Chapter 30 - Property & Community Association Management

Example - Holiday Decorations

A homeowner hung a seasonal wreath including a peace sign on her front door. The board received four complaints from neighboring homeowners in a community of 200 units claiming that the wreath was anti-war and, as such, was divisive. One neighbor even claimed that the wreath promoted Satanic practices. The homeowner received a notice from the board stating that the association would not tolerate any signs, flags, etc. that were divisive, and that the wreath must be removed. The homeowner claims the wreath is not anti-war or Satanic. The president of the association ordered the architectural review committee to require that the homeowner remove the wreath, but the members of the committee refused. They agreed with the homeowner that the wreath was merely a seasonal decoration.

Inspection

After a Basic Business License has been issued, the property must undergo a housing inspection. The Inspection Report form evaluates the rental unit for 17 items and 3 certifications. The rental property must adhere to codes that deal with heating, lighting, ventilation, utilities, occupancy space, cleanliness, sanitation, pest control, fire prevention, etc. The Inspections and Compliance Administration conducts the inspections to ensure that rental properties are up to code. If the property does not meet all requirements within 45 days of licensing, the license may be revoked, and the landlord may lose all fees paid in connection with the licensing process.

Management Fees

All management agreements state the amount of the fee, when it is due, and the method of payment. The owner and property manager select a flat fee, percentage fee, or a cost-per-unit fee. the management agreement delineates the payment of leasing commissions, if any. Usually, the property manager does not solely lease commercial property. The property manager and an outside leasing broker can split the leasing fee. Any outside brokerage commission fees should be stated in the management agreement. The management agreement should have an early termination clause for leases that the manager has negotiated. If the owner wishes to end the management agreement prior to the cancellation date, the manager should be provided with adequate compensation for the negotiated leases up to the date of termination.

Example - Parking Violation

An HOA prohibits its members from parking commercial vehicles on community streets or in an owner's driveway. An elderly couple living in the community parked their white van in the driveway, because it was used to the husband, who was in a wheelchair. It is much easier to access the van if it was parked in the driveway. The HOA gave the couple multiple parking tickets totaling $1,400 because the van, which displayed handicap plates, looked more like a commercial than a residential vehicle. They refused to pay the $1,400 fine so the HOA placed a $5,500 lien on the couple's home. The president of the HOA board stated that the HOA was simply trying to raise awareness of the rules among the owners in the community. Fortunately, the disagreement was settled out of court using a mediation program. The HOA agreed to waive their legal right to all the fees levied against the couple and gave them the right to park their vehicle in the driveway. The couple agreed to the settlement and later moved out of the community.

Economic Influences on the Market Example

As the economy improves from a trough, the rental market is relatively good, and vacancies are low. When investors receive attractive returns on property, the number of investors increase, and more rental space is added. Ultimately, the supply of available space will exceed the demand. Vacancy rates will be high and property owners must compete for tenants, which will result in a rent reduction. Eventually, the cycle will come full circle, causing the rental rates to equal the demand for rental property.

Name three common rules and regulations of condo and co-op associations.

Associations have rules for pets, landscaping, balconies, holiday decorations, parking, and smoking, to name a few.

Typical Residential Demographic Information

Average age Education Employment Median incomes/median household incomes Number in household Occupations Population counts Type, number, and price of housing units

Owner's Obligations

Before submitting an application for a Basis Business License, owners who plan to operate as a legal business entity (LLC or corporation) first must apply to the IRS for an Employer Identification Number (EIN). They also must register with the DC Office of Tax and Revenue and will be given a unique registration number to use when applying for the Basic Business License. All applicants for a Basic Business License must also submit a Clean Hands Self-Certification form to document that they do not owe more than $100 in fees, interest, taxes, or penalties to the District. Depending on whether the owners are operating from an office or conducting the business out of a home in the District, they will need to obtain either a Certificate of Occupancy or a Home Occupation Permit.

