CH 16 - Property Management

definitive expiration date.

In many states, property management contracts must provide for a ______________ Failure to include such a provision in the contract could result in the loss of license.

owner

In the property owner/property manager relationship, who is the client?

general agent

In this relationship, a property manager or property management company is a __________ because of the broad range of duties performed.

Preventive Maintenance.

Includes routine maintenance and inspections to keep equipment and the property in good working order. This could include scheduled inspections and the replacement of parts before they fail.

Cosmetic Maintenance.

Increases a property's appeal. Adding new wallpaper to a lobby or planting flowers next to a walkway can attract new tenants.

Building Manager

Involved in the management of just one building.

Net operating income is equal to gross income minus expenses: $68,000 - $8,000 = $60,000 NOI. Cash flow is equal to net operating income minus debt service: $60,000 - $22,000 = $38,000 cash flow.

Jan borrowed $300,000 and made a down payment of $50,000 to buy a warehouse. She has an effective gross income of $68,000, expenses of $8,000, and an annual debt service of $22,000. What is her cash flow?

Property Management—

Leasing or renting, or offering to lease or rent, real property of others for a fee, commission, compensation, or other valuable consideration pursuant to a property management employee contract.

property management division

Many property managers work in a ____________ within a commercial real estate sales company.

agency relationship

Most states require anyone who takes a listing, publishes a listing, negotiates a lease, and/or interacts with potential clients to have a real estate license. Therefore, a property manager has an ___________ with a property owner, who is the client, and so owes fiduciary duties to owners as the principal.

trust account,

North Carolina has set forth legal requirements for a real estate brokerage __________ also called an escrow account.

Property Manager.

Oversees the management of a number of properties for various owners.

Net Operating Income =

Potential Gross Income - Vacancy and Collection Losses + Miscellaneous Income - All Variable, Fixed, and Capital Expenses

agreement of both parties complete destruction of the property condemnation of the property sale or transfer of title to the property

Property management contracts may be terminated by which of the following?

management contract.

Property manager Mike becomes an agent of property owner Leslie by signing a property

direct and indirect costs

Property managers should determine both the _____________ associated with their job.

Leases. Letters— Financials—. Project bids— Basic information—

Records that a property manager should maintain include the following:

Resident Manager.

Represents a property management firm and may live on the premises of the building that he manages.

Corrective Maintenance.

Restores broken or failed equipment to a specified condition. Repair work may be a less frequent expense, but property managers need to line up qualified repair people they can call at a moment's notice.

Habitability Repairs Policy.

The contract should provide guidelines for how the property manager is to handle repairs. Some property management contracts, for example, state that property managers must get owner approval for repairs costing over a certain set dollar amount. But when a property manager feels that a repair is necessary for habitability of the building and the owner refuses to approve it, the property manager should have the right to terminate the contract immediately.

demand deposit account

The law specifically indicates that a trust account maintained by a broker-in-charge must be in a____________________ located in a federally insured depository institution that is lawfully doing business in North Carolina

Eviction—

The legal process of forcing someone off property or preventing someone from re-entering property.

Remember that cash flow is net operating income minus debt service: $28,000 - $15,600 = $12,400

The operating statement on Kathy's rental property shows an effective gross income of $48,750 and a net operating income of $28,000. She pays $2,900 a year for insurance, $7,000 a year for property taxes, and $15,600 a year on her mortgage. What is the cash flow?

property management contract.

The relationship between the property owner/investor and the property manager is governed by a written ____________________ Key components of the property management contract include the authority and duties of the property manager, the property description, compensation details, and a contract period. Additionally, the contract should spell out the repairs policy, accounting and reporting responsibilities, and details specific to contract termination.

A Key Report

This statement shows the income and expenses for the property over a specific period of time—sometimes annually, quarterly, or monthly—as agreed to in the property management contract. This report includes the income from rents and other sources, such as parking or vending. It also shows the vacancy losses.

general

Tim is a property manager of a residential rental property in North Carolina. As a property manager, he is most likely to be considered a ____________ agent.

must be FDIC-insured.

To be in compliance with state law, trust accounts used by a property manager to deposit funds

fiduciary duty

Ultimately, a property manager has a __________ to the property owner to ensure that the rent is sufficient to meet the operating expenses of the property and provide the property owner with the expected return.

Contract Rent—

What tenants are actually paying for in rent, as stated in the terms of the lease.

