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Chapter 15 - Property Management And Leasing
Terms in this set (39)
Institute of Real Estate Management (IREM)
Formed by 100 companies, in 1933, under the National Association of Realtors to improve the professional standards of property managers.
Certified Property Manager (CPM)
Certified individual managers rather than the companies that employed them to deal with the lax standards set by IREM.
Accredited Residential Manager (ARM)
Residential property manager designation.
Accredited Management Organization (AMO)
Designation given by IREM to a company.
- Needs to have at least one CPM in charge.
- Have property management as primary activity.
- Follow minimum standards and the rules of IREM.
- Renew accreditation yearly.
3 Basic Kinds of Managers
Individual Property Managers
A licensee of a real estate office or agency that manages a number of properties for various owners. May be full time in management, self-employed as a managing agent, or may be one of several managers in the management department of a large real estate company.
Persons working under the direct supervision of a licensed property manager need not be licensed to show property, accept preprinted rental applications, provide information on rental terms, and accept signed leases and deposits.
Individual Property Manager
An individual property manager manages a single property for the owner and may or may not possess a real estate licesnse. This person susually is employed on a straight salary basis.
Resident Manager (If you have 16 or more units, you need a resident manager who is a "responsible person.") (Mobile home parks having more than 50 units must have a resident manager.)
Lives on the property and may be employed by the owner or by a managing agent. Does not require a RE license. Usually qualified for this assigned by previous management experience or by special training. Personality is critical to success; specifically, the manager should exhibit the following:
- The merchandising ability to contract, show and close the rental of a unit.
- A high degree of self-confidence and willingness to take charge.
- Accuracy in handling money, checks, bank deposits, and other bookkeeping duties.
- Awareness of and sensitivity to the events occurring on and around the property.
- Orderliness and legibility in keeping records meticulousness in filing, cataloging, and making reports.
- Computer skills, such as the ability to access and interpret data.
- The ability to select residents on the basis of economic capability and credit references.
- The diligence to maintain the property (the amount of maintenance will vary with the size of the property and the policies of management).
Functions of a property manager:
Administrator for the Owner:
- The highest return from the property realizing its highest and best use.
- The enhancement or preservation of the physical value of the property.
Specific Duties of a Property Manager:
State Defined Responsibilities
As an agent, the property manager must:
- Show good faith and loyalty to her principal (the owner).
- Perform her duties with skill, care, and due diligence.
- Fully disclose all pertinent facts.
- Avoid commingling funds.
- And refrain from personal profits without the principal's full knowledge and consent
Is often less than scheduled rent if inducements are provided to the tenant, such as one month's free rent for a one-year lease.
To set up proper rent schedules:
The manager must make a skilled and thorough analysis of the neighborhood.
Residential properties are by far the most numerous of the properties subject to professional management. 133 million occupied housing units in the U.S.
Costa-Hawkins Rental Housing Act
Landlords who are subject to rent control are free to establish new base rents for new tenants, as well as for sublessees and assignees when landlord consent is required for the sublease or assignment.
Condominium Association Management
Growing segment in the property management field. Heavy on accounting aspects.
Mobile Home Parks
Management of a mobile home park is a specialty field involving the following:
- Park development.
- Public Amenities
- Enforcement of park rules
- Approval of lease assignments on sale of units.
Formalizes the relationship between the owner and the manager and points out the rights, and duties of each party. Includes:
- ID of the parties.
- Sufficient ID of the property.
- The contract period, including beg and end dates.
- Management's and owner's responsibilities.
- Management fees - the amount, when it is to be paid, and the manner of payment.
- Provision for management accounting, including records to be kept and report to be made.
Management fees can cover one or a combination of the following:
- Flat fees
- Minimum fee
- Minimum plus percentage of the gross (common)
- Leasing fee (flat fee for a percentage of the lease rental; generally higher % for the 1st year and a lower % for subsequent years.
- Additional fees or percentages for special services, such as drafting leases, supervising repairs, remodeling, handling evictions, overseeing contracts, and collecting delinquent accounts of former tenants.