Enforce Rules and Regulations

Condo living is perfect for people who want to spend their free time pursuing hobbies, traveling, or just relaxing instead of doing yard work or home maintenance. But it comes at a price—the HOA fees, lack of privacy, and the multitude of rules and regulations associated with community living. Associations have rules for pets, landscaping, balconies, holiday decorations, parking, and smoking, to name a few. A manager must know the association's rules and regulations and enforce them. Just like property managers, association managers must regularly make inspections of the entire community, looking for instances of non-compliance with the rules and regulations. He or she notifies the owners of violations of the community rules, monitors the correction of violations, and keeps records related to each unit.

Name two types of common interest communities (CICs)

Condominiums, planned developments, stock co-ops, and community apartment projects.

Differentiate cycles and trends in the economy.

Cycles are periodic, irregular up-and-down movements in economic activity that take place over a period of two to six years. Trends are changes in the market in a consistent direction that occur over a long-term period.

Basic Business License

DC law considers homeowners who rent out detached homes, duplexes, townhouses, condo units, and individual rooms as being in the rental business. All landlords in DC must have a Basic Business License (BBL), which can be obtained through the DC Business Center. One Family Rental License- single-family homes, town houses, duplexes, individual condominium units or individual rooms. Two Family Rental License - English basement apartment or converted basement apartment. Apartment License - apartments in buildings with 3 or more units, even if they are not all being rented out. The Basic Business License Self-Certification form should be submitted when you apply for a license. The form requires applicants to certify that the applicant follows all applicable D.C. laws, including ceiling heights of at least 7 feet, hardwired smoke detectors by all bedrooms and fully functional, easily accessible exits and emergency escape routes.

Typical Board Committees

Executive or Rules Budget & Finance Architectural Landscaping

3 Steps of Preparing a Management Plan

First, the property manager prepares a market analysis that focuses on both a regional and neighborhood evaluation. The evaluation includes the demographic conditions, geographic features, governmental prospective, existing real estate supply, potential future developments, and tenant/ resident demand. It is important to focus on how each of these elements affects the subject property. Next, the manager prepares a property analysis to identify the property's strengths and weaknesses. The manager can then consider different alternatives to improve the property's weaknesses or further enhance its strengths to improve its overall economic performance. The property manager's final step is to prepare a written report for the owner detailing the proposed management strategy for the property. As the management plan takes effect, the property manager needs to send timely reports to the owner. The reports evaluate the property manager's effectiveness in handling the property.

How long to rental rates for commercial property lag the residential rental market?

From six months to a year.

Name the things an association manager does when he or she sees violations of community rules.

He or she notifies the owners of violations of the community rules, checks the correction of violations, and keeps records related to each unit.

Name four items that inspected in a rental property.

Heating, lighting, ventilation, utilities, occupancy space, cleanliness, sanitation, pest control, fire prevention, etc.

Write the District's definition for property manager.

In Washington DC, a property manager is an agent for an owner of real estate in matters regarding property management.

Write the District's definition for property management.

In Washington DC, property management is defined as the leasing, renting or offering to lease or rent, managing, marketing, and the overall operation and maintenance of real estate.

Supply Analysis: Existing Rental Inventory

It increases due to new construction. In the housing market, it can take years to increase the existing housing supply. It decreases due to destruction, abandonment, demolition, or conversion to other uses. Because the supply of real estate does not increase quickly or easily, the real estate market is especially susceptible to changes in demand.

Name the type of relationship between owners and property managers.

It is an agency relationship.

Name the two licensees who may act as property managers in the District.

Licensed property managers and licensed real estate brokers

Marketing.

Marketing is an ongoing activity for most properties. The budget and type of advertising and marketing are defined in the management agreement. Any limits on marketing and advertising costs should be clearly stated in the agreement.

Leasing and Evictions.

Most management agreements give leasing authority to the manager. If the manager has authorization to negotiate and execute leases on behalf of the owner, the agreement must state the minimum and maximum lease terms approved by the owner. When negotiating new leases or renewals, the agreement must state if any concessions are allowed. Sometimes the agreement allows reasonable concessions. Usually, the property manager is authorized to handle evictions. However, some owners prefer to handle evictions through their own attorneys.

commingled (mixed)

Most property managers keep a separate account for each client. These funds should not be commingled (mixed) with the manager's personal or business accounts or with other clients' funds.

