Investor · San Antonio, TX · Member since 2016 · 90 posts · 28 votes
Hello. I just recently discovered the biggerpockets.com podcast and instantly became hooked.
My wife and I have a LLC in Louisiana, but we live in San Antonio, Texas. We just purchased 2 four-plexes in Louisiana and my father-in-law is managing the properties for us. Is there a way he can legally sign lease agreements as an agent for our LLC without being licensed and without adding him to the LLC? I looked into doing a power of attorney, but I feel like that grants him more access than I really want him to have. I only want him to sign lease agreements and possibly appear for us in an eviction hearing.
Investor · Lafayette/Baton Rouge, LA · Member since 2013 · 1k+ posts · 915 votes
10y
LA law requires a real estate license to manage property that's not your own in the state of LA. The topic of this thread suggests to me that you already know that. No matter how many years anybody gets away without it, when something more serious than an eviction comes up, I wouldn't want to be on the wrong side of the law.
If you hire a licensed property manager, it will cost you in the ball park of 8-10% of gross rents. The licensed PM can legally sign leases and appear in court on your behalf. You won't save a few bucks by letting your father-in-law "manage" your properties, but you wont have to add him to your LLC or anything else you are uncomfortable with either.
I managed my own properties a long time before I became licensed and still do, but they were never 9-10 hours away from me. There are benefits to having a professional. How much does your FIL know about fair housing laws, lead based paint disclosures, sex offender notification, the Americans with Disabilities Act, landlord - tenant law in the state of LA or other local ordinances? Very often, people think, "this is private property, I can do what I want with my property." I think there is substantial justification for professional management in your situation. Your two properties are eight units and that adds up to enough interactions with the renting public to warrant some professional management as a matter of risk management IMO.
Rental Property Investor · West Monroe, LA · Member since 2015 · 12 posts · 3 votes
10y
I have been having whatever maintenance guy that works for me at the time sign lease agreements and appear in eviction court. Judge has never made a deal about it. Not sure what is legal, just sharing 6 years and lots of evictions worth of 1st hand experience.
The directors of the company - presumably yourself and your wife - would need to pass a resolution granting yourbeau-père) the authority to contract on behalf of the company (only) for the purpose of signing leases with tenants and to represent you in eviction hearings. Might be best to check with your attorney for appropriate wording.
This resolution would need to be recored in the corporate minutes.
The problem that may arise is whether an unlicensed property-manager in Louisiana is permitted to manage properties other than their own. If this is the case, then perhaps you can engage him simply as a leasing agent (unless that role requires a license). Otherwise, as a director of the corporation, you would not be representing the best interest of the company by engaging an unlicensed PM. Alternatively, you could sell him a single share in the company and/or make him an officer of the company and he would not be managing someone else's properties. Get to know the local real estate and tenancy laws and consult your attorney.
Investor · Panama City, FL · Member since 2015 · 378 posts · 183 votes
10y
you can authorize someone to sign documents for your LLCs. Imagine if the CEO of Starbucks had to sign every lease on the buildings they rent? They authorize a regional director or employee to enter into contracts for them, if you want to make it more formal you could provide him a notarized affidavit giving him the authority to sign leases on behalf of the LLC
Investor · Sulphur, LA · Member since 2013 · 126 posts · 41 votes
10y
My property manager is not licensed in the state of Louisiana. They manage over 400 units and have been for about 15 years. I haven't had any issues with them doing evictions for me.
Investor · Lafayette/Baton Rouge, LA · Member since 2013 · 1k+ posts · 915 votes
10y
LA law requires a real estate license to manage property that's not your own in the state of LA. The topic of this thread suggests to me that you already know that. No matter how many years anybody gets away without it, when something more serious than an eviction comes up, I wouldn't want to be on the wrong side of the law.
If you hire a licensed property manager, it will cost you in the ball park of 8-10% of gross rents. The licensed PM can legally sign leases and appear in court on your behalf. You won't save a few bucks by letting your father-in-law "manage" your properties, but you wont have to add him to your LLC or anything else you are uncomfortable with either.
I managed my own properties a long time before I became licensed and still do, but they were never 9-10 hours away from me. There are benefits to having a professional. How much does your FIL know about fair housing laws, lead based paint disclosures, sex offender notification, the Americans with Disabilities Act, landlord - tenant law in the state of LA or other local ordinances? Very often, people think, "this is private property, I can do what I want with my property." I think there is substantial justification for professional management in your situation. Your two properties are eight units and that adds up to enough interactions with the renting public to warrant some professional management as a matter of risk management IMO.
Rental Property Investor · San Antonio, TX · Member since 2011 · 512 posts · 290 votes
10y
Hey Larry,
How about getting him a tablet or smart phone and have the tenant sign the contract on it in a Google doc, then you sign. Then you can instantly email it to them then mail them a hard copy. I can't see how that would be seen as managing your property. I have had my handy man deliver keys to new tenants when I was out of town and never would think of it as property management. I could even see the selection of tenants from afar as being a great way of avoiding being accused of any breech of fair housing standards. Basically all he would need to do is open the place for showings.
Investor · San Antonio, TX · Member since 2016 · 90 posts · 28 votes
10y
Maybe I am using the term "manager" wrong Robert. My wife and I deal with all of the issues via phone, text, and email, getting it rented, and anything else that arises. All he does is show the property, collect rent, and repairs. Our tenants aren't exactly credit worthy so our rent is 100% cash, and that is not something I want to entrust to a management company. He's also very good with people and had developed a good rapport with our tenants. The properties require a lot of attention and not something I would really want to trust to a company where I am just another client. My father-in-law does a tremendous amount work around the properties and goes above and beyond what I would expect from any management company. We don't have him do it to save money. In fact, when we get established a little better I told my wife I want to pay him more because he does such a good job.
