Unit 8: Property Management
manager protects the interest of the property owner by
(1) constantly improving the reputation as well as the physical condition of the property (2) guarding the owner from insurable losses (3) helping the neighborhood and the community to offer the best possible residential and business environments (4) keeping a constant check on all expenditures to be sure that costs are kept as low as possible for the results that must be accomplished.
Property management consists primarily of the following six activities:
(1) securing suitable tenants, (2) collecting the rents, (3) caring for the premises, (4) budgeting and controlling expenses, (5) hiring and supervising employees, (6) keeping proper accounts and making periodic reports to the owner.
Alice is the property manager at an apartment complex. Her late-rent collection policy should include all contingencies EXCEPT
Alice should consider the personal situation of each renter when deciding whether to send late-payment notices. Should Include: Alice should initiate and follow through with eviction proceedings in conjunction with legal counsel for the owner or the management firm. Alice must consistently charge a late fee if one is provided for in the lease. Alice should make every attempt to collect back rent without resorting to legal action.
Among the many concerns of property managers are environmental issues. What types of issues are those?
Assessing mold and asbestos issues and remediation
An apartment complex property manager has concerns about the owners' liability for possible drownings in the pool. They talk to the owners, who ultimately decide to drain and backfill the pool. This is an example of which of the following ways of managing risk?
Avoiding the risk
Which of the following is NOT a function of property management?
Construction Functions: Leasing Marketing Maintenance
Janet is a property manager for a large mixed-use space. She wishes to purchase insurance coverage for her negligence and innocent mistakes. What type of insurance should she purchase?
Errors and omissions
risk management
Evaluation and selection of appropriate property and insurance coverage
When is asbestos presumed to be present
In building constructed before 1981
Workers' Compensation Insurance
Insurance carried by an employer to provide medical care and a portion of lost wages to an employee who has a work-related illness or is injured at work.
Casualty Insurance
Insurance that provides monetary benefits to a business that has experienced an unforeseen peril such as flood, fire, etc.
Errors and Omissions Insurance
Insurance which financially protects an architect against claims for damages resulting from professional negligence. Also called professional liability insurance.
When Jeffrey, a property manager, and Pete, a property owner, negotiated a property management agreement, which provision of the agreement might have been based on a percentage of gross or net income, a commission on new rentals, a fixed fee, or a combination of methods?
Management fee
Which of the following aspects of property management does NOT require a real estate license?
Marketing property require: Leasing property Controlling the acceptance of rent from a resident of a single-family property. Showing property
What is an example of the types of damages covered by liability insurance?
Medical bills paid for a slip and fall accident by a patron in a grocery store
Phillip is moving out of town to take a new job and has advertised his home for lease. As a landlord, which of the following is NOT a part of the required tenant-approval process?
Phillip must provide a copy of an applicant's credit report to any applicant rejected based on a credit report. Part of the Request: Phillip may not reject an applicant based on a criminal screening if all applicants are not being screened. Phillip must provide an applicant with a printed or online notice of his tenant selection criteria at or before he gives the applicant an application form. Phillip must provide an applicant with a list of the grounds for which he may deny the application.
In setting an operating budget, which of the following is not a fixed expense?
Repairs FIXED: Property taxes Real estate taxes Employee salaries
Reba manages a commercial office building in downtown El Paso. The occupancy level is 98%. What should Reba consider in determining the rent for office space?
She should raise the rent.
property manager
Someone who manages real estate for another person for compensation. collecting rents maintaining the property accounting for income and expenses. must adjust the rental rate to produce the highest total income
Joe is a commercial property manager. Which of the following might Joe have to consider in managing the property to meet a tenant's particular space needs?
Tenant improvements; are construction alterations
Joe is a new property manager for Capital City Apartments. He is in the process of establishing rental rates for the units. What is Joe's basic concern in setting the rates?
That income from the rent covers expenses and provides a fair return on the investment
specialized professional organizations
The International Council of Shopping Centers is a specialized professional organization for shopping center managers. The Building Owners and Managers Association International (BOMA International) is a federation of local associations of owners and managers, primarily of office buildings. The Texas Apartment Association has more than 10,000 members who manage more than 1.7 million rental housing units statewide.
capital expenditures budget
The budget that presents the company's plan for purchasing property, plant, equipment, and other long-term assets.
Hilda manages an apartment complex in downtown Houston. The apartments are always completely full, with a waiting list to get in. Which of the following could be the cause of the high occupancy rate?
The rent is too low. Hilda has an effective rental program. There are not enough apartments in the area.
How are the duties of a property manager similar to the responsibilities of a real estate listing agent?
They are responsible for accounting, loyalty, and disclosure.
What is a growing trend among building owners and property managers (especially in the commercial and retail sections) to reduce liability and insurance costs?
Transferring risk to tenants by requiring them to have their own insurance
A property manager taking out insurance is an example of which of the following ways of managing risk?
Transferring the risk
What is one key component in a professional apartment manager's search for new companies to represent?
Whether the owners of the property have realistic revenue projections
Maintenance, rehabilitation, insuring the property, and addressing environmental requirements are
a property manager's physical management activities.
Property manager Frieda hires Albert as the full-time janitor for one of the buildings she manages. While repairing a faucet in one of the apartments, Albert steals a television set. Frieda could protect the owner against liability for this type of loss by purchasing which of the following?
a surety bond. Surety bonds cover losses from an employee's criminal acts or negligence. Casualty insurance covers such events as theft, burglary, vandalism, and machinery damage; it is generally coverage on specific risks rather than being all-inclusive. Liability insurance covers medical expenses for a person injured in an owner's building as a result of the landlord's negligence. Workers' compensation insurance provides medical care and a portion of lost wages to employees who have a work-related illness or are injured at work.