List three reasons why owners hire property managers.

Multiple properties or rental units Rental units are in a different city Owner has no time or interest in hands-on management Owner does not want the legal responsibilities of being an employer Property is part of a government affordable housing program Property is part of a trust or owned by multiple owners, so they want transparency and accountability.

Reasons Owners Hire Property Managers

Multiple properties or rental units Rental units are in a different city Owner has no time or interest in hands-on management Owner does not want the legal responsibilities of being an employer Property is part of a government affordable housing program Property is part of a trust or owned by multiple owners, so they want transparency and accountability. In Washington DC the principal-agent relationship is the most common type of property management arrangement. It is created by a written management contract between the principal (owner) and the agent (property manager). The principal hires the agent to perform a service and gives the agent authority to act for or on behalf of the principal. The agent is in a position of trust with the principal and owes the principal certain fiduciary duties. This creates a fiduciary relationship between the agent and the principal.

List three of the eligibility requirements for a DC Property Manager license.

Must be able to read, write and understand English. Must have passed the DC Property Managers Exam. Is a high school graduate or holder of a high school equivalency certificate. Has not had an application for a property manager's license denied, for reasons other than failure to pass the required examination, in dc or elsewhere, within one year prior to the date on which the application is filed. Is not on license suspension on date the application is filed. Has not had property managers license revoked within 3 years prior to the date the application is filed.

How many hours of pre-license education is required for a DC Property Manager license?

None currently.

Items Needed for an Efficient Takeover

Number and types of units Rent roll and rental rates Existing leases Sources and amount of additional income Accounts payable Service contracts and contractor's information Existing insurance policies Real estate tax bills and power of attorney for taxes

Name two items needed for an efficient takeover.

Number and types of units. Rent roll and rental rates. Existing leases. Sources and amount of additional income. Accounts payable. Service contracts and contractor's information. Existing insurance policies. Real estate tax bills and power of attorney for taxes.

What is a property manager who is hired for a CIC called?

Often, CIC property managers are called association managers.

takeover

Once the owner and property manager sign the management agreement, the property manager takes over an owner's property. This transfer of responsibilities, also known as takeover, should take place as soon as possible after the management agreement is signed.

Name the three Basic Business Licenses.

One Family Rental License Two Family Rental License Apartment License

List four of the typical clauses found in a property management agreement.

Parties to the agreement Term of the agreement Owner's obligations Manager's responsibilities Management fees Termination provision

Typical Clauses in Property Management Agreements

Parties to the agreement Term of the agreement Owner's obligations Manager's responsibilities Management fees Termination provision

A licensee engaged to manage real estate shall:

Perform in accordance with the terms of the property management agreement. Exercise ordinary care. Disclose in a timely manner to the owner material facts of which the licensee has actual knowledge concerning the property. Maintain confidentiality of all personal and financial information received from the client during the brokerage relationship and any other information that the client requests during the brokerage relationship be maintained confidential unless otherwise provided by law or the owner consents in writing to the release of such information. Account, for in a timely manner, all money and property received in which the owner has or may have an interest. Comply with all fair housing statutes and regulations. [47-2853.195 a)(1-6)].

List four of the fiduciary responsibilities that a property manager has

Perform in accordance with the terms of the property management agreement. Exercise ordinary care. Disclose in a timely manner to the owner material facts of which the licensee has actual knowledge concerning the property. Maintain confidentiality of all personal and financial information received from the client. Account for all money and property received in which the owner has or may have an interest. Comply with fair housing statutes and regulations. [47-2853.195 a)(1-6)].

Who Should Sign the Property Management Agreement?