Will, I like that idea. I will look into that option. For this particular instance that I brought up the question for, it won't be an option because it has to do with state paperwork for the housing authority.
Rental Property Investor · Olympia, WA · Member since 2014 · 777 posts · 744 votes
10y
@Larry H. Property management responsibilities are often misunderstood. You will want to check local law, but in my jurisdiction an UNLICENSED person CAN do the following:
Delivering a lease application, a lease, or any amendment thereof to any person;
Receiving a lease application, lease, or amendment thereof, a security deposit, rental payment, or any related payment for delivery to and made payable to the real estate firm or owner;
Showing a rental unit to any person, or executing leases or rental agreements, and the employee or retainee is acting under the direct instruction of the owner or designated or managing broker
Providing information about a rental unit, a lease, an application for lease, or a security deposit and rental amounts to any prospective tenant; or
Assisting in the performance of property management functions by carrying out administrative, clerical, financial, or maintenance tasks.
The key is in how the money is handled. If you are not a Licensed Real Estate Agent, you cannot control money for someone else. If they make the payment payable to YOU, and he deposits it to YOUR account, you should be fine. If, however, he collects rents and places it in his own account from which he later disperses funds, he must have a license.
If you make your beau-père a shareholder in the company which owns the property (could be a single, non-voting class, share) and/or make him an officer of the company (Director of Building Maintenance), would Louisiana still require he be licensed to manage the properties?
Investor, Entrepreneur, Educator · Springfield, MO · Member since 2009 · 21k+ posts · 12k+ votes
10y
Okay, as Curtis mentioned, there are exceptions for "on-site" property managers who are employed by an owner and who do not conduct those services he mentioned for any other property owner.
Your father-in-law is not an "on-site" manager.
Unlocking a door is "showing" the property, that requires a license.
If your LLC owns the property and hires a manager, they need to be licensed, it's not their property.
A POA is not a good idea as a course of conducting business, if you were in the hospital that would be different if you cannot perform, otherwise you're simply trying to circumvent licensing laws.
The best way is to admit your father-in-law to the LLC! His membership can be restricted as to voting rights, powers granted, liability and other matters such as inheritance. Think in terms of common and prefered stock, the Operating Agreement controls the relationship of members and then he can act as a member.
As to evictions, or other legal matters, that's up to the judge to allow a non-attorney member to represent an LLC,
Your concerns of having another member are probably not warranted, but you should consult a LA. attorney.
Investor · Lafayette/Baton Rouge, LA · Member since 2013 · 1k+ posts · 915 votes
10y
Whatever you decide @Larry H. just be certain that you are on the right side of the law by getting legal counsel from an attorney in or near the jurisdiction your properties are in. There are jurisdictions (parish to parish here) that have very different attitudes toward landlord vs tenant situations.
There are reasons why LA is where it is on this list:
Your tenants are immersed in advertising (billboard, TV, radio, etc.) to pursue legal action in the event of any accident, injury or incident and with "hungry" attorneys everywhere you turn, you will have to defend yourself sooner or later.
It sounds like your father-in-law is great for the role you want him to play. It's just that the laws cover some things that seem like an innocent practice that are covered by specific laws. For example, "NO PET" policies have different rules under ADA and the Fair Housing laws that mean you have to allow the animal because it's not considered a pet, but a necessity. Especially when you are participating in housing programs that can make you subject to close scrutiny for specific Fair Housing and ADA requirements. Again, its a matter of how the local administrators enforce the rules. It would be nice if they were consistent with how it works, but its implemented differently from place to place.
The bottom line is get legal advice from an attorney you would consider hiring if you were being sued for something that happened at your property. You might need them again in the future and it never hurts to have the relationship established before you need them.
Contractor · Los Angeles, CA · Member since 2015 · 4k+ posts · 1k+ votes
10y
Larry H. Have him added in your Operating agreement, add 0.5% share, that way he is part owner and have a resolution to give him powers on what you need him to do. It will just be a piece of paper but you need a paralegal to draft and submit it to your state. You can also go advanced and have that: if you were to sell the company, he has to agree without question, and the share should not be transferrable, or if he were to sell it, you will be the first to buy it at a value stated on the amendment, even if it is only a dollar. No legal advice given but I have this agreement with someone I want to be a part of my company but don't want him to control anything other than what I want him to do.
Real Estate Broker · Raleigh, NC · Member since 2014 · 2k+ posts · 1k+ votes
10y
@Larry H. If you simply need him to sign leases, can't you just do that yourself electronically? I use Docusign, and it's been forever since I've printed and signed anything.
You can always hire an attorney to appear for you in court if there is an eviction. I guess going this route depends on how regularly this occurs.
Attorney · Winchester, VA · Member since 2015 · 726 posts · 387 votes
10y
You want a non-lawyer to appear on your behalf who is not a CEO of the corporation at court room proceedings? No. I've been very vocal about UPL rules on this forum before, but no. Refer to a local attorney soon.
Investor · San Antonio, TX · Member since 2016 · 90 posts · 28 votes
10y
Leases are not an issue. A new tenant has state paperwork that needs to be filled out and signed and we were trying to get everything turned in to the state today (Monday). After talking to the office we found out it wasn't that urgent and we can do everything by email.