Should property managers be required to have a license?

26 Replies

First I just want to say that I am new to Bigger Pockets and I am meeting new people and learning even after 30 years in real estate. Thanks to all. I think this is a great site. Now on to my post.

I am reading posts where a current landlord is helping his neighbor or friend manage his or her rental unit. I am not sure about other states but here in Florida anyone can manage a property but you must have a real estate license to rent it to a tenant and only an attorney can write a lease. So I want to caution all landlords helping others to be very careful. I think you are putting yourself at risk. For example:

Do you know about the fair housing laws? Is the landlord naming you as an additional insured on their insurance policy? Do you have an agreement in writing to act on the landlord’s behalf? How about giving proper notice for inspections or other matters? What about the last month’s rent or security deposit? You are now responsible for other people’s money. If the tenant becomes upset over something and they decide to sue they are going to sue everyone, including you.

As of now anyone in Florida can open a property management company and start managing properties and thousands of dollars of other people’s money with no license or training required. There is a strong movement in Florida to have all property managers have a real estate license and I think this will become law in the next year or two.

I would like to know what others think. Is this a good idea to have all PM’s have a license? What are the laws in other states? Has anyone had a bad experience managing another person’s property? I would like to hear from other landlords, property managers, investors and agents. How many of you that are managing another’s property would be willing to get a license? What do you think?

There are a lot of good landlords on this site who know what they are doing but I think they should think twice before they take on a property they don’t own.

I think there should be some sort of licensing that is only for property managers. A real estate license is overkill if you are not selling real estate. I had to get a real estate broker's license just to do property management, and had to learn a ton of stuff that I forgot 5 minutes after the test was done. For instance, why do I need to know about loans, water rights, real estate sales contracts, etc, just to manage properties. Ridiculous. 

People definitely need some sort of license, so a license specifically tailored for property management would be great.

8 hour class on fair housing?   why does government need to regulate pm?

if you own the property you are qualified to do pm.   if you dont own you can't?   seems like no logic to me. other than government likes to charge for licensing. 

Account Closed 

  the reason you need to be a broker in almost all states to do PM is your responsibilities are far more than the average sales agent... It is critical in my mind that all PM has brokers license and the add on ( if required for the PM module  like Oregon).

Your doing exactly what a RE broker does your representing an owner and would be tenant .. same as you would an owner and would be buyer..

ON top of that you MUST have a trust account for deposits.. this is the critical area. Do you want a bunch of unlicensed people holding on to what could account to hundreds of thousands of dollars of tenants deposits... ( I think Not).

So once a PM matures say 500 to 1000 doors just think of the kind of money flowing through that company its in the millions... And you want some unlicensed and unregulated person with minimal training education and experience handling that responsibility.. I think not personally.

@Jay Hinrichs  I don't think you read my entire post. I absolutely don't want unlicensed, unregulated property managers running around. I definitely think PM should be licensed. But a real estate and/or broker's license is not the right kind of license. The things that real estate/broker's learn are so different than what a PM does.

A license that is specifically for PM would be great. The classes can be on trust accounts, leases, evictions, legal stuff, etc. I don't need to know about loans, water rights, metes and bounds, and all that other stuff that has absolutely nothing to do with property management.

Account Closed 

  I did read your post.. and that's why I said Oregon has a PM module that does just that.

but if your in the business you do need to know the basics that all RE brokers know.. not just a small section that may or may not pertain to one slice of the business.. Its not feasible on a licensing reality... You would have far to many specialist would not work.

Think of a Doctor... they have to know all about medicine then they can go into a specialty that may or may not ever involved what they learned in med school.

Same thing in my mind.. But I hear what your saying.... having a Broker license in 3 states plus a NMLS mortgage banker license I end up taking CE for all of these and its largely information I never use in practive... especially loan business.. I have never done a conventional mortgage loan and don't need to know all the in's and outs of Tila ect. but I have to so I can do private loans.

No license required in Maine for property managers. I currently own and manage my own rental properties. I am also the property manager for a 62 unit condo association. I do not rent or sell these properties, I manage the maintenance and all common areas. I would be interested in licensing or certification for PM's. I am undertaking this myself with IREM, but a real estate license would be overkill.

@Jay Hinrichs  We will have to agree to disagree.

@Michael Radeka  I agree. A real estate license is definitely overkill. It's like learning to fly a 747, so you can drive your Mini Cooper. :)

@Kirk R.  There is a difference between managing your own property and managing a property for someone else. When you manage someone else's property:

  • there's a lot of money (rent, deposits, reserves) that needs an accounting and regulation requires that it be set up in a trust account, this protects both the property owner and the property manager.
  • any actions you take are the responsibility of the building owner, so if you're not familiar with the Landlord - Tenant Laws (Fair Housing Act, how to properly evict a tenant, city and state safety codes, to name a few), you could potentially cost an owner thousands if not ten's of thousands.

