Chapter 13Property Management

Managing and Leasing Properties

Property Management It is extremely important to have a full understanding

of the regulatory laws that govern less-than-freehold-estates, also known as leasehold estates

A “leasehold estate” is a tenant’s right to occupy real estate during the specific term of a lease

I. Fair Housing Laws

Fair Housing Laws California first passed the Unruh Civil Rights Act and

then the Fair Employment and Housing Act Both laws dealt with discrimination issues

The Federal Civil Rights Act of 1968 (expanded in 1988) reinforced both of the previous laws

A. State Law – Unruh Civil Rights Act

No discrimination in Business This act was the first civil rights act in California and

prohibits “steering” and “blockbusting” as a real estate business practice

B. California Fair Employment and Housing Act

This act outlaws discrimination in housing FEHA clearly defines DISCRIMINATION as the

refusal to sell, rent, or lease housing accommodations, including misrepresentation as to availability, offering inferior terms, and cancellations on the basis of race, color, national origin, religion, sex, familial status, and handicap

Not so many years ago, buyers of child-bearing age, applying for financing on a purchase loan, were questioned about their use of birth control

C. Housing Financial Discrimination Act of 1977

This act prohibits financial institutions from engaging in discriminatory loan practices called “redlining”

REDLINING is the practice of financial institutions denying loans or varying finance terms based on the location of a given property, regardless of the credit worthiness of the borrower

D. Federal Civil Rights Act of 1968

For all practical purposes, discrimination laws evolved from the U.S. Supreme Court Case Jones v. Mayer, Title VIII of the Civil Rights Act of 1968, and the 13th Amendment to the U.S. Constitution

In 1988, this Act was expanded to include protection against familial status and the handicapped

II. Property Management

Property Management

Few people possess sufficient knowledge, skill, and time to manage their own properties

As a property manager, you are in a better position to assess your clients’

insurance needs handle financing offer timely suggestions on exchanging or sale opportunities recommend other investment properties

A. Types of Properties The basic types of income-producing properties

include: Residential Office building Retail property Industrial property

Apartment buildings lead in the demand for property managers

B. Types of Property Managers

The principal goal of any manager is to minimize expenses, maximize rents, and increase the long-term appreciation of the property

Outside Manager

Resident Manager

Institutional Manager

C. Duties and Responsibilities of Property

Managers A list of some important duties and functions of the

manager follows: Establish a rent schedule Rent vacant units Keep all plumbing, heating, and electrical in good working order Maintain roof, windows, and doors Make sure floors, stairways, and railings are safe Keep premises clean and free of pests Qualify tenants Prepare and renew leases Collect rents Account for funds Submit monthly statements to owners

Tenant’s Responsibilities

The tenant has the following responsibilities:

Keep the dwelling clean and sanitary Use all fixtures properly, keeping them clean Cause no damage to the property Use property at state in the lease agreement Pay rent on time Give a 30-day notice when vacating a month-to-month tenancy Return door and mailbox keys when vacating Leave unit in as clean a condition as taken at the start of the

lease

D. Landlord-Tenant Termination Laws

A 30-day termination notice must be given when the possession of a rental unit is for less than one year

A landlord must give 60-day notice to terminate the tenancy if the tenant has lived in the dwelling for one year or more

A tenant ONLY needs to give a 30-day notice to terminate a tenancy

The THREE-DAY NOTICE TO QUIT states that the tenant has three business days to pay all past due rent or vacate the property or face an unlawful detainer

E. Selection of Property Managers

Property managers should possess skills and talent in handling people, money, and a diversity of other responsibilities

When hiring a property manager, you should sign a Management Contract with them which outlines the duties and expectations of the job

Outside professional managers are usually paid a percentage of the gross revenue

F. Leasing and Tenant Selection

All rental applicants need to be screened carefully and the proper and latest rental agreements need to be used

The owner’s investment can be seriously impaired if proper tenant selections are not done

As a property manager in California, you may charge up to $30.00 per applicant as a nonrefundable tenant screening fee

Many forms for qualifying tenants are available

1. Lease Contracts Any rental agreement that ends over one year from the

date of signing must be in writing

Types of leaseholds: Estate for Years Estate from Period-to-Period Estate at Sufferance Estate at Will

2. Establishing Rent Schedules

“Contract rent” is the current amount being paid, and “economic rent” is the amount the unit could make if available on the market today

A good property manager is constantly working to bring the contract rent up to the economic rent

Types of leases: Flat rental Net leases Gross rental Percentage lease Graduated lease

G. Accurate Record Keeping

There are a variety of computer programs available to aid in maintaining accurate records

A Cash Journal can be used to report cash received from tenants

An Activity Report summarizes all revenues and expenses

H. Common Interest Development Management A COMMON INTEREST DEVELOPMENT is a form of

home ownership whereby individual owners are allowed the use of common property and facilities, the governing of which is controlled by a homeowner’s association

An homeowner’s association manager runs the day-to-day affairs of the association, taking direction from the board of directors

The obligations of the association are set forth in the CC&Rs

The budget of the association is determined by the amount of money required to operate and maintain the common areas

I. Prepaid Rental Listing Service

In order to collect fees, a prepaid rental listing service, must either be run by a broker or pay for a new license every 2 years

Because of many abusive practices in the past, all PRLS must register with the DRE

J. Improving Value Through Balanced Management

Being a property manager is diverse job and it is critical to keep a proper balance across all areas

Determining when to spend or not spend money on maintenance is a large part of the job

Spending a little to maintain a property saves the owner a lot in the long run

As a property manager, you must be acutely aware of changing conditions in the real estate market

K. Rent Control• Rent control discourages the building of more

apartments, causing existing rents to go even higher, further damaging a city’s housing affordability

• Rent control, in California, can only apply to residential properties

L. Low-Income Housing Section 8 is a county rent subsidy for qualified

tenants who meet the required criteria The property must be approved by county inspectors

for eligibility and is checked for its condition at least once a year

M. Professional Associations for Managers

The most notable professional association for property managers is the Institute of Real Estate Management, a division of the National Association of Realtors®

A Code of Ethics was adopted by the institute and must be adhered to by any Realtor® applying for membership

III. Going “Green” Made Easy

Going Green

Chapter Summary

• Fair Housing Laws• Unruh Civil Rights Act• FEHA• Housing Financial Discrimination

Act• Federal Civil Rights Act 1968

• Property Management• Types of Properties• Types of Property Managers• Duties and Responsibilities• Landlord/Tenant Termination laws• Selection of a Property Manager• Leasing and Tenant Selection• Accurate Record Keeping• Common Interest Development

Management• PRLS• Balanced Management• Rent Control• Low-Income Housing• Professional Associations for

Managers