term tenancy. This can include the cost, management companies placement fees, of the landlord finding a new tenant, if it is a reasonable cost.
Some financial institutions are asking for a fixed term tenancy when doing refinancing of the property. This gives them some assurance the unit may have funds coming in for a specified period of time.
The fixed term agreement also provides recourse for landlords seeking compensation after the tenant has vacated early. When a tenant terminates early and the landlord proceeds to a tenancy hearing, leaving a fixed term is viewed as a breach of contract by the tenant and they will be held responsible for required costs.
In general a fixed term can provide stability to both the landlord and the tenant for the time of the fixed term. It is important for landlords to review what their short and long term expectations are for their rental property before entering into a fixed term.
Cartref Properties can assist you, call today to discuss your needs. You can find more information about us at: www.cartrefproperties.com
Licensed Property Management
Recently I was engaged online with a party discussing the requirements of being licensed in BC. The discussion started with a post online about someone’s strata corporation having a bylaw that stated "Unless with written approval from the Strata Council, rental unit must be managed by Licensed Professional Rental Property Manager."
The person was asking “does this mean I must hire a property manager”
With regards to these bylaws we were recently advised through training offered by the governing authorities in BC that it would not be enforceable, as an individual is entitled by law to manage their own rental property.
I proceeded to explain that once you compensate another party to manage your rental, that party must be licensed to manage the rental property. A response suggested that “someone can manage properties for a single owner and not be licensed. Other exemptions are developers”
There are exemptions for parties to manage rental properties in BC. For developers they are exempt becaue the developer’s employee is the party managing the property. This can be for any rental, if an entity owns the property, any of its employees may manage that property without being licensed. There are other exemptions as well including, but not limited to persons acting under authority of the court, a trustee in bankruptcy, an executor of an estate are few other exemptions.
If the owner of a rental property hires another person or company to manage their property and they compensate them, and the individual or company is not part of the exemptions then the party must be licensed in order to provide rental management services. Why is it important for parties to be licensed to manage rental properties for other people and or companies. Licensing provides a source of education of the rental laws and should improve the experience for owners and tenants when renting a rental property. Licensed property managers are expected to maintain a higher standard of professionalism when providing rental management services to their clients and tenants. Licensing provides tenants and owners a recourse of filing complaints and or recoveirng costs through systems like the Real Estate Compensation Fund to provide protection for clients in the event they have lost money due to the actions of licensed professionals.
Many concerns with landlords having negative experiences with tenants often occurs from a landlord who is lacking education of the rental laws in BC. In any endevour if you are unaware of your requirements it will lead to an unexpected outcome. Being a landlord in BC is a complicated and time consuming process. Operating a rental property is comparable to operating a business, and should be viewed in that manner. Many landlords fail to take the business approach to managing a rental property. Meaning you should follow the laws required for managing your rental property. Failing to follow the laws provides opportunities for unethical tenants to take advantage of uneducated landlords.
If you need assistance managing your rental property in the lowermainland of BC Cartref Properties can help you have a positive experience.
Cartref Properties can assist you, call today to discuss your needs. You can find more information about us at: www.cartrefproperties.com