Sole Proprietorship - Person named on the Assumed Name Certificate Partnership - Person authorized on behalf of the partnership as shown in the Partnership Agreement Corporation - The Corporate Bylaws and Articles of Incorporation provide the information needed to determine the number and authority of persons who are allowed to bind the corporation under a management agreement. In addition, a corporate resolution may be needed to authorize a specific action, such as the signing of a property management agreement for the corporation. The board of directors passes the resolution. The property manager should request a certificate of resolution to verify board approval of the action. When the property management agreement is signed, the Corporate Seal should be imprinted near the signatures of the parties who signed the document.

Leasing

Sometimes association managers are responsible for leasing units in a CIC property. They should be familiar with the Fair Housing laws and Americans with Disabilities Act and must strictly follow them when leasing property. A manager must also be aware of and comply with federal law and local ordinances that apply specifically to the management of association properties.

What is the transfer of responsibility for the property from owner to property manager called?

Takeover.

Influence of Supply and Demand on Real Estate Example

The Intermountain Power Project in Delta, Utah supplies electrical power to Utah and Southern California. It doubled its capacity and needed more workers. The influx of workers increased the population of Delta from 2,000 to 4,000 in a very short time and created a skyrocketing demand for housing. The location of the property and the timing of market changes affect the supply and demand for real estate. Changes in supply and demand have a ripple effect from one market segment to another. An example of this is the lagging demand for apartments as home prices rise, accompanied by increased demand for single-family homes. If home prices become too high, affordability decreases, and potential homebuyers rent. The increased demand for rental units causes a rise in rental rates. If there are more residential and commercial units than qualified or interested tenants, rental rates decrease.

Management Agreement between the Board and Association Manager

The board and the association manager should contract with each other in a way that details the duties of the association and the property manager. This establishes a clear understanding of the rights and responsibilities of each. Management contracts for CICs differ according to the association's needs, resources, size, location, and rules and regulations. Most contracts have standard property management clauses. CIC management contracts also include clauses that are unique to associations. Before association managers sign a contract to manage an association, they should thoroughly review the controlling documents. This review helps determine if the association's operating budget is enough to maintain the needed reserves and provide adequate income to the association manager. Determining the amount of the management fee to be charged is determined by the type of property to be managed. Residential, commercial, and industrial CIC properties have distinctly different needs, and pricing may vary dramatically. One of the best tools an association manager can use when pricing its services for a CIC is a management pricing worksheet. The worksheet considers the direct costs related to each management activity, and adds overhead, anticipated marketing, and a profit margin. The association manager usually bids the management fee for an association as a flat fee or as a cost-per-unit fee.

Why should the manager walk the property using a property inspection checklist?

The checklist creates a baseline for the status of the property as of the takeover date.

List four of the typical responsibilities that a manager of an association assumes.

The community association manager may be responsible for administration, fiscal asset management, common area maintenance, property inspections, enforcing rules and regulations, and even leasing.

Insurance.

The managed properties must have adequate insurance. The owner should provide the property manager with copies of the insurance policies. If the owner does not provide the manager with copies of the insurance policies within a reasonable time, the management agreement should state that the manager is authorized to buy insurance at the owner's expense.

Maintenance and Repairs.

The management agreement sets a cap on the amount of money that can be spent without the owner's approval. Usually, this does not pertain to emergency repairs. The management agreement should state whether the owner or the property manager would be responsible to repair or replace necessary items to keep the property in compliance with the lease agreements, housing codes, and state and federal laws.

Manager's Responsibilities: Collect Rents and Pay Expenses

The management agreement should state how expenses will be paid. The manager may pay the expenses from operating income or the reserve fund, or the owner may pay for expenses directly. In addition, it should clarify the procedure used to pay expenses if the monthly expenses exceed the monthly income. Some agreements authorize the manager to use part of the reserve fund. Others state the manager should contact the owner to make a capital contribution to cover the shortfall. In no circumstance should the manager cover the deficiency with his or her own money. The manager distributes the cash flow from the property to the owner according to the terms of the agreement.

Define management plan.

The management plan is a financial and operational blueprint for a particular property created by the property manager for the owner.

Service Contracts.

The manager may enter service contracts, such as cleaning, maintenance, landscaping, or other services the manager considers advisable.

Reports to the Owner.

