The percentage is the part everyone quotes. It is rarely the part that decides your annual cost.
A management agreement has several separate charges in it, and the base fee is only the first. Two firms quoting the same headline rate can produce annual totals that differ substantially, depending on how the rest of the agreement is written. This is a breakdown of every line that shows up, why commercial pricing works differently from residential, and the specific questions worth asking before you sign anything.
The base management fee
This is the number in the pitch. It is usually charged as a percentage of collected rent, occasionally as a flat monthly amount on smaller or single tenant properties.
Two details matter more than the percentage itself.
Collected rent or scheduled rent. A fee on collected rent means the manager earns less when a unit sits empty, which aligns their incentive with yours. A fee on scheduled rent means they are paid on vacant space. Ask which one the agreement says, because the wording is easy to miss and the difference compounds over a bad year.
What the base fee actually includes. Rent collection and owner statements are always in it. Lease administration, vendor coordination, and inspections sometimes are, and sometimes appear as separate charges later.
The leasing fee
Charged when a new tenant signs. This is usually the second largest number in the agreement and the one owners most often overlook, because it does not appear until there is a vacancy.
On commercial deals a leasing fee is typically calculated against the total base rent over the lease term rather than a single month's rent, which makes it materially larger than the residential equivalent owners may be used to. On a long term industrial or retail lease it can be the biggest single management related cost in that year.
Worth asking: does the fee change if the manager procures the tenant themselves versus cooperating with an outside broker? Those are different amounts of work and are often priced the same.
The renewal fee
Charged when a sitting tenant extends. Almost always smaller than a new leasing fee, and reasonably so, since the work is genuinely less.
The question is whether it exists at all, and whether it is charged when the renewal is automatic under an option the tenant already holds. A renewal that happens because the original lease said it would is not the same as a renewal someone negotiated.
Maintenance and the vendor markup
Here is where the real variance lives, and where the headline percentage stops being useful.
Some managers pass vendor invoices through at cost. Others add a percentage markup to every repair. Some own or are affiliated with the maintenance company doing the work.
None of those arrangements is automatically wrong. An in house maintenance team can be faster and cheaper than a third party call out. But you should know which arrangement you are in, because it changes the incentive around how often work gets ordered and at what price.
The question to ask: is there a markup on vendor invoices, what is it, and does the manager have an ownership interest in any vendor being used?
An owner comparing two firms on their base percentage alone, where one passes costs through and the other marks up every invoice, is comparing the wrong number.
The fees that do not make the pitch
These vary the most between firms and are the most common source of a bill that does not match expectations:
- Setup or onboarding fee, one time, for taking the property on
- Technology or administrative fee, often monthly, sometimes per unit
- Vacancy fee, a reduced charge while a unit is empty, on agreements that bill against scheduled rent
- Project management fee, a percentage on capital work or tenant improvements above a threshold
- Legal coordination, for serving notices, coordinating unlawful detainer, or appearing on the owner's behalf
- Early termination fee, what it costs to leave
Ask for the full schedule in writing before signing. A firm that will not put every fee on one page in advance is telling you something.
Why commercial does not price like residential
Owners who have held residential rentals often expect commercial management to price similarly. It does not, and the reasons are structural.
Lease complexity. A commercial lease runs years, carries options, escalations, and CAM reconciliations, and requires ongoing administration a residential lease never generates. Someone has to actually track the escalation schedule and bill it correctly.
CAM reconciliation. On multi tenant properties, operating expenses are apportioned among tenants and reconciled annually. It is real accounting work with real dispute exposure when it is done badly.
Fewer, larger tenants. A vacancy in a single tenant industrial building is not a partial income interruption. It is all of it. The work of keeping that tenant is worth more than the per unit math on an apartment building suggests.
Regulatory divergence. Residential multifamily in Los Angeles carries rent regulation exposure that commercial space largely does not. Determining which ordinance governs a given parcel is its own specialized problem, and getting it wrong is expensive.
Which is why property type drives price as much as size does. Industrial, multi tenant retail, office, and multifamily each carry a different workload, and a firm quoting one number for all of them has not looked at your property.
What to ask before you sign
Take this list to any firm you are considering:
- Is the base fee on collected or scheduled rent?
- What exactly does the base fee include, and what is billed separately?
- What is the leasing fee, and how is it calculated?
- Is there a renewal fee, and does it apply to option exercises?
- Is there a markup on vendor invoices? How much? Do you own any vendor being used?
- What are the setup, technology, and administrative fees?
- What is the termination provision and its notice period?
- Who is my actual point of contact, and are they the person I am speaking to now?
That last one is not a fee question, but for most owners it turns out to be the one that mattered.
Still deciding whether to hire anyone at all? Start with self-managing vs. hiring a property manager in Los Angeles, which prices the side of the comparison this article does not cover.
How Encore prices
Our management fee is a percentage of rent actually collected, so a vacant unit costs us alongside you. What that fee covers is the part worth stating plainly:
No markup on vendor invoices. Repairs are passed through at cost. We do not earn on your maintenance.
No setup fee. No administrative fee. No technology fee. The management fee covers the work.
Pricing depends on property type, size, and scope, so the number belongs in a conversation about your specific building rather than on a web page. What you will get before anything is signed is the complete schedule on one page. Not because it is generous, but because the alternative is a conversation in month four about a line item nobody mentioned in month one.
We manage industrial, retail, multi tenant commercial, and multifamily across Los Angeles County, including roughly half a million square feet of industrial in the Bell and Vernon corridor and multifamily in Glendale, La Crescenta, and Studio City. Because we also broker and lease, an owner works with the same team from acquisition through disposition rather than being handed between firms.
Owners work directly with a partner in the firm. That is the model, not a promotion.
Want a fee proposal on your property? Call or email . We will tell you what it costs before you ask twice.
This article is general information about how management agreements are structured. It is not legal or financial advice on your specific property.