Regulations protect people from those without scruples. 

Account Closed

Merry Christmas :-)

The reason PM's need a real estate license is they perform brokerage services, which include accepting, holding, and disbursing other people's money, along with leasing of property.

Property managers can also act as buyer's and seller's agents in a sales transaction.

Here in Texas you need a real estate license if you manage property for someone else. But if you are working directly for the owner as their employee you do not need a license.

@Randy Johnston  


Seems like the owner is better qualified to decide whether someone can PM than the government?

If the owner loses a bunch of deposits/money cause of his bad PM decision this is on him.  If he lets the PM run wild with all the money - this is on the owner also.
If the owner gets sued this is on him too.  

The owner is legally able to PM without government's approval.  I am more trusting of the owner's judgement than the government. 

Seems like there is already good reason for the owner to select someone that will do a good job PMing.  Not the government.


I get both sides! I understand  if you are managing 100's of property the need for a manager with experience and a certification . I think where my "frustration" lies is what is needed to "legally" to get a licensee.  It is slightly frustrating that with a master degree, background in doing commercial property as a employee (so experience!).  I can't "legally" manage a property for my parents or friends who are deployed and get paid for my time and erffort. think that the "certification" should be different than being able to buy and sell property! They are very different, the skills to be able manage versus agent!  

In my opinion I have the skills   with a MBA background in finance/accounting, 5 rental property, 4 more family managed,. Plus working for multi-family/commercial real estate doing many of the same functions only as an employee and therefore no license needed. According to California law I am no more skilled to manage than my brother an engineer with no prior experience. Ithe argument is how am I any less skill than an  now broker than someone right out of HS with only  3 years of experience working under another broker as an agent (not putting down an agent just saying low education requirement)! No experience in property management only buy and selling! 

Funny thing in Oregon @Michael Radeka   condo management companies don't need a real estate license.

@ Michelle L. and @Elizabeth Colegrove Getting a real estate license doesn't teach you how to sell real estate or get listings. What it is designed to do is protect the public by teaching you the laws and ethics. You also cannot have a felony and they keep a record of your finger prints. Having a module like Oregon would be great as @Jay Hinrichs says.  @Kirk R. I don't like government regulation any more than you but I think we need a minimum requirement for someone handling other peoples money . Liability may be on the owner but in today's society, they are going to sue the landlord and every one else involved.

@MichaelRadeka. In Florida you would need a CAM license to manage condos. I applaud you for self learning through IREM. 

At least if someone has a license they know the laws and ethics and have some type of accountability.

@Kevin Page  no i totally under about the laws or regulations. It just frustrates me that the qualifications are directly related to being a "realtor" and not other qualifications. I feel that I have as much knowledge or more of the rules but have no desire to sell and therefore makes it 100 times more difficult to get the qualification.

You must be licensed in 45 of the 50 states to manage properties you do not own (including for family).

I imagine the laws stem from consumer protection needs. There are no problems managing properties for others without a license, unless you end up in court! So make sure you are licensed if managing properties you do not own.

Why license? There are tons of laws and ordinances you need to know to deal with all aspects of real estate legally and the only way to, hopefully, make that happen is to hold those in management positions to a higher standard.

What are the laws in your state? Here's a place to begin:

http://www.allpropertymanagement.com/propertylaw/

@Elizabeth Colegrove 

 with your education and background a RE license and the subsequent test would be a snap if your going to be in the business then why not just take a few hours to study up pass the test and add that to your credentials

I like the idea of a license but don't like the idea of it being required. It should be up to the landlord to decide if they want to go with a licensed or unlicensed PM. 

@Chris K.  

  One of the main issues is that clients deposits do not belong to the owner or the manager they are to be held in a trust account... most states have a RE recovery fund.. where is an innocent gets fubared by a bad licensed broker they could have some recourse on the fund.

@jay 

@Jay Hinrichs  I totally agree! If it was just a couple of tests I would have had it two years ago . Unfortunately in California they require 2 years of experience under a license broker having 40 hours of transactial experience. So therefore while I argue that I am more experience in property management than a top agent with 3 years of experience with no other business experience. The law disagrees, and I have no desire to sell real estate to get my license. 

in il think we have more governors in prison than alive.   so involving government to protect consumers.   i was a realtor but even when you look at changes in technology.   maybe realtorz need to chamge some too. way back when i  remember when had updated printed books with all the properties before internet. &    there was no gps.   no cell phones with internet.  no internet crime maps.  no Internet school ratings.  not sure guessing commissions percentages are same.