Market Rent—

What the property could rent for in the open market if unencumbered by any lease and available.

definitive termination date description of the property management authority and limitations management fee

When contracting with an owner to manage a property, Helen needs to ensure the contract includes which of the following elements?

one-year operating budget

When putting together a property management plan to propose to an owner, Sue should include which of the following items?

collecting rent from tenants depositing rent payments into the owner's account interviewing tenants negotiating leases between the owner and tenant

Which of the following are duties Patricia should expect to have responsibility for as the new property manager for the Governor's Square apartment complex?

The property management contract

details the duties, responsibilities, allocation of costs, and compensation of the property manager. An owner's responsibilities vary and should also be listed in the management contract.

The ADA

has a very specific definition of a service animal: Any dog or miniature horse that is individually trained to do work or perform tasks for the benefit of an individual with a disability. The tasks must be directly related to the person's disability.

A security deposit

helps a landlord ensure compliance with a lease.

consumer reporting agencies (CRAs)

include credit bureaus, tenant-screening services and reference-checking services.

A property manager

is a person hired by a real property owner to administer, market, and maintain property, especially rental property.

. A property manager

is a person hired by a real property owner to administer, market, and maintain property—especially rental property. However, property management goes beyond collecting rent and leasing apartments or office buildings. A property manager is considered the custodian and supervisor of an owner's property.

The rent roll

is a report or spreadsheet that lists key information about a property such as the number of units, tenant names with unit numbers, lease dates, and the rent each tenant pays on a unit. This is helpful for the property manager to manage the level of vacancies and occupancies and to keep tabs on local rent rates.

A flat fee

is a specific fee paid out at specific increments.

A general agent

is an agent authorized to handle a wide variety of the principal's affairs in one area or in specified areas.

A percentage fee

is based on the operation's gross collectible income. The percentage fee could also be a fixed percentage of rent or a bonus when a certain number of leases are signed.

Rent

is the consideration a tenant gives a landlord in exchange for temporary possession of the property.

Actual eviction

is the forced removal, by legal means, of a tenant and his belongings.

A management proposal

is the plan created by the property manager for overseeing the property. It includes a one-year operating budget that identifies fixed expenses (which are unchanging regardless of occupancy) and variable expenses (which depend on occupancy), as well as capital expenses that are used to improve the property and increase its value. A critical factor to consider in determining a set rent amount is supply and demand.

Risk management

is the process of identifying, managing, and minimizing the potential risks on a property.

A management plan

is the proposal created by the property manager for overseeing the property.

Cash-on-cash return

is the ratio of income generated by the cash investment.

Property management

may be defined as leasing or renting, or offering to lease or rent, real property of others for a fee, commission, compensation, or other valuable consideration pursuant to a property management employment contract

Constructive eviction

occurs when a tenant vacates the premises due to the owner's negligence.

A property management

organization may be a single licensee or a vast corporation.

While a security deposit

typically may not be used for cleaning the rental unit, when negotiating the lease, a property manager could impose a separate non-refundable cleaning fee or pet fee. If the tenant pays the rent in full and keeps the property in good condition, the whole security deposit should be refunded when the lease ends and possession is returned to the manager. If the tenant has breached the terms of the lease or failed to look after the property, the manager may be able to keep part or all of the deposit to cover damages.

Market rent

(also referred to as economic rent) is what the property could rent for in the open market if currently vacant and available.

Tenants also have legal duties

. Tenants must not intentionally or negligently damage any part of the property, or permit guests to damage it. Furthermore, a tenant is expected to keep the rental unit safe and sanitary, dispose of rubbish and garbage, keep the plumbing fixtures clean, use all electrical and plumbing fixtures properly, and comply with health and safety codes.

Operating Budget—

A budget created to project the income and expenses for a property over a one-year period.

income statement,

A key report for which a property manager is responsible is an _________ also referred to as profit and loss statement.

security deposit

A landlord may require a ____________ before a tenancy begins to ensure compliance with all lease provisions.

security deposits

A landlord or property manager who collects and maintains ___________ from a tenant in a residential dwelling must have a trust account.

One-year operating budget Five-year plan Market analysis of region

A management plan generally includes the following:

General Agent—

A person authorized to handle a principal's affairs in one area or in specified areas.

Property Manager—

A person hired by a real property owner to administer, market, and maintain property, especially rental property.

Management Proposal—

A plan created by the property manager for overseeing the property, including market analysis, and developing a variety of financial reports, including the operating budget.

general agent

A property manager is a ___________ tasked with a wide range of duties and responsibilities.

