Property Management and Related Laws

Property Management & Law

1)Objectives of Property Management –

• To attain the highest possible net return for the property owner.
• To protect his capital investment at all times.

2) Specialized Fields

(Apartment complex, Retails, Office buildings, Hotels, Shopping centers,Industrial parks, Theaters, Restaurants, Hospitals, etc)

1. Qualifying and investigating tenant’s credit.
2. Marketing the space and collecting rents.
3. Establishing and maintaining trust account for rental income and security deposits.
4. Purchasing supplies and auditing and paying bills.
5. Hiring, training and supervising employees.
6. Inspecting vacant space frequently.
7.  Arrange  and paying for adequate insurance coverage.
8. Scrutinizing taxes and assessments.
9. Analyzing depreciation deductions.
10. Developing tenant relationship policies.
11. Maintaining proper records and making periodic reports to the owner.
12. Preparing and executing leases.
13. Advertising vacancies though selected media.
14. Planning and supervising alteration and modernization programs.
15. Having knowledge of health, building code and safety standards.
16. Providing adequate security to safeguard tenants.
17. Preparing an annual budget.

3)Property Management Agreement

1. A legal description of the property.
2. Agreement period to exit.
3. A definition of the responsibilities of the manager.
4. The authority of the manager.
5. The reporting requirements. ( both frequency and detail)
6. Compensation of the manager.
7. A limit on how much the manager can spend without expressed authorityexcept in a case of emergency.

4) Management Fee – Usually 5 – 10% of gross collectible rent. – Direct employee expenses, such as salaries for super, maintenance supervisors are charged directly to the owner.

5)Operating Responsibilities of a Property Manager

1. Management Plan
2. Budget Preparation
3. Leasing Space
4. Rent Collection
5. Recording-Keeping
6. Maintenance
7. Handling Tenant Requests
8. Communicating with the Owner

5)Financial Responsibilities of a Property Manager

1. Income and Expenses Report
2. Periodic Profit and Loss(P/L) Statement
3. Cash Flow

6) Licensing Requirements –

• In NJ, salesperson licensee cannot engage in property management agreement and perform property management for a fee with a client without a supervising broker’s involvement.
• If a legal case is involved, E&O insurance company may deny the coverage for the salesperson.
• A salesperson may engage in these activities only when working under the supervision of a licensed broker. ( NJSA 45:15-3)

7)Federal Laws Affecting Property Management

1. Environmental Protection ( EPA)
2. The Federal Fair Housing Law
3. The Internal Revenue Code (IRS)
4. The Occupational Safety Health Act ( OSHA)

Takeaways:

1. In recent years, the field has grown rapidly due to the increase of housing laws and regulations at all levels, and the development of new forms of multi-family ownership, including condos and coops.
2. This field requires a certain skills and accountability including legal obligations.
3. Salesperson licensee’s independent performance for a fee without supervising brokerage is the violation of licensing laws and regulations and lead to liability and risk, including no coverage for E&O insurance.