Why Pay Second-Year Agent Commission? When No New Tenant Was Found

Q:
Many times, property owners ask agents:
When it comes to rental agreements (especially for residential leases),
why do we have to pay a commission in the second year,
even though the agent doesn't seem to do anything?

A:
Paying a second-year commission
is similar to buying risk insurance or paying for a service,
where the agent is responsible for looking after the case
for as long as the tenant—brought in by the agent—
continues renting the property.

If the tenant turns out to be a good one, great—
neither the owner nor the agent has much to do.

But if the tenant causes problems,
the first person who has to take action
to solve issues or show up on-site
is the agent.

The agent is expected to handle various problems on the owner’s behalf,
such as chasing rental payments from the tenant,
coordinating with the building management,
or dealing with other related matters.

That’s why agents should have a written agreement,
a "Rental Agency Agreement,"
to clearly define their roles and responsibilities—
what services are included
in exchange for the second-year commission.

This is often where agents make a mistake:
90% don’t explain their work process
or clarify what they are responsible for.

There’s usually no written agreement
to be discussed and agreed upon before starting the job.

Assuming that every owner automatically knows the rules
and then suddenly asking for a commission in the second year
might seem unfair from the owner’s point of view.

On the flip side,
if an owner sees
the second-year commission
as "getting paid for doing nothing,"
they might feel it’s not justifiable.

In that case,
the agent’s role would be limited to
simply finding a tenant and closing the rental deal—
and that’s it.

After that, the owner takes care of everything on their own.
No need for the agent to provide any after-service.

If the property gets damaged
or the tenant pays late or defaults,
it’s up to the owner to handle it.

The agent doesn’t have to deal with
any post-contract problems.

This kind of deal is fair—
to both the owner and the agent.

However, if the owner expects
ongoing support throughout the lease term,
problem-solving, and other services,
yet refuses to pay a second-year commission—
that’s the kind of deal that’s unfair.

Put yourself in the agent’s shoes:
Doing work without getting paid—
what’s the point?

There’s also another type of service
offered by a subsidiary of a developer:
TMS (Tenant Management Service).

This service is ideal for property owners
who are foreigners or live overseas.
The fee structure is
equivalent to one month’s rent per year.

TMS mainly focuses on
maintaining the condition of the unit
—not finding tenants like agents do.

TMS covers everything from
changing lightbulbs, fixing keycards, doors, sofas, shower heads,
even the bed.

They also handle damages
for items still under warranty.

TMS and agent services are completely different.

Many foreign investors
use both services:
TMS to manage the property,
and agents to find tenants.

Even though this adds up to
two months’ worth of fees each year,

owners view their units as valuable assets
with strong growth potential.

So having someone manage everything end-to-end
is seen as a worthwhile investment.
.
Join the discussion at
https://www.facebook.com/Ex.MatchingProperty/posts/pfbid0k2mTCErRVwE1afG6qSwEcYhAkZKgiWNVMycqsZgAWTwfxstxNT6Nk7NKSX8GFQ8cl