Chapter 6 Property Managers

• Library: Every Landlord's Legal Guide (Nolo) (2020 Ed.)

CHAPTER 6 Property Managers

Hiring Your Own Resident Manager

Decide the Manager's Duties, Hours, and Pay

Advertise the Job

Screen Potential Managers Over the Phone

Interview Strong Candidates

Get a Completed Application

Check References

Check Credit History and Background

Check Criminal and Driving Records

Offer the Position and Put Your Agreement in Writing

How to Prepare a Property Manager Agreement

Clause 1. Parties

Clause 2. Property

Clause 3. Beginning Date

Clause 4. Responsibilities

Clause 5. Hours and Schedule

Clause 6. Payment Terms

Clause 7. Ending the Manager's Employment

Clause 8. Additional Agreements and Amendments

Clause 9. Place of Execution

Your Legal Obligations as an Employer

Employer Identification Number

Income Taxes

Social Security and Medicare Taxes ("FICA")

Unemployment Taxes

Minimum Wage and Overtime

Workers' Compensation Insurance

Immigration Laws

New Hire Reporting Form

Management Companies

Pros and Cons of Management Companies

Management Company Contracts

Special Issues Involving Leases and Insurance

Your Liability for a Manager's Acts

Notifying Tenants of the Manager

Firing a Manager

Evicting a Manager

FORMS IN THIS CHAPTER

Chapter 6 includes instructions for and a sample of the following form:

• Property Manager Agreement

The Nolo website includes a downloadable copy of this form. See Appendix B for the link to the forms in this book.

Many landlords hire a resident manager to handle the day-to-day details of running an apartment building, including fielding tenants' routine repair requests and collecting rent. Landlords who own several rental properties (large or small) often contract with a property management firm in addition to, or in place of, a resident manager. Hiring a manager can free you from many of the time-consuming (and tiresome) aspects of being a residential landlord.

But it can also create some headaches of its own: lots of paperwork for the IRS; worries about liability for a manager's acts; and the responsibility of finding, hiring, and supervising an employee.

This chapter explains how to weigh all these factors and how to minimize complications if you decide to get some management help.

In some states, you might not have a choice—you might be required by law to hire a manager. California, for example, requires a resident manager on the premises of any apartment complex with 16 or more units. (Cal. Code of Regulations, Title 25, § 42.) New York City has similar requirements for buildings with nine or more units. Check with your state or local rental property owners' association, or do your own research, to see if your state requires resident managers.

RESOURCE

Several other Nolo books provide useful information on hiring, managing, and firing employees:

• The Employer's Legal Handbook, by Fred S. Steingold, is a complete guide to the latest workplace laws and regulations. It covers everything you need to know about hiring and firing employees, drug tests of employees, personnel policies, employee benefits, discrimination, and other legal issues affecting small business practices.
• The Manager's Legal Handbook, by Lisa Guerin and Sachi Barreiro, has excellent information about hiring employees.
• The Essential Guide to Federal Employment Laws, by Lisa Guerin and Sachi Barreiro, has extensive discussions on relevant federal laws, including the Fair Labor Standards Act, Americans with Disabilities Act, Equal Pay Act, Immigration Reform and Control Act, Fair Credit Reporting Act, and Occupational Safety and Health Act, as well as state and federal employment discrimination laws.
• Dealing With Problem Employees, by Lisa Guerin and Amy DelPo, includes chapters on hiring, evaluating, disciplining, and firing employees.
• The Essential Guide to Workplace Investigations, by Lisa Guerin, gives employers practical information on how to investigate and resolve workplace problems.

These books are available at bookstores and public libraries. They may also be ordered directly from Nolo's website, Nolo.com, or by calling 800-728-3555.

For free general information on employment law, from discrimination to workers' compensation, see Nolo's articles in the Employment Law Center at Nolo.com.