The manager must keep accurate accounting records of income and disbursements. The manager must provide financial and operating reports to the owner—usually on a monthly basis, unless otherwise stated. Owners have the right to inspect records about their managed properties during normal business hours.

Takeover Procedures

The manager must send letters to the different on-site employees, service contractors, suppliers, and tenants introducing himself or herself as the new property manager. As part of the takeover procedure, the manager should walk the property using a property inspection checklist. This information creates a baseline for the status of the property as of the takeover date. Photographs and diagrams are useful to illustrate the property's condition. As the plan for managing the property is implemented, the manager will be able to document the changes made to the property. Communication between the manager and the owner is essential. The owner will want to know if the new manager is making progress in meeting the owner's goals. The property management agreement specifies how and when the manager communicates with the owner. Sometimes face-to-face visits as well as phone conversations and e-mails may be necessary depending on the situation and the owner's personal preference. Sometimes the property manager reports to an individual who is not the owner or who is a corporation. If the owner is a corporation, the property manager will communicate with the individual or individuals within the corporate structure named in the management agreement.

Manager's Responsibilities: Operations

The ongoing management includes marketing, supervising employees and service contractors, signing lease agreements, and maintaining the property. Managers rely on property management software to help with the daily management tasks. These programs keep detailed information on owners, properties, and tenants. They should be used to check lease and renewal dates and rent increases to help eliminate collection errors. Tracking maintenance work orders and scheduling keeps tenants happy. Operating reports (collections, vacancies, maintenance) and financial statements are easy to prepare using property management software.

Indemnity.

The owner agrees to keep the property in compliance with all government regulations (health, safety, environmental, and building codes). The manager must notify the owner of anything that is noncompliant so the owner can implement corrections or authorize the manager to do so. The owner should indemnify the manager against any liability for noncompliance.

Who are the parties to a property management agreement?

The owner of real property and the property manager

Influence of Supply and Demand on Real Estate

The principle of supply and demand is the basis for analysis of any market economy. Price levels change based on the relative supply and demand for any resource. When demand is high for consumer goods, such as property, supply falls behind and must catch up. This causes prices and rent amounts to increase. When supply catches or exceeds demand, prices and rent will decrease. An analysis of both supply and demand is necessary and an analysis of one without the other is useless. The real estate supply is relatively inelastic. Producing livable housing units can easily take 18 months or longer. In the meantime, demand may continue to grow and can change much more quickly than supply. Interest rates and employment rates can increase or decrease demand quickly.

What is the most important contract that a property manager signs?

The property management agreement.

Reserve Fund.

The replacement reserve fund may be established and maintained by the owner or funded by the property's gross receipts.

Name the phases and turning points in the business and real estate cycles.

The two phases are expansion (recovery or boom) and contraction (recession or bust). The two turning points are peaks and troughs.

Exemptions from Rent Control

The unit is owned by a person and not a corporation, and that person must not own more than 4 rental units in DC The unit was built after 1975 The unit is federally or district-subsidized

Define working capital fund.

The working capital fund is the amount of money needed to meet immediate obligations and is generally equal to one month's expenses.

Manager's Responsibilities

Usually, the manager has the authority to collect rent, pay expenses, and manage daily operations. In addition, the manager has the obligation to distribute net income and send timely reports to the owner. Any responsibilities that an owner chooses to keep, which are not included in those of the management company, must be detailed in the management agreement.

community apartment project

a CIC with joint ownership of the property by the various owners with an exclusive right to occupy a given apartment unit. Typically, the owners have ownership in the building as tenants in common. There is one mortgage and one tax bill for the entire building.

breach of contract

a failure to perform on part or all the terms and conditions of a contract without a legal excuse. Default occurs if the breaching party does not cure the breach after receipt of a written demand from the other party. The non-defaulting party may end the agreement and recover any money due under the agreement.

management plan

a financial and operational blueprint for a particular property created by the property manager for the owner. The plan describes in detail the subject property's current use along with its physical condition, fiscal projections, and any operational issues. It also includes an analysis of the market (both regional and neighborhood), the competing properties, as well as potential improvements or alternative uses for the subject property. Proper use of a management plan helps owners in meeting their goals and objectives as well as maximizing the property's value and return. Over the short term, the plan helps both the owner and manager in better planning, prioritizing and understanding the costs associated with each potential decision. Developing a management plan takes time and effort. In creating a management plan, the property manager must focus on the owner's objectives when making recommendations and decisions related to the property. For example, the manager can make recommendations to renovate a building or to change common area finishes, but the owner makes the final decision.

