When you decide to hire a property manager, probably it is to create a change in your life as an owner. Most owners, who have tried to manage their property, eventually face a decision. Sell or hire a manager. It is not easy being the landlord and maintaining a professional distance from the tenants. It is almost impossible if you are not located within about a 15 minute drive from the home. When we are hired as a property manager for an owner who was trying to manage the property themselves, sometimes we find some practices of the owner that need to be ended. We often learn about the practice after the management agreement is signed via a tenant. Or the owner asks about them when signing the agreement. Here is a list of a few things that come to mind that may change when you hire a manager.
1. Probably the most common issue is handling the security deposit. Indiana and Florida law requires to be a property manager and lease property, the manager and their company must hold a real estate license. An owner can lease their own property without a license but otherwise, the state’s real estate laws apply. So, security deposits must be held in a separate escrow account that is owned by the brokerage and is subject to audit by the state. Simply, the owner can not hold these funds. We always try and make that clear. It is a issue with owners who have current tenants and are holding a security deposit for the tenant. If the cash is not available from the owner, we have to hold back rental proceeds to create a security deposit in our escrow. Owner’s do not like this, but our license is at risk if we are managing a property with a tenant under a lease. We have a fiduciary responsibility to that tenant also and have to ensure their security deposit is in safekeeping.
2. The owner will not interview the prospective tenant. I find this is sometimes the one thing that some owners still want to do. Before agreeing on a tenant they want to interview them. The reasons this should not be allowed are numerous. One is the owner should not establish a relationship with the tenant in order to allow the property manager to do their job. The property manager often has to wear a black hat for the tenant and the last thing an owner wants is the tenant to then feel like they can just turn around and contact the owner about the big, bad property manager. Another one that is much more sensitive has to do with Fair Housing. Frankly, anyone who holds a real estate license can not be a party to any type of discrimination when it comes to the sale or leasing of a property. It is hard to speculate the line of questioning that could ensue between an owner and a prospective tenant, but as long as their is a licensed property manager they will be expected to monitor and ensure all the Fair Housing standards and laws, both locally and nationally, are followed.
3. Similar to the reasoning above, the owner will not be given a copy of credit reports or background checks. The manager will review these and give general descriptions and recommendations, including to proceed with a lease or a declination. Privacy laws protect tenants and this information. A property manager is held to a very high standard by nature of having a real estate license. An owner will have to trust the manager, their processes and screening procedures, to follow the manager’s recommendation. It is a key part of the relationship.
4. Owners are not going to inspect their property’s interior while occupied by a tenant. I have had a tenant contact me to let me know the owner had just left and had walked through the property. The manager can’t stop this from occurring but it is likely a violation of the tenant’s rights. Most leases provide the tenant with the right of a notice prior to the manager (or any party) entering the property-with certain exceptions. The curious owner is not one of those exceptions. Additionally, these owner inspections create a direct communication between tenant and owner. That usually moves the manager out of the loop and makes it difficult for us to provide the services in our agreement.
It is natural that an owner wants to stay a part of the property they own. If you are considering hiring a manager for a property you currently manage, do a pro/con analysis of what you will gain with a manager versus what you will need to give up. A professional manager will provide transparency, professional third party management, income maximization strategies, and the resources to lease your property faster. In return, the owner will step quietly into the background and spend their time on something else. Ideally something that the owner finds much more rewarding!
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Tags: communications, Indianapolis, Indianapolis Property Management, Indianapolis Property Manager, Liability, Management Agreement, property management, Property Manager, security deposit, tenant qualifications, tenant rights, tenant screening, Wilmoth