Property Managers and Building Supers
The focus in this chapter is on property managers, not supers. While there aren't any hard and fast rules, here's the difference between a building superintendent (super) and a manager.
Property managers usually have more tenant-relations responsibilities than supers do, such as taking apartment applications, accepting rent, and responding to tenant problems and complaints. You might also authorize a trusted manager to purchase building supplies and hire outside contractors for specialized repairs.
Building supers, on the other hand, usually concentrate on building repairs and maintenance tasks. They often possess special skills and are experienced at running complicated heating plants and air conditioning systems. Customarily, supers don't collect rent or take rental applications.
The legal issues as to hiring and compensating managers and supers are generally the same.

Hiring Your Own Resident Manager

If you put some thought into writing a job description, and some effort into recruiting and hiring a good manager, you'll avoid problems down the road. Don't hurry the process, or jump into an informal arrangement with a tenant who offers to help out if you'll take a little off the rent—you'll almost surely regret it.

Decide the Manager's Duties, Hours, and Pay

Why do you want to hire a manager? You need to answer this question in some detail, as well as the following:

What are the manager's responsibilities? The Property Manager Agreement included in this book lists duties you might want to delegate, such as selecting tenants, collecting rents, and hiring and paying repair people. Finding an on-site manager who can handle all these aspects of the job, however, is a tall order—so tall that many owners restrict the on-site manager's job to handling routine repairs and maintenance chores.

Is the job full or part time? How many hours do you anticipate the manager working? What hours do you expect the manager to be on the rental property or on call?

Will the manager live on the rental property or off? Someone who just collects rent and handles minor repairs, doesn't necessarily need to live at the rental.

How much do you plan to pay the manager? You may pay an hourly wage, generally ranging from $15 to $25 per hour, or a flat salary. How much you pay depends on the manager's responsibilities, the number of hours, time of day and regularity of the schedule, benefits, and the going rate in your community. You can get an idea how much managers are paid by asking other landlords or checking want ads for managers. Offering slightly above the going rate in your area should allow you to hire the best, most experienced candidates. If you do this, you might want to try and tap into the local grapevine of experienced managers to see if you can snag someone who wants to move up.

Illegal Discrimination in Hiring
Federal, state, and local laws prohibit many kinds of discrimination in hiring. The Equal Pay Act applies to every employer, regardless of size; the Immigration Reform and Control Act of 1986 (IRCA) applies to employers with four or more employees. Title VII of the Civil Rights Act and the Americans with Disabilities Act apply only if you employ 15 or more people. Some state laws apply even if you have only one employee, such as California's prohibition on worker harassment.
Pay attention to these laws even if they do not specifically bind your business. Doing so will not hinder you from making a decision based on sound business reasons: skills, experience, references. The laws only forbid making a decision based on a factor that isn't reasonably related to the applicant's ability to do the job. Following them will protect you from accusations of discrimination.
Here are some of the bases on which these laws make it illegal to discriminate: race, color, gender, religious beliefs, national origin, age (if the person is 40 or older), and disability. Several states and cities also prohibit discrimination based on marital status, sexual orientation, or other factors. Contact your state fair employment office for details.
Much of the advice in Chapter 5, which deals with illegal discrimination against tenants, will also be of help when you're hiring a manager.

Should you give the manager reduced rent? Some landlords prefer giving a resident manager reduced rent in exchange for management services, rather than paying a separate salary. This isn't a good idea—for one thing, reduced rent alone won't work for a full-time manager. Reduced rent in exchange for being a manager can be a particular problem in rent control areas, because you might not be able to adjust rent easily. If you later have to fire a manager who is compensated by reduced rent, you might run into problems when you insist that the ex-manager go back to paying the full rent. But if the tenant-manager pays the full rent and receives a separate salary, there will be no question that you are entitled to the full rent if you have to fire the manager. (Note that firing the manager doesn't mean you can expect the person to leave the rental; you'll need to follow proper termination rules for that.)

Your obligations as an employer are the same whether you compensate the manager with reduced rent or a paycheck. For example, you must still pay Social Security and payroll taxes, as discussed below. However, paying the manager by reducing rent can create problems under wages and hours and overtime laws.

Advertise the Job

Some landlords find great managers primarily via word of mouth: by talking to tenants, friends, and relatives; or getting the word out through Facebook or other social media. Others run an online ad, use an employment agency, or advertise elsewhere. If...