Preventive Maintenance. Corrective Maintenance. Cosmetic Maintenance.

A property manager's maintenance responsibilities can generally be divided into three broad categories:

Property Manager. Building Manager. Resident Manager.

A solo property manager could have different roles, depending on the extent of the owner's property, such as a:

Property Management Contract—

A written agreement that creates an agency relationship between the property owner/investor and the property manager.

security deposit

A(n) ______________ helps a landlord ensure compliance with a lease.

bond

According to the North Carolina Tenant Security Deposit Act, however, a landlord could choose instead to furnish an adequate ____________ in the amount of the deposits from a licensed North Carolina insurance company. If so, the security deposits could be held in a trust account outside of the State of North Carolina [G.S. § 42-50].

Accounting Responsibilities and Reports.

Accounting for all income and expenditures is more involved than it sounds. Property managers cannot simply set rent levels based on the expenses associated with operating the building or returning a desired profit. They are instead tasked with securing the highest possible rent for a given property that the market will allow. A property manager must be able to document all the factors that impact the owner's bottom line since that's something the owner is particularly interested in. Usually distributed on a monthly basis, property management reports are prepared by property managers to inform owners of the status of the property, often including income, expenses, and disbursement information. The property management contract should clearly explain when the report must be distributed and to whom.

1. The property manager gives the tenant a notice to quit. 2. The property manager files a forcible detainer action in court. 3. The court issues an order of eviction.

Actual eviction requires three steps:

automatically terminated

Additionally, in some states, property management contracts contain provisions that state the agreement will _____________ by the sale or transfer of title to the property, condemnation of the property, or complete destruction of the property.

Selecting tenants Signing leases Setting and collecting rents Handling security deposits Initiating eviction procedures as necessary Hiring staff and outside vendors

As a general agent to the property owner, a critical component of the property management contract is the detailed description of the property manager's authority and any limitations related to tasks, such as the following:

fiduciary obligations.

As the property manager for owner Ross, Monica is held to high standards of good faith and loyalty, known as

principal.

Both a property manager and a property management company have an agency relationship with a property owner, who is the

Management Contract Termination.

Details about the termination of the owner-manager relationship should be spelled out in the management contract. In case an owner wishes to cancel a contract early, information about the property manager's compensation for negotiated leases and contracts not yet executed should be stated. In some states, property management contracts contain provisions that state the agreement will automatically be terminated due to the sale or transfer of title to the property, condemnation of the property, or complete destruction of the property.

additional

Furthermore, the owner cannot charge an ____________ deposit or increased rent for a resident with a service animal.

custodian and supervisor

However, property management goes beyond collecting rent and leasing apartments or office buildings. A property manager is considered the _____________ of an owner's property.

breaches the lease contract

If a tenant _____________, a property manager can choose to terminate the contract by evicting the tenant.

breaches the lease contract

If a tenant _____________, a property manager can choose to terminate the contract by evicting the tenant. Actual eviction is the forced removal, by legal means, of a tenant and his belongings. It typically requires three steps: The property manager gives the tenant a notice to quit, the property manager files a forcible detainer action in court, and the court issues an order of eviction.

Contract rent

(which may sometimes be referred to as current rent) is what tenants are actually paying in rent, as stated in the terms of the lease and maintained on the rent roll.

solo property manager

A real estate licensee who is interested in being his own boss and controlling as much of the business as possible might choose to become a ____________ for a property owner or owners.

fiduciary duties

As an agent, a property manager owes the property owner the same ___________ of obedience, loyalty, disclosure, confidentiality, accountability, and reasonable care owed to all clients.

raise the rent

Bart manages a building with 30 units. No one has moved in about five years. What should Bart, as property manager, recommend to the owner?

Steering—

Channeling prospective buyers or tenants to particular neighborhoods based on their race or membership in another protected class.

The property management contract,

also called the management contract or the property management agreement, is a written agreement that creates an agency relationship between the property owner/investor and the property manager. The management contract should be signed by both parties.

Management fees

may be fixed (flat) or a percentage.

An owner's responsibilities

vary and should also be listed in the management contract. This could include information on who oversees payroll and insurance, as well as providing direction on any monthly, quarterly, and yearly payments. Regardless of how involved a property owner chooses to be, the owner should be responsible for providing all documentation, records, and disclosures as required by the management company/property manager to manage and operate the property.