When considering an investment in California real estate, prospective investors should carefully consider how much of their time and attention the investment will require. Properties that generate rental income require management in order to ensure that the stream of rental income continues unabated. Investors who are willing and able to take on this responsibility may do so, but they should also consider retaining a property manager to handle the day-to-day operations. Property managers in California must have a real estate license to perform functions like soliciting tenants or negotiating and enforcing lease agreements. Otherwise, they are not required to have a specific license.
Types of Property Managers
The term “property manager” can refer to an individual or a business. Property managers might handle a single property for one client, or multiple properties for many clients. The general set of responsibilities is the same, regardless of a property manager’s business status or size.
The California Department of Real Estate identifies three types of property managers, although it provides this list as a set of guidelines rather than a formal legal classification:
– An “individual property manager” might manage multiple properties for multiple clients.
– An “individual building manager” manages a single property, such as an apartment or office building.
– A “resident manager” manages a large residential property, and often lives on-site.
In all of these cases, the individual property manager might work directly for the property owner, or might work for a property management company.
Property managers are generally responsible for keeping the property in habitable condition, for the benefit of both the tenants and the property owner. The specific responsibilities of a property manager depend on factors like the nature of the property or properties under management and the extent to which the owner wants to turn control of the property over to a manager.
A property manager is employed as an agent of the owner. Under the law of agency, an owner may be liable in some circumstances if a property manager’s violates California’s landlord-tenant laws.
Common responsibilities of a property manager include the following:
– Routine maintenance of a property’s common areas;
– Responding in a timely manner to requests for tenant repairs;
– Collecting rent payments from tenants;
– Paying property-wide expenses, such as utilities, mortgage payments, property taxes, and insurance premiums;
– Compliance with state and federal laws, such as California disclosure and rent control laws, and state and federal antidiscrimination laws;
– Showing vacant units to prospective tenants, if the owner has not retained a real estate broker for this job;
– Performing credit checks and other due diligence on prospective tenants;
– Negotiating lease agreements, to the extent allowed by the property owner;
– Executing lease agreements with new tenants;
– Holding security deposits in trust for tenants;
– Notifying tenants of unpaid and delinquent rent;
– Enforcing lease agreements, including eviction proceedings; and
– Making regular reports to the owner about income, expenses, and other matters.
California requires a real estate broker’s license to perform certain functions often performed by property managers, including soliciting prospective tenants and negotiating lease agreements. A property manager who does not perform these functions does not necessarily need a real estate license.
Property managers may obtain certifications from private organizations, indicating that they have received a certain amount of training and adhered to certain ethical standards. The Institute of Real Estate Management, for example, offers credentials like Certified Property Manager (CPM) and Accredited Residential Manager (ARM). Credentials offered by the National Association of Residential Property Managers include Residential Management Professional (RMP) and Master Property Manager (MPM).
More Blog Posts:
Due Diligence Tips for Commercial Property Purchases in California, Titles and Deeds, October 9, 2018
What Are a California Landlord’s Remedies for a Tenant’s Breach of a Commercial Lease? Titles and Deeds, September 12, 2018
What California Real Estate Investors Should Know About Buying Apartment Buildings, Titles and Deeds, March 22, 2018