Price point

a point on the scale of possible prices at which a property might be marketed.

Arbitration

a process in which the parties (and/or their attorneys) present their cases to an arbitrator, who makes a decision. Parties may be present with their attorneys. Legal briefs are usually prepared, and documents and other physical evidence are provided. Testimony is often given under oath. If attorneys are present, they may make opening and closing remarks. Arbitration is almost always binding, which means that the parties must abide by the decision of the arbitrator and may not request a trial. Alternatively, a nonbinding arbitration allows the parties to request a new trial, should the results prove unfavorable.

property manager

an agent for an owner of real estate in matters regarding property management. The property manager is under direction of the owner and is paid a commission, fee, or other valuable consideration for his or her services. [§47-2853.141]. In other words, a property manager is anyone who conducts physical or administrative management of a property in DC, which could also include financial aspects. A property manager may employ resident managers. Property managers are accountable for the day-to-day job-related activities of the property manager's employees. Property managers must not perform any activities that relate to listing for sale, offering for sale, buying or offering to buy, negotiating the purchase, sale, or exchange of real estate, or negotiating a loan on real estate for a fee, commission, or other valuable consideration.

association

an organization composed of people who own condominium units, the right of exclusive occupancy in a community apartment, or ownership interest in a stock cooperative. The association is organized to operate and maintain the CIC's common areas. A person automatically becomes a member of an association when he or she buys property in a CIC. This is true whether the property is a residential, commercial, or industrial CIC. The most common type of association is the non-profit mutual benefit corporation created for condominium developments. Therefore, it will be the model used for the following discussions of the association's formation, responsibilities, and relationship to the property manager. The term association will refer to a community association of a condominium development.

regular sessions

board holds general meetings for the association

The Board's Responsibilities

bylaws of the association establish the frequency of the sessions. The association members and property manager are given notice of the time and place of the meetings. Sometimes the board has executive sessions that are held apart from association members and the property manager. These meetings generally are held to discuss sensitive subjects that do not require an open forum. The board administers many of its duties through committees whose members are members of the board and volunteers from the association. These committees offer an important role in the effective and efficient management of an association. Board members must exercise reasonable care and deal in good faith on behalf of the association. The board makes sure that the association's money is collected, its bills are paid, and that the association is running efficiently. The board is responsible for reviewing the association's bank statements and preparing and distributing a budget to the members prior to the beginning of the association's fiscal year. At the end of the fiscal year, the board must prepare a fiscal year-end financial statement for distribution to the members. In addition, the board must address any violations of the association's rules and regulations. Many boards hire a licensed property manager or real estate broker to perform property management functions for the association. A unit owners' association has the power and right to adopt and amend bylaws or rules and regulations and to adopt and amend a budget for revenues, expenditures, and reserves, and collect assessments for common expenses from unit owners. It also has the power to hire or discharge a managing agent or other employees, agents, or independent contractors; [§42-1903.08]. The managing agent is the community association manager (manager). Usually, the board appoin

Trends

changes in the market in a consistent direction that occur over a long-term period. In the short term, the real estate market follows the behavior of the general economy. Therefore, the state of the general economy adds insight when predicting real estate trends. On the other hand, cycles are periodic, irregular up-and-down movements in economic activity that take place over a period of two to six years. Typical economic cycles include the business and real estate cycles, which experience expansion followed by contraction.

