Rental Property Management & Legal Considerations for Landlords
Managing properties can be a profitable business, and many landlords turn to property management companies, or resident property managers, for help with the day-to-day oversight of their rentals. In doing so, landlords limit their interactions with tenants and increase their availability to invest in other properties. But landlord liability may be affected by delegating certain duties, and it is important to maintain compliance with local and state laws.
Resident Property Managers
A rental property manager handles the day-to-day details of running a rental building, including screening tenants, handling repairs, and collecting rent. Some states require a resident manager for the premises of apartment complexes with at least a certain number of units. Landlords that own more than one rental property, or that live far from their properties, may find it beneficial to have a manager or company oversee everyday details. Hiring an experienced property manager can also help a newer landlord understand the intricacies involved in managing rental property.
A landlord may choose to limit the responsibilities of its resident property manager, and as the employer, the landlord is in charge of the manager’s schedule and wages. To limit landlord liability for tenant safety, all potential resident managers should be carefully screened. Landlords should check references and credit reports, and they may want to turn to a local real estate association for references.
A rental property manager should be knowledgeable regarding basic landlord-tenant law, particularly if they are selecting tenants. Potential tenants may have claims of housing discrimination, and it is important that the resident manager comply with all fair housing state and local rules. It can also prove beneficial for landlords to maintain an insurance policy that covers the illegal acts of employees.
It may be preferable to pay a property manager a separate, full salary rather than reducing their rent. This way, the employment agreement and the rental agreement or lease remain separate, and there will be no confusion if the landlord needs to fire the property manager or another employment dispute arises.
After selecting a property manager, a landlord should prepare a written property manager agreement that details the individual’s responsibilities, hours, and pay. This agreement should include an expectation regarding how maintenance issues will be resolved. For example, perhaps the manager may spend only up to a certain dollar amount before obtaining the landlord’s permission. Landlords should try to anticipate issues and discuss them with prospective managers before summarizing any agreement in written format. In addition, as an employer, it is crucial that a landlord abide by federal and state tax rules, as well as Social Security and recordkeeping obligations.
Rental Property Management Companies
One benefit of hiring a rental property management company is that the company is an independent contractor. As a landlord, you may not want to be responsible for an employee, as you are when you are hiring a resident property manager. In this case, landlord responsibilities can be delegated to a property management firm.
The downside of hiring a rental property management company can be the cost, and many landlords evaluate the cost of hiring the management company to perform hands-on management against the benefit they receive by focusing on growing their business. When searching for a quality property management company, landlords should rely on recommendations from housing associations and colleagues. They should interview prospective companies and ensure that their questions are answered. Protecting their property and their own liability is critical.