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How Lease-Break Fees Help Rent Recovery

Lease-Break Fees

Digested from AppFolio

By remembering a few simple rules, property managers can become more effective at recouping what is owed to them.

When it comes to unpleasant onsite tasks, debt collection probably ranks at the top of the list. But by remembering a few simple rules property managers can become more effective at recouping what is owed to them, according to Laurie Lowe, writing for the AppFolio blog.

For starters, remember that the higher the amount that is owed, the less likely you will be able to recoup the entire amount. This should guide your collection strategy.

“For this reason, though it may go against what you believe, it’s often wise to consider charging a reasonable lease-break fee in lieu of accelerating rent to the end of the lease,” Lowe says. “Also, avoid tacking on penalties or pursuing the cost of collections with high fees. Doing so could put any repayment efforts from the resident out of reach. As a general rule, staying under three times the rent amount is usually a good bar for improving your chances of recovery.”

When a resident comes to you with a settlement offer, your first instinct might be to refuse it or counter it, but Lowe argues that managers should be open-minded.

“Be sure to tread carefully; receiving some of the money that you’re owed is better than no money at all,’ Lowe writes. “According to experts, if you’re offered a settlement of at least 40 percent of what is owed, think long and hard about accepting it. It may be the option between settling their debt, their unwillingness to pay at all, or filing for bankruptcy, in which case you would get next to nothing.”

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