Customized and integrated collections processes and auditing help apartment management companies improve their bottom lines and improve accuracy.
Hawthorne Residential Partners manages properties in several states and multiple jurisdictions—which means having to deal with dramatically different rules and processes for executing an eviction. To ensure that managers are addressing lease violations and collection issues in a manner that is consistent with Hawthorne’s overall policies, the company has implemented a standardized, companywide eviction and collection process.
Michele Runyan, Regional Property Manager, says the national eviction software application, which was adopted a year ago through Nationwide Eviction, is especially helpful for new employees.
“New staff members or staff members transferred from a different community can hit the ground running in their new jobs since the eviction and collection process is consistent for all areas,” Runyan says. “We want no drop off in our effort to keep our communities pleasant for our residents and profitable for our company.”
The web-based eviction and collection service enables Hawthorne to monitor and optimize the process across its entire portfolio. Senior managers can track the activities in their portfolio without making a single call and, if a problem arises, address it quickly. An attorney who is integrated with the eviction platform is also available to prosecute evictions.
Runyan says something as minor as a one-week improvement in eviction filing can result in thousands of dollars in NOI recovery.
“Not only are you able to lease the unit to a paying resident faster, but you also get rid of disgruntled residents who often engage in destructive behaviors such as damaging the unit or devising some basis for an appeal or counter lawsuit,” she says. “Our efficient method of finalizing evictions sends a clear message to our residents that we stand firm on our resident policies and procedures.”
Over time, Runyan believes that the company will effectively use data and trend analysis to reduce the eviction and collection activity that is required at some of its communities.
Show Me the Money
Nearly seven years ago, WRH Realty Services decided to dig a little deeper and introduced a customized collections platform.
Cynthia Haines, CPM, Chief Operating Officer, says NCC Business Services of America’s platform enabled her Jacksonville, Fla.-based company to focus on potential screening concerns, operational inefficiencies and geographic challenges and adjust its systems and procedures accordingly to obtain higher collection rates and minimize default risks on the front end.
“We utilize customized collection reports to perform analysis on default by product type, geographic location, average account balance being sent by property, speed of placement and, of course, percentages collected,” she says.
Haines says the customized approach has allowed her team to identify weaknesses in procedures—such as refining screening criteria based on collection analysis and streamlining procedures to speed up account placements—and quickly revise them, which improves their overall collection rates.
Economic improvement and reduced delinquencies also have improved collection rates, Haines adds.
Judy Tubb, Director of National Collections for Post Apartment Homes, L.P., agrees. She says the Atlanta-based company’s recovery percentage and collection totals decreased drastically in 2008 and even more so in 2009. However, she has noticed a considerable increase beginning in 2010 and continuing into this year.
“In 2007—right before the recession—we had our best year to date and collected $1,137,000.” Tubb says. “In 2010 we began to recover from the downturn and collected $1,135,000.”
Although Post Apartments has yet to experience a year as successful as 2007, Tubb says the company’s in-house collections process has come a long way since its collections department was created in 1997. In 1998, during the first complete year of in-house collections, the company collected a total of $154,000—about one-eighth of its total in 2007.
Tubb says her collections department—which uses National Credit Systems’ collections software—regularly discusses ways of implementing an automated process to reduce the paper the company receives and speed up the collection process.
Caught in the Act
Skippers beware.
Michael Johnson, Executive Vice President and Chief Administrative Officer for ALCO Management, says his company has prevented many residents from evading their debt by incorporating rental payment history data with the company’s credit screening.
“We’ve had residents who move out of one of our communities and owe us money, and then try to move back into the same community,” Johnson says. “We should be able to catch this on our own, but the reality is that if you have onsite turnover, it’s easy to miss. With the credit screening tied to our collections process, we can see right away if they are already in our system and have bad debt.”
Since integrating Experian RentBureau’s resident data, Johnson says ALCO is collecting money much faster. Debts that would normally be turned over to a collections agency are now being paid immediately by those residents who want to move back in.
In some cases, ALCO also has changed its credit screening criteria. Johnson says some communities give a higher preference to prospective residents who have a better rental payment history rather than a good overall credit history.
Linda Willey, Director of Ancillary Services for Camden, says her company also has curtailed resident disputes at collection time with the use of a new document management program. Through Camden’s property management software, the
Houston-based company stores its documents in an electronic database and can e-mail them to a collection agency with a few clicks of a mouse.
Willey says storing documents electronically is convenient when residents claim that they never signed the lease or received notification about debt.
“When someone disputes a claim, you have to go back and prove it,” she says. “With this document management system, we don’t have to dig up a file and fax 40 pages over to Hunter Warfield, Inc., our collection agency—a task that our onsite employees don’t have time to do and that may fall by the wayside. Now we can interact with our collection agency in a timely manner, which means collecting the money sooner.”
Bottom-Line Bump Up
In many multifamily housing markets, reallocating utility costs to residents has become the norm. Doing so can provide drastic savings for apartment management companies—but their third party utility billing vendors may not be capturing all of their resident-related utility expenses.
To answer this question, San Francisco-based McDowell Properties hired a company last year to audit the utility billing practices of its third-party utility billing vendors.
Steve Radcliffe, Managing Director—Asset Services, says the auditing firm, Utility Revenue Services (URS), provides a complete review of all facets of utility reimbursements. The company reviews each rate structure, billing methodology and allocation process used to bill the community residents to identify when a billing vendor has under-billed or missed resident-related utility expenses that should or could be reallocated to the residents.
The auditing company then takes a percentage of the additional revenue McDowell Properties earns for a fixed period of years after they mutually agree on what changes will be implemented.
Based on the audit company’s recommendations, Radcliffe says McDowell Properties increased trash fees, changed vendor billing fees, made common area deduction adjustments and separately metered the irrigation systems. URS also recommended pest control charges for residents and final billing fees.
“In doing so, we have saved hundreds of thousands of dollars, which translated into millions of dollars of asset value,” Radcliffe says.
Irvine, Calif.-based Legacy Partners Residential, Inc., also uses the auditing service, which identified a city sewer expense totaling $10,000 that was not included in the sewer calculations to bill its residents. At another Legacy community, Scott Morrison, CPM, Senior Vice President, says the auditing company discovered that the sewer rate to bill the residents was the 2009 sewer rate versus the 2011 rate. Utilizing an outdated sewer rate resulted in the residents being under-billed by approximately $2,400 annually.
Legal concerns also have been identified and reconciled. “At one community URS identified the improper charging of an account set-up fee,” Morrison says. “The water district had a rule which specifically prohibited the charging of certain fees, including an account set-up fee. The billing vendor was either unaware of the prohibition or failed to ensure the fee was not being charged at our community.”
— NAA’s Lauren Boston
Units would like to thank Nationwide Eviction, Experian RentBureau, NCC Business Services of America, Utility Revenue Services, Hunter Warfield, Inc., and National Credit Systems for contributing to this article. For a list of National Suppliers Council members who provide billing and collections services, please see page 70-71.