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Property managers are an intrinsic part of the rental housing business, ... but they are often ignored by the get rich quick book and tape offers presented in TV info-commercials. When an investor decides to manage their own property, they quickly learn that the job requires totally different knowledge and skills than the investing aspect of the rental housing business.
Professionals also learn that it is best to have a third party between the property owner and their tenants. We all tend to develop relationships that become personal, and those between landlords and tenants must be kept on a business basis. One of the things you will learn here is if you manage your own property, you should at least do it through a company name and treat it like the business it must be.
The information contained here, and linked to from this page, is the minimum that any property manager should know. We are constantly compiling a great deal more and designing tools and services specifically for professional property managers. RHOL members should also access our Property Management Web.
Fair Housing: Federal Fair Housing Laws prohibit discrimination if it is based on: race, color, religion, gender, national origin, familial status, mental or physical handicap.
State and local Housing Discrimination Statutes and fair housing laws sometimes provide even broader coverage. They often prohibit discrimination based on: age, occupation, source of income, marital status, sexual preference, ancestry or even military background.
The most obvious example of discrimination is refusing to rent to a member of a protected class. But housing discrimination can take many forms, including: offering different lease terms to members of protected classes; using discriminatory or preferential language in an advertising; treating certain classes of applicants preferentially or segregating protected classes into separate areas of a rental property or community. Return to list
Americans with Disabilities Act: Individuals with disabilities have a right to equal housing opportunities under both the Fair Housing Act (FHA), which made them a protected class, and the Americans with Disabilities Act (ADA) of 1990, which requires that a landlord make economically feasible "reasonable accommodations" and "reasonable modifications" for disabled tenants. Fair Housing requires that a landlord not discriminate based on a tenant applicant’s mental or physical handicap. The American’s with Disabilities Act goes much further. Those covered by the Act include: any physical, mental and emotional impairment that limits one or more of life’s major activities.
See the Pages on Barrier Free Access for the Disabled in the Property Management Web
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Target Tenants: Think about your building and who would make an ideal tenant for the unit that you have available. Paint, decorate and advertise accordingly. A nationally known speaker and publisher, Mr. Landlord (Jeffery Taylor), stresses the concept of matching your surroundings to who you would like as a tenant. If an older tenant would be better for a particular property, make sure your unit is barrier free and decorated in a friendly traditional manner. Target your marketing and media to places most likely to be seen by the people who will best like the vacant property.
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Tenant Screening: Landlords and property managers must understand that tenant screening is crucial to their success. We cover the subject rather extensively on our Tenant Selection and Tenant Screening pages elsewhere on this site. But you can never learn enough about the subject. If landlords and property managers always selected ideal tenants, their would be nothing but millionaires in the rental housing business. Read everything you can, here and elsewhere, then join a local Rental Housing Association. Many of them have lists of tenants who are chronically evicted and landlord groups can also offer a multitude of other services. You must always check out your applicant before you commit. You can also collect an application fee from your tenant to pay for this service. Collecting this fee is a common practice and it is a very small cost to your tenant compared to a deposit.
Property managers must not only select tenants who are good credit risks, but also people who will coexist peacefully with their neighbors and other tenants. Middle of the night calls are much more likely to deal with some kind of disturbance than with leaky plumbing.
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Deposits: Failing to establish a clear and fair system of setting, collecting, holding and then returning security deposits has contributed significantly to the negative landlord image. It has also resulted in legislation in most states and countries that now regulates almost every aspect of rental housing deposits. Neglecting to inspect and document the condition of the rental unit before the tenant moves in often leads to disputes or misunderstandings over security deposits when the tenant moves out. Consequently, many landlord tenant laws now require that inventory or move-in check lists be completed and signed, prior to occupancy, in order for any charges to be deducted from security deposits for damage.
Unscrupulous landlords have contributed to over regulation of rental housing in many ways, but perhaps the single most frustrating is their unwillingness to treat security deposits as the tenants money.
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Disclosures: Failure to make full disclosure and remedy environmental hazards, like radon and lead, is not only very risky business, but as of September, 1996, it against the law. Even if you didn't cause or know about lead-based paint or pipes in a rental building, you have an obligation to give tenants notice that such hazards even might exist.
Landlords are increasingly being held liable for tenant health problems resulting from exposure to environmental poisons in the rental premises. You may want to check out our environmental pages to help you become aware of potential problems and perhaps how to deal with them.
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Establishing Collection Procedures: Many tenant problems stem from an improper business image. Tenants can and do manipulate landlords when there appears to be no defined consequences for breaking rules. A very informal tenant landlord relationship gives this appearance. On the other hand, formal organized rent procedures provide a powerful collection tool and business like appearance. Professional property managers have standard procedures in place to provide this all important part of their business. Tenants obey the rules because there appears to be serious consequences.
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Pets: A review of typical vacancy advertising in a local newspaper would lead you to believe that pets are poison in rental housing. The ads will almost always culminate with: "No Pets allowed." Many property managers have discovered, however, that a more prudent pet policy can be profitable. Older adults often make the very best tenants. They can usually afford the rent, are more responsible, have stability in their lives, and ... often have a pet. In fact, more than one third of rental housing residents have pets, whether the landlord approves or not.
