What is an insufficient notice-fee? Simply put, it’s an acceleration of rent due to giving a notice that does not meet the necessary lease protocol.
I am back for the weekly (save last week – vacation) budget installment. I took some time off last week and ultimately (save a pic post here and there) unplugged. All I can say is – DO THIS. Give yourself three to five days off every quarter and get away from everything. It’s good therapy. So – this week, we are talking about the Insufficient Notice Fee.
Insufficient Notice Fee Defined
What is an insufficient notice-fee? Simply put, it’s an acceleration of rent due to giving a notice that does not meet the necessary lease protocol. For example, Mills Properties requires a 60-day notice before move-out.
Budget Strategy
The Insufficient Notice Fee is a line item that you can budget based on T-12 (Trailing 12 months) information. The frequency is random, so there is a real chance that you could estimate for four based on your trailing information and end up with two or six. You will likely never be precise with this number. In the same respect, you will probably never be too far off.
It’s short and sweet this week. And it’s hot in #STL.
Your trying to keep cool in the 100+ temps multifamily manic,
M
0 Responses
When you are looking at your budgets compared to your actuals – what do you look at that tells you these fees are being charged properly? How do you know that your property manager is charging everyone the applicable fee and not just some of the residents who do not give sufficient notice?
Since this account is such a sporadically used account, you could not go off of prior months trend to verify this is being charged accurately.
I also often wonder, how much of a success rate do you actually have collecting the insufficient notice fees? If it is more of a Class B or C property is it even worth charging an insufficient notice fee that 9 times out of 10 you are going to write off anyway? In my expenrience at Class A properties, generally speaking, the residents care about their credit a little bit more and you more than likely can collect the fees.
Do you think it would be worth only charging and budgeting the fees at the properties that show past history of actually being able to collect the fees?
Carin,
All very good points. The only sure way is to administer a very well thought through audit process. That auditor should be a third party completely unassociated with your firm – ideally. If not, that person should report directly to the most senior person(s) in the organization. They should not in any way report to a director or senior person on the operations side as many of the functions/metrics of the audit are operations heavy.
That being said, I 100% agree with your logic concerning Class A product versus the rest of the field. And, I like the idea of budgeting as such. My only concern as an organization is do you run the risk of violating fair housing laws. If I apply it at a Class A and not a Class B or C am I discriminating? Seems a little counter-intuitive but I have seen stranger things.
I do think in the absence of a good audit that using historical information is at very least a good starting point.
Thank you for taking the time (twice)! You rock and I very much value your thoughts and opinions.
Have an amazing 4th.
M