The law states that a separate record must be kept for each manged property. True/False
Computer Companies Offering Programs For Property Management
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ledger of rent coming in and monies paid out on behalf of the owners. these are charged against the income of the property
Any person who receives rental income must provide IRO Form 1099 for all service providers of $600 or more. True/False
tenant pays a fixed rental and the owner pays all of the expenses for the property
to keep a tenant on a gross lease from holding over at the end of the term by materially raising the rent when the lease period expires.
the owner gets a net amount and property expenses are paid by the tenant. payments are similar to annuity.
single net lease - tenant pays the taxes and base rent
double net lease - tenant pays for insurance, taxes, and bases rent
triple net lease - taxes, insurance, base rent, and the tenant is responsible for all property maintenance and repairs
generally long leases and are often found in sale-leaseback agreements
provides a stated percentage of gross receipts of a business to be paid as rent.
usually used in shopping centers.
clause in percentage lease where lease can be terminated if minimum income/payments are not made
- should a tenant not obtain a desired gross, then the lessor has the right to terminate the lease.
fixed rent like gross lease, but provides for increases at set periods
Exculpatory Clause (Hold-Harmless Clause)
Lease frequently contain an exculpatory clause, whereby the tenant agrees to relieve the landlord from all liability for injury or property damage resulting from the condition of the property or the negligence of the owner.
Invalid for residential leases.
Implied Warranty of Habitability
A feature of residential leases. The property is habitable.
transfer the entire leasehold rights to a third party. the third party pays their rent to the original lessor/landlord. the original lessee is liable should the assignee defaults.
transfers only part of the tenants interest. the sublessee pays the original lessee who then pays the lessor. this is referred to as a sandwich lease
Protecting Tenants at Foreclosure Act of 2009
Before this act, foreclosure of a prior lien would nullify a residential tenant lease. Now the lease survives foreclosure and the tenant is allowed to remain in possession until the lease term expires. However, if the buyer at foreclosure intends to occupy the property, the lease may be terminated with 90 days' notice.
In the case of a month-to-month lease, the tenant is entitled to 90 days' notice to vacate.
Tenants in foreclosed properties must be given notice of their rights.
Unlawful Detainer Action
A landlord may evict tenants and bring an _____ against them for failure to pay rent when due, violation of provisions contained in the lease or rental agreement, or failure to vacate the premises after termination of 30-day or 60-day written notice.
Process of removing a tenant for being behind in rent:
1. The landlord serves the tenant with a three-day notice to quit or pay rent.
2. If the tenant fails to heed the notice, the landlord files an unlawful detainer action in court.
3. If the landlord wins, the court awards the landlord a judgment. The landlord then asks for a writ of possession authorizing the sheriff to evict the tenant.
4. The sheriff sends the tenant an eviction notice. If the tenant fails to leave, the sheriff then physically removes the tenant.
Small Claims Court Limitations
$5000 max for business.
$10000 max for individuals.
estate for years
a lease for a definite fixed period of time. Professional property managers will generally insist on an estate for years.
estate from period to period (periodic tenancy)
lease from period to period, most commonly month-to-month, can be ended by a notice for the length of the rent paying period but for no more than 30 days (60 days for mobile homes).
However, is a residential tenant has lived on the premises for at least 12 months, a landlord must provide a 60-day notice to terminate the tenancy.
If a tenant is under a rental agreement with a governmental agency, in certain Section 8 housing situations, a 90-day notice must be given to terminate. The lessor can change lease terms on a periodic tenancy by providing a tenant a 30-day written notice, however, if the rent is increased more than 10% during a 12-month period, then a 60-day notice is required.
Estate at Sufferance
Is created when a tenant obtains possession of a property legally but then remains on the property without the owner's consent, such as a holdover tenant after the expiration of the leasehold interest.
- Need to be evicted.
- If the lessor accepts rent, the estate becomes a periodic tenancy based on the rent-paying period.
Estate At Will
Has no specified time limit. Possession is given with permission, but no agreement is made as to the rent. As an example, possession is given to a prospective tenant before the lease terms are agreed to.
In CA, such an estate requires a 30-day notice to terminate.
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