Most pet owner tenants are actually willing to pay pet deposits, or even higher rent to keep it. Good managers find ways to attract and keep good tenants. Often their pet policy gives them a big advantage over a less liberal competitor. If you are a no pet person, it may be worth your while to check our pets pages.
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Repair and Maintenance: Not staying on top of needed maintenance and repair, and/or failing to make repairs when requested, is one of the most shortsighted and costly mistakes that property managers make. If the property is not kept in good repair, the tenant may have the right to withhold rent, sue for any injuries caused by defective conditions, or move out without notice. And who could blame them? As a result of shoddy and improper maintenance by nonprofessional property managers, American courts began to hold that there is an "implied warranty of habitability" in housing that is offered for rent. Many states have even codified that concept by statute and landlords can now be held criminally responsible for neglecting maintenance in some states.
An RHOL landlord member from the UK, Matthew Gibb, recently emailed us the following: "Our action group managed to successfully lobby parliament recently on some impending legislation. It was proposed that if a repair notice was served on a landlord of a house in multiple occupation, the landlord would be immediately criminalized. Now, a warning notice must be served first."
As Matt's note from the London suggests, the evolution from "as is" to the concept that rental property must be guaranteed safe and sanitary is becoming accepted world wide. You may want to review our pages on the Warranty of Habitability to get a better understanding of what is now expected of property owners and managers and why.
In addition to the new legal requirements, timely and preventive maintenance is a income property manager's best investment in both the property and in attracting the best tenants. You may want to also see Maintenance FAQs, Talk About Maintenance and our Maintenance pages elsewhere on this site.
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Safety and Security: Landlords are sued more than any other group of business owners in America. The average settlement paid by a landlord's insurance company is $600,000, and the average jury award is $1.2 million. Locks and lights are relatively cheap and easy to install or add. They may even help save lives and property. Letting your tenants and property be an easy mark for a criminal, or renting to one, invites both traumatic and expensive trouble.
Perhaps the most important safety devices a property manager can install are smoke detectors. Most building codes now require at least one ionization detector on each floor of a dwelling. Many mandate a detector in each bedroom as well.
See the RHOL Smoke Detector Page.
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A Tenant's Right to Privacy: Violating a tenant's privacy is one of the most common and emotion-filled issues in rental housing; right next to disputes over rent and security deposits. They often arise over a landlord's right to enter a rental unit without reasonable notice and cause, and a tenant's right to be left alone at home.
A typical lease allows a landlord, or agent, to enter the premises for normal maintenance and repair with 24 hours notice, or in case of emergency. Amateur landlords often think that since they are the owners, they may go into a rental property anytime they wish. That is not true. A tenant has a right under the law to: "quiet enjoyment."
A major point of contention over tenants right to privacy in recent years results from onerous new rental property only inspection ordinances being adopted by various municipalities across the country. In many cases the local rental inspection laws do not acknowledge the tenant's right to deny access to anyone, even city rental inspectors; "without probable cause to believe that a crime has been committed" as is required under the Fourth Amendment to the US Constitution. Although the same local officials are quick to acknowledge that they are prohibited from entering an owner occupied residence without permission or a warrant. There is a great deal of money from what are called "fees" and a lot of additional power that flows from information on property owners and their tenants at stake for municipalities, so the issue will have to be decided at the local ballot box, or eventually by the US Supreme Court. Winning local elections with more intelligent and reasonable candidates is cheaper and easier by far.
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Employees: Selecting, screening, then hiring the right property manager or maintenance people can be as important as selecting property and tenants. But that alone is not enough, an owner has both a financial and legal responsibility to provide adequate supervision as well. If an employee does their job improperly, you pay the bill. If they commit a crime, or are incompetent, you may be held financially responsible as well. Verifying education and experience is only the beginning of the screening process. Courts have held that employers have a duty to conduct a thorough background check too. Minnesota recently passed important new legislation that now requires property owners to properly screen employees. See: New L/T Law and Updates
Carefully selecting all employees, then clearly spelling out the manager and maintenance staff duties will also help to prevent expensive problems down the road.
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Insurance: Having adequate liability and other types of property insurance is an absolute must. A well-designed insurance program can protect your rental property from losses caused by everything from fire and storms to burglary, vandalism, and personal injury.
Some rental housing associations have been successful in helping their members secure coverage for discrimination lawsuits as well.
A typical fire insurance policy on rental properties does not offer adequate liability insurance. However, typical homeowners policies contain $300,000 in liability protection on up to five rental units before additional policies need to be purchased. Don't ever take coverage for granted, require that your agent help educate you on what you have and what you need.
See our Pages on Buying Rental Housing Insurance
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Legal and Accounting: Using a lawyer or CPA when you can do the work yourself will probably cost you as much aggravation as money. You could ask your lawyer or accountant for advice on how to avoid the problems above, and pay an average of $150 per hour for the lessons, or spend the time to learn the information contained on this site and in the material we link to yourself, for a fraction of the cost. However, when in doubt, seek professional advice. Even at $150 an hour, seeking a lawyer's advice early in a problem can avoid thousands to litigate your mistakes or disagreements.
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