Legally Speaking, What is Considered Property Management?

14 Replies

What services could a person provide that would not be considered acting as a property manager? I was trying to think of property services for landlords that would not require a person to be a licensed realtor.

This is a good question, @Anthony Gayden .  I've wondered myself about why a real estate license is required to perform property management.  You don't have to have a license to manage properties you own, so why to do it for others?

Seems like a racket to me.  Like the requirement that you have to be a licensed mortician to be able to sell a casket.  An arcane requirement devised to protect those already in the business from competition.

My wife and I currently manage 16 units of our own property.  We could easily offer property management services to others in our community, but can't because we aren't willing to jump through the hoops to get a brokers license, which includes working as a real estate agent for 2 years.  What does selling real estate for 2 years have to do with property management?

I would love to hear a legitimate explanation of why states require this.  Maybe we should call our reps and see if we can get this changed in Nebraska!

Depends on your state, but a primary factor is your ability to select tenants, negotiate lease terms, hold and exchange funds, charge fees. If you don't do those things, you are probably in the clear. If you can make decisions - especially financial - for the property independent of the owner, you are for sure a property manager. No one would consider the handyman doing regular maintenance or an acquaintance showing properties a manager. 

I manage my own units and am also studying for my broker license for this very reason. Although the license may prove useful, I can say with certainty that the strong majority of what I am studying has no applicable value to property management. If the purpose is to ensure those in the business of PM are consistently qualified, there should be a separate and distinct PM license.  

Most states require a license for real estate transactions. Property management falls under this. The main reason is that when you manage for yourself and do something stupid you only have to answer to yourself. As a realtor you are held to a higher standard because you are managing and making decisions for others. You are holding money that does not belong to you. It belongs to the property owner and the tenants. If you are not held accountable by the local and state real estate commissions what would stop you from mishandling or spending that money. As an owner you want a PM that is held to that higher standard for your protection. In addition management and handling tenants is an ever changing process. Who is making sure your PM is staying current on the ever changing landscape of fair housing. Again part of maintaining the proper license is continuing education. A good manager does much more than just just place a tenant and collect rent. They keep the owner owner out of trouble and protect the owners investment.

Originally posted by @Tracy Streich :

Most states require a license for real estate transactions. Property management falls under this. The main reason is that when you manage for yourself and do something stupid you only have to answer to yourself. As a realtor you are held to a higher standard because you are managing and making decisions for others. You are holding money that does not belong to you. It belongs to the property owner and the tenants. If you are not held accountable by the local and state real estate commissions what would stop you from mishandling or spending that money. As an owner you want a PM that is held to that higher standard for your protection. In addition management and handling tenants is an ever changing process. Who is making sure your PM is staying current on the ever changing landscape of fair housing. Again part of maintaining the proper license is continuing education. A good manager does much more than just just place a tenant and collect rent. They keep the owner owner out of trouble and protect the owners investment.

I understand, and agree with, the premise of what you are saying, but the broker license honestly overlaps only slightly with what property managers do on a day to day basis. I think the majority of property managers would be fine with a license requirement if it did not include studying and paying for a majority of knowledge that does not apply to what they do.  Also, I do not 100% agree that personal property managers only answer to themselves should they do something stupid. Personal property managers can still treat tenants unethically. They hold funds that belong to tenants. They are still responsible for understanding and following fair housing laws etc. When the day comes that I look for a manager for my portfolio, I would much rather have a personal property manager with years of experience in my area, than a broker who deals mostly with real estate sales. Unfortunately my state doesn't give me that option.

I get the idea that as a steward of other peoples money you probably should have some sort of certification to make sure you are on the up and up.  However, a real estate brokers license isn't very applicable.  Maybe a stand alone property management certification that's based on experience in property management rather than real estate sales.

@Wade Sikkink @Adam Giles

Both of you hit the nail on the head. I was looking at becoming a property manager, and I saw that in Nebraska it is required that you be a real estate broker. Obviously the majority of the things that deal with real estate sales have nothing to do with property management.

I was wondering if there were services you could provide landlords that would not require you to be a broker?

-Taking applications for leases and showing the property, but the owner decides on the tenant and writes/signs lease?

-Performing handyman duties, maintenance and yard work?

-Performing background checks, calling references and marketing?

-Collecting rent (checks made out to the owner)?

-Being present for contractors, but the owner makes all financial decisions for repairs/maintenance?

@Anthony Gayden

I think those services would be valuable to landlords.

I have also been thinking of providing some sort of rental turn over service including:

-Property condition inspections for move out
-providing pictures and lists of what is damaged or what needs to be done for turn over.
-then having the property cleaned, fixed, and readied for the next tenants.

This service could be valuable to mom and pop landlords. I think this could even be subbed out from large property management companies.

I know this is a time consuming aspect of land-lording that I don’t particularly enjoy using my time for with my properties.

Originally posted by @Anthony Gayden :

@Wade Sikkink @Adam Giles

Both of you hit the nail on the head. I was looking at becoming a property manager, and I saw that in Nebraska it is required that you be a real estate broker. Obviously the majority of the things that deal with real estate sales have nothing to do with property management.

I was wondering if there were services you could provide landlords that would not require you to be a broker?

-Taking applications for leases and showing the property, but the owner decides on the tenant and writes/signs lease?

-Performing handyman duties, maintenance and yard work?

-Performing background checks, calling references and marketing?

-Collecting rent (checks made out to the owner)?

-Being present for contractors, but the owner makes all financial decisions for repairs/maintenance?

 I don't think you would be on any odd legal footing with any of that. Everything you mention is something that any owner can contract out for themselves to lots of firms that are not property management firms. You can hire companies to check references, provide rent portals & drop-off points, etc. and none of them are considered property management. 

I believe you cross the line when you make financial & governing decisions on behalf of the owner and/or tenant. Those decisions might include: negotiating the terms of a lease; holding money in escrow; charging tenants late fees; performing evictions; contracting for services on behalf of the owner; ETC. If you are only acting at the owner's direction - showing a house the owner has determined is vacant, for example, or coordinating/performing services at the owner's direction that does not largely require independent decision-making - I think you would be in the clear. 

Hello,

To be on the safe side I would email or call the Nebraska real estate commission. You wouldn't be able to advertise yourself as a property manager but maybe a landlord assistant title would slide. I am a real estate agent in Nebraska and I have spoken with them a few times and they were very helpful. However if you do decide to get your real estate license I did the van ed online courses and just took the prep class at Randall real estate school in Omaha I would recommend both. Good luck, and if you do find a way around the real estate license to unofficially property manage please keep us posted I would be very interested, the main reason I am keeping my license is to start property managing for other people someday.

Thanks,

Taija

The short answer is the statute was written that way because of a strong real estate lobby.  It’s statute 76-14 if you’re looking for some dry reading.

Thanks everyone for the replies. I believe that there is a market out there for landlords who want to retain financial control and decision making for their properties, but need someone to do the dirty work.