Property Management

defined as the leasing, renting or offering to lease or rent, managing, marketing, and the overall operation and maintenance of real estate. The term includes the physical, administrative, and fiscal management of any real property serviced by a licensee, or his or her employee or agent.

rules and regulations

designed to maintain a certain order and quality of life in a community. These rules are designed to minimize noise and other nuisances that can occur when there are common walls and facilities shared by owners. Although association rules occasionally feel burdensome, they are intended to promote the common welfare of the community. Some associations have more rules and regulations than others do. For example, some association rules limit the number and size of pets that an owner may keep on the property. Some association rules require that parking permits be issued to each owner for guest parking.

Supply Analysis: Absorption

estimates the square footage that can be absorbed by the market for a specific type of property. Absorption is important since a flood of new units and office space creates an imbalance in supply and demand.

Business and real estate cycles have two phases and two turning points

expansion (recovery or boom) and contraction (recession or bust). The two turning points are peaks and troughs. An expansion is an increase in the pace of economic activity. Conversely, a contraction is a slowdown in the pace of economic activity. The peak is the upper turning point of a business cycle, and the trough is the lower turning point of a business cycle.

fiduciary relationship

implies a position of trust and confidence. This applies to agency relationships in various types of industries, not just property management.

stock cooperative (co-op)

is a CIC project in which a corporation owns the land and buildings. A buyer receives stock in the corporation and receives a proprietary lease for the unit.

property management agreement

is a formal and binding contract between the owner of real property and the property manager. It defines the rights and duties of the owner and manager and establishes the authority and responsibilities that the manager has on behalf of the owner and in operating the property. The management agreement guides the property manager through standard operating procedures (SOP). Whether working for a private owner or a large corporation, it is important to use a dated, signed agreement to define the working relationship with the owner. The signed management agreement creates an agency relationship between the owner (principal) and the property manager (agent). The agency relationship requires the property manager to use due diligence when managing the property

community association manager (manager)

is a licensed property manager or real estate broker who manages the common property and services of condominiums, cooperatives, and planned communities through their homeowners' or community associations. They play a key role in affecting the association members' feeling—either positively or negatively—of their community. The role of the manager in a CIC is significant and hiring a good manager can save money and frustration for owners and tenants living or working in this type of community. An association manager is usually hired to act as the agent of the association. As an agent for the association, the manager takes direction specifically from the board. The manager who is hired to manage a common interest community (CIC) must know how an association is structured and operated. Understanding association covenants, rules, regulations, or restrictions is an integral part of working in a CIC environment. As you learned previously, depending on the terms of the contract, the community association manager may be responsible for administration, fiscal asset management, common area maintenance, property inspections, enforcing rules and regulations, and even leasing. In many respects, the work of community association managers parallels that of property managers. They collect monthly assessments, prepare financial statements and budgets, negotiate with contractors, and help to resolve complaints. In other respects, however, the work of these managers differs from that of other residential property and real estate managers. Community association managers interact on a daily basis with homeowners and other residents, rather than with renters. Hired by the volunteer board of directors of the unit or co-op association, they administer the daily affairs, and oversee the maintenance of property and facilities that the h

special agent

is a person employed to perform a particular task or transaction for a specified amount of time. For example, a real estate broker hired to find tenants for a particular building is a special agent.

Alternative dispute resolution

is a procedure to settle disputes using mediation or arbitration rather than litigation. a cost-effective way to have a dispute heard and decided

building moratorium

is a temporary suspension of new building construction to control growth. The reason for this might be the inability of the city or county to supply the necessary infrastructure to accommodate the new growth—water, sewers, waste management, roads, schools, and fire protection. A moratorium on new building of rental property prevents any competing units from entering the market in the near future.

common interest community (CIC)

is a type of real estate ownership in which a person has an individual unit and shared use of common areas and facilities of the property. Common classifications for common interest communities include condominiums, stock co-ops, and community apartment projects.

