Rent collection & arrears management

What a management agreement should say about arrears

Learn what a property management agreement must include about arrears handling, escalation timelines, legal action, and performance accountability.

You've decided to let someone else handle rent collection, but you're unsure what protections should be spelled out in writing. A management agreement that glosses over arrears leaves you exposed — to delayed action, unclear fees, disputes about what was actually promised, and gaps in who's responsible when payments don't arrive.

The real question is: what should a management agreement commit the manager to doing, and when, so you know exactly what you're paying for and can hold them accountable if it goes wrong?

Clarity on how arrears are tracked and escalated

Your agreement should spell out the manager's system for flagging late rent. This isn't about trust; it's about knowing the timeline. Does the manager contact the tenant by WhatsApp on day one of non-payment, or day five? Does a formal letter follow after two weeks unpaid, or after a month? What triggers a warning notice? Does the manager keep a record you can access, or do you have to chase them for updates?

The agreement should also define what "arrears" means in your context. Is it rent not received by the due date, or only after a grace period has passed? If your lease allows a tenant five days to pay, the manager should know that day six is when they start acting. Without this clarity, you might think action was already underway when the manager was still treating it as within-terms.

Include a trigger point for escalation — the threshold at which the manager moves from friendly reminders to firmer action or legal consultation. Some managers escalate at two weeks arrears; others wait for a full month. Your agreement should specify this, so you know when to expect movement.

What the manager will and won't do

Arrears management covers a spectrum. At one end, a manager collects rent and sends you a summary. At the other, they issue formal demands, liaise with attorneys, and prepare for eviction. Your agreement must state exactly where this manager sits on that spectrum, because the fee and the outcome both hinge on it.

Write clearly which tasks fall to the manager and which to you. Will they issue Section 21 notices (or other legal notices), or will they alert you to arrange that with your own attorney? Will they attend to sequestration or judgment debt procedures, or do they stop at issuing a formal demand letter? If the tenant owes three months and pays one month partway through the process, does the manager halt legal steps or continue? Who decides?

Also specify what the manager will not do. If they don't attend court or apply for eviction orders, that needs naming. Tenants sometimes assume a manager with "legal" in their title will take them through the full court process; avoiding that misunderstanding upfront saves time and money later.

Payment and accountability for the manager's fee

The agreement should tie the manager's fee to performance benchmarks so you're not paying full price if arrears pile up. For instance, does the fee reduce if arrears exceed a certain percentage of rent collected? Does the manager's compensation include a recovery bonus if they retrieve long-overdue amounts? These incentives matter — they align the manager's effort with your outcome.

Request monthly reporting: a breakdown of tenants who are current, tenants who are one payment behind, and tenants in deeper arrears, plus the action taken on each. This keeps the manager accountable and gives you real-time visibility. If reporting is fuzzy or delayed, escalate in writing.

Also confirm who bears the cost of legal escalation. Does the manager include attorney fees in their standard commission, or do they invoice you separately? Are there caps on what they'll spend before seeking your authorisation? A vague fee structure for legal action can turn a moderate arrears issue into an unexpected expense.

Before you sign, ask your prospective manager for a template agreement, review these three areas carefully, and ask them to walk you through their arrears process in practice. You're looking for someone who treats the agreement as a working document, not a formality. When you're ready to move forward with a manager who has a transparent, detailed approach to arrears, Strove's verified property managers are vetted and reviewable, so you can compare their terms and track records side by side.

Common questions

Should the agreement specify how many days late before the manager takes action?: Yes, absolutely. Define the exact timeline — whether the manager starts contacting a tenant on day one of non-payment or after a grace period — so you both know when formal action begins. This prevents delays and misunderstandings about what's already been done.
Can I make the manager's fee depend on how quickly they recover arrears?: You can tie the fee structure to arrears thresholds or add a recovery bonus, but discuss this upfront and get it in writing. Some managers include recovery work in their standard fee; others charge separately. Clarity here prevents disputes later.
What should I do if the agreement doesn't say who pays the attorney when arrears reach legal action?: Ask the manager to clarify before signing. Confirm whether legal costs are included in their commission, invoiced separately, or capped at a certain amount that requires your approval first. A vague fee structure on legal escalation can become expensive.
Does the agreement need to say what happens if a tenant pays part of their arrears mid-process?: Yes, include a clause stating whether legal action continues, halts, or pauses based on partial payment. This removes ambiguity and prevents the manager from taking an action you didn't authorise or missing an opportunity to collect.

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More on Rent collection & arrears management

Clarity on how arrears are tracked and escalated

What the manager will and won't do

Payment and accountability for the manager's fee

Common questions

Should the agreement specify how many days late before the manager takes action?

Yes, absolutely. Define the exact timeline — whether the manager starts contacting a tenant on day one of non-payment or after a grace period — so you both know when formal action begins. This prevents delays and misunderstandings about what's already been done.

Can I make the manager's fee depend on how quickly they recover arrears?

You can tie the fee structure to arrears thresholds or add a recovery bonus, but discuss this upfront and get it in writing. Some managers include recovery work in their standard fee; others charge separately. Clarity here prevents disputes later.

What should I do if the agreement doesn't say who pays the attorney when arrears reach legal action?

Ask the manager to clarify before signing. Confirm whether legal costs are included in their commission, invoiced separately, or capped at a certain amount that requires your approval first. A vague fee structure on legal escalation can become expensive.

Does the agreement need to say what happens if a tenant pays part of their arrears mid-process?

Yes, include a clause stating whether legal action continues, halts, or pauses based on partial payment. This removes ambiguity and prevents the manager from taking an action you didn't authorise or missing an opportunity to collect.