Are You Entitled to 'Add-on' Management Fees?

If you manage a site with unusual long-term management problems or extra administrative burdens, you may be able to get an “add-on fee” from HUD. Add-ons are additions to management fees, designed to give incentives and compensation to managing agents who can show that site conditions make management of a property more demanding than normal. Add-ons are intended only to compensate agents who are dealing with long-term site conditions. And it’s in addition to the percentage-based, standard management fees an owner pays an agent.

“Special fees” are different from add-on fees. They are intended to compensate agents for dealing with short-term site conditions and correcting a specific problem or handling a specific task over a set period of time.

HUD doesn’t have a single, nationwide list of HUD-approved add-ons. Instead, it requires each area Hub office to issue its own list of permissible add-ons with flat dollar amounts per unit per month (PUPM) for its area. As a result, what may qualify for an add-on in one area may not qualify for an add-on in another area.

As guidance to the Hubs, HUD includes a list of “Examples of Long-Term Project Conditions That Could Justify Add-On Fees” in Handbook 4381.5, fig. 3-4. Here are examples of conditions from that list:

  • High-density sites
  • Scattered sites
  • Remote location
  • Adverse neighborhood conditions
  • Sites owned by nonprofits or cooperatives
  • Subsidy/program mix
  • Sites predominantly catering to disabled residents
  • Sites committed to the Multifamily Better Buildings Challenge

HUD won’t consider add-on fees until after it has approved your fee percentages for residential, commercial, and miscellaneous income. If, after getting your other fees approved, you want to apply add-on fees for long-term problems, you can find information on how to apply in “How to Request 'Add-On' Management Fees for Demanding Long-Term Site Conditions,” available to subscribers here.