I am from Texas and in Texas you are required to have a Real Estate License in order to collect money on behalf of another party. But, more importantly, I believe you should also have experience owning and managing properties. It is very important that when you are managing someone else's livelihood you should have the experience needed to ensure that the property is profitable and the current laws and regulations are being followed.  

Than you,

Kevin Davidson

Marketing Coordinator

Empire Industries LLC

Originally posted by @Kevin Page:

@ Michelle L. and @Elizabeth Colegrove Getting a real estate license doesn't teach you how to sell real estate or get listings. What it is designed to do is protect the public by teaching you the laws and ethics. You also cannot have a felony and they keep a record of your finger prints. Having a module like Oregon would be great as @Jay Hinrichs says.  @Kirk R. I don't like government regulation any more than you but I think we need a minimum requirement for someone handling other peoples money . Liability may be on the owner but in today's society, they are going to sue the landlord and every one else involved.

@MichaelRadeka. In Florida you would need a CAM license to manage condos. I applaud you for self learning through IREM. 

At least if someone has a license they know the laws and ethics and have some type of accountability.

I agree with your post except for one sentence. While it is nice to think that convicted felons can't get a real estate license, that isn't universal in all states. In NC, a convicted felon (convicted of white collar crimes, no less!) and a person who subsequently had her license suspended (1 year) for violating several REC rules and NC laws incuding mis-apprporiating funds (operating and trust), was able to get her license reinstated.

One thing I think people don't realize is that a state's Real Estate Commission, when presented with a case involving criminal conduct, does not have any obligation or jurisdiction to initiate a criminal action. That's up to the complaintant, who may not know their rights, etc., because the REC attorneys do not provide the complaintant (i.e. someone in the general public) legal advice or guidance.

@Jay Hinrichs  Regarding "...most states have a RE recovery fund.. where is an innocent gets fubared by a bad licensed broker they could have some recourse on the fund." This is indeed the case, but the recovery fund represents the 'method of last resort' in dealing with licensed brokers/firms. A complaintant must have (within one year) already sued, won the suit, attempted to recover via executing the collection for judgment, executed sale via the Sheriff, and come up short. Example: http://www.ncrec.gov/Forms/Consumer/rec417.pdf

I don't know what 5 states doesn't require a license, rather odd. I'm surprised at the opinions too, some good stuff. State laws vary, generally you need a license to manage for others.

I don't see any REC cracking down on family owned properties, the intent is not to invade a family's personal business renting a house. Immediate family members are exempt from dealing in many RE and finance requirements. It's always good to begin reading laws from the very beginning, applicability will be stated along with exemptions.

Unrelated parties who manage any RE for others for compensation are agents of the owner, a license is probably required acting in the role of a business agent.

Local acceptance generally rules. A neighbor may agree to "watch a property" do administrative matters just for that one house out of a personal relationship, they are taking on the liability if they facilitate rental activities, they may have a POA, such arrangements I would say are generally overlooked, until that informal PM messes up and causes some loss to either party.

An employee of an owner is usually exempt, mostly of apartment complexes. An HOA may hire a manager without a license under the employee exemptions. A member of an HOA may be exempt as well, having an ownership interest.

Someone who is a principal, a member of a LLC for example can be exempt from licensing of a property owned by that LLC.

Managers of housing units owned by non-profits are usually exempt, such as a board member or an employee.

Investors may lien on the angle of having an equitable interest in a property too much in some (many) cases. All RE is local, but when you sub-let one property there won't be any kick back, if you have 15 properties sub-let, the authorities can certainly look at you as conducting a business and that the arrangement used is to circumvent licensing laws. If you have no real skin in the game, just having your name on a contract doesn't give you much, if any, of an "equitable interest".

IMO, a judge will always side on the good of the public rather than wording used in a contract, the legal intent being a requirement for any valid contract.

 Yes, a PM managing for others, the general public, should hold a license.

I would think that there would be a RE broker who would allow a new agent to hang a license, for a small fee, allowing rentals, the E&O coverage alone would probably be worth the fees and any backroom support they may lien on in any conflict. I'd think there would be many small brokers that one could negotiate with on such an arrangement, they could even assign commission/sale splits giving credits toward any sale if they are creative that could meet state requirements.

An RE license may not be the only issue, making money in any business transaction may require a business license, end up in court and your claims may be kicked out if you are not properly set up. Fines may be levied as well.

Always best to consult with a local attorney before getting involved in RE matters. Guessing there are two reasons investor types don't ask an attorney, 1. they are afraid of having to pay something (many attorneys will give a few minutes of free consultation) and 2. they are afraid of the answer not being what they want to hear. So, take your chances, it comes with consequences. :) 

       

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