Due diligence

is the amount of care that a reasonable and prudent person would exercise under similar circumstances.

working capital fund

is the amount of money needed to meet immediate obligations and is generally equal to one month's expenses. This includes debt service and salaries. Sometimes the owner supplies this fund. Otherwise, the new manager creates the working capital fund from current rental collections. The owner should supply the property manager with information for every property to be managed. Using a property takeover checklist ensures that the information and documents needed to manage the property have been received from the owner. Upon receipt of the accounting information from the owner, the manager sets up accounting records. The owner and manager should analyze the accounts payable and agree on each party's specific liabilities for expenses. They set a specific date when the manager becomes responsible for paying expenses as well as when unpaid bills need to be paid.

Cash flow

is the income from the property's gross receipts less expenses, reserves, and debt service.

Scarcity

is the lack of supply of some type of real property, which results in increased values (demand exceeds supply). If competition is unchecked, it can cause saturation in a given market area.

supply

is the total amount of a given type of property for sale or lease at various prices and at any given point in time. The supply of real estate is dependent on social trends, economic circumstances, governmental regulation or control, and environmental conditions.

Term of the Agreement

it is for one year. The agreement usually has a provision for automatic renewal on a yearly basis unless there is a termination date written in the agreement. The owner and the property manager negotiate the term. Often the property manager would like a longer term, but owners do not want to be locked into a long-term management agreement. A long-term agreement could interfere with an owner's plan to sell the property or change its use. Usually, property managers prefer longer-term contracts, or at the minimum, a one-year contract with annual renewals. A property manager spends considerable effort analyzing a property's needs to set up the systems needed to manage a property to meet the owner's goals. Since it may take months or even years before the property becomes profitable, the management company would like a long-term agreement.

absorption period

measured by observing the number of units or square feet that lease during a given period of time. The time can be weekly, monthly, semi-annually, yearly, or some other defined period. For example, if the weekly absorption rate for units leasing in a defined area is two, it can be determined how long units may need to be exposed to the market before they are leased and at what point the market becomes out of balance.

Saturation

occurs when a product is widely distributed in the market area as the result of widespread competition to market and sell the same product (supply exceeds demand).

Condominium (condo) .

ownership gives the owner a separate interest in space (called a unit) and an undivided (shared) interest in the common areas of the condominium community

community association management

property management specialization of managing common interest communities (CICs)

DC Property Manager Licensing Requirements

property managers must pass the DC Property Manager examination and obtain a property manager license. However, anyone licensed as a real estate broker does not have to obtain a property manager license, because the broker's license is considered superior to the property manager license. There is no pre-license education requirement for property managers in D.C. However, the eligibility requirements are listed in Section 47-2853.142. To be eligible to take the DC Property Manager license, a person: must be able to read, write and understand English. must have passed the DC Property Managers Exam. must be a high school graduate or holder of a high school equivalency certificate. has not had an application for a property manager's license denied, for reasons other than failure to pass the required examination, in dc or elsewhere, within one year prior to the date on which the application is filed. is not on license suspension on date the application is filed. has not had property managers license revoked within 3 years prior to the date the application is filed. Real estate brokers licensed in the District are considered to have satisfied the educational and examination requirements for licensure as property managers.

Housing starts

refers to the number of new dwellings begun nationwide during a particular period. Monthly reports are available from the U.S. Census Bureau. Housing starts are a leading indicator, meaning they detect trends in the economy looking forward. Declining housing starts indicates a slowing economy and increases in housing activity can bring an economy out of a downturn. The amount of housing starts also affects the amount of new commercial construction. To keep up with economic trends in an area, the number of housing starts and building permits issued are a useful source of information.

board

the central governing body of an association and board members are elected into office by association members.

Mediation

the process in which a neutral, uninterested third party helps the parties involved in a dispute to negotiate a settlement or other resolution. The mediator (impartial third party) talks with each party individually, offers suggestions and his or her opinions as to the viability of the case, and tries to help the parties come to a mutually agreeable resolution. The mediator has no power to require any party to compromise or settle and cannot impose a decision. Depending on the terms of a mediation agreement, agreement of the parties to mediate does not necessarily prevent them from seeking relief through other legal means.

absorption rate

the rate at which a type of property is leased (absorbed) by the market.

principal authorizes a general agent

to perform all tasks associated with the continued operation of a particular project, such as managing a property.