A property manager has three principal responsibilities
administration marketing physical management.
surety bond
agreement by an insurance or bonding company to be responsible for certain possible defaults, debts, or obligations contracted for by an insured party; used to ensure that a particular project will be completed at a certain date or that a contract will be performed as stated.
There are eight key component to an agreement between a professional property management company and a building owner, including "allocation of costs." What does that refer to?
allocation of costs is an internal agreement that sorts out whether the management company or building owner will pay things such as building employee taxes and Social Security benefits. It also details who will pay for things like building promotion and expenses, such as telephone, electricity and onsite office maintenance.
a property manager will be called on to commercial or industrial space to
alter the interior of the building to meet the functional demands of the tenant range from repainting to completely gutting the interior and redesigning the space.
removing the source of a risk
avoid it
If a property owner rejects a rental application based on the applicant's credit report, the applicant must
be given the name of the credit-reporting agency and must be told that she has a right to get a copy of the credit report applicant also must be told that the credit agency did not make the decision to reject the applicant.
What is the primary focus in property management?
bottom line. Because the primary focus in property management is the bottom line, a property manager should develop an operating budget before attempting to rent any property.
A real estate license is NOT required for those who, for a fee, rent or lease or procure tenants for a property unless they
collect or deposit rent for a single-family residence. The Real Estate License Act states that a real estate license is required when a person, for a fee, rents or leases or procures tenants for a property, unless that person is an onsite apartment manager or an employee of the owner of the property. Property managers who collect rent , do billing statements, and make maintenance arrangements do not need to be licensed. If a property management company is also going to lease and list for lease real property belonging to others, then the people who do the leasing and listing of the properties must be properly licensed. A person who controls the acceptance or deposit of rent from a resident of a single-family residence must be licensed.
replacement cost
construction cost at current prices of a property that is not necessarily an exact duplicate of the subject property but serves the same purpose or function as the original.
management agreement
contract between the owner of income property and a management firm or an individual property manager that outlines the scope of the manager's authority to manage the property. should be in writing and should cover the following eight points: description of the property time period the agreement will cover definition of management's responsibilities statement of owner's goals extent of manager's authority reporting management fee allocation of costs.
taking preventative safety measures
control it
A property manager for a single-family residential unit may do all of the following without a license EXCEPT
control the acceptance or deposit of rent. Can: prepare billing statements maintain the property collect rent and mail it to the landlord.
To minimize the liability risk associated with the property's swimming pool, the manager could hire lifeguards, restrict the hours of operation, or both. This is an example of
controlling the risk. can control the risk by taking preventive measures to minimize the risk.
property manager *retains risk* by
deciding that the chances of the event's occurring are too small to justify the expense of any other response. When considering the possibility of a loss, the property manager must decide whether it is better to avoid it by removing the source of the risk control it by installing preventive measures transfer it or share it by taking out an insurance policy retain it by deciding that the chances of the event's occurring are too small to justify any other response
Jane is a property manager for a large commercial office building in Dallas that was constructed in 1936. Which of the following is NOT a consideration for Jane in attracting new tenants?
external obsolescence. Renovation or modernization of buildings that have become physically or functionally obsolete and thus unsuited to new tenants' needs is important. The renovation of a building generally enhances the building's marketability and increases its potential income. External obsolescence is caused by factors not on the subject property.
business interruption insurance
form of coverage that provides income to a business in the event the premises become untenable.
The agency relationship between Jeffrey, a property manager, and Pete, a property owner, would usually require Jeffrey to act as
general agent, with fiduciary responsibilities to Pete. A general agency relationship exists between the owner and the property manager, because the manager may bind the owner to any contracts (leases, construction agreements, etc.) within the scope of the manager's authority laid out in the management agreement. If only a special agent, the broker would not be able to bind or obligate the owner to such contracts.
Which is NOT a provision of the FTC "Red Flag" FACTA rule?
if a property manager cannot resolve address discrepancies in a credit report and/or application, the manager may still lease to the rental applicant. Under certain circumstances, if a property manager verifies a correct address, it must be reported to the consumer reporting agency. If the manager cannot resolve the discrepancies, the rule states that the rental application is to be denied.
Standardized property management fees are which of the following?
illegal price-fixing Management fees must be negotiated between the owner and the property manager. Standardization of rates would be viewed as price-fixing.
liability insurance
insurance that provides protection from claims arising from injuries or damage to other people or property
How is commercial space rental typically stated?
monthly rate per square-foot basis. Office and commercial space rentals are usually stated according to either the annual or the monthly rate *per square foot of space*.
cash value policy
pays you for the value of the damaged property after considering depreciation
Property managers administration activities
preparing budgets and reporting to the owner, and marketing activities, such as finding and selecting tenants.
Do apartment managers need real estate licenses?
property owners and their onsite employees do not require licenses to lease units. Employees for professional management firms that operate at a number of different locations must have real estate licenses.
Which of the following would be considered a capital expenditure in creating a budget for a property manager?
renovation of the units. If an owner and a property manager decide that modernization or renovation of the property will enhance its value, the manager should budget money as capital expenditures to cover the costs of remodeling. In the case of large-scale construction, the expenses charged against the property's income should be spread over several years.
The occupancy rate for the Mountain View Apartments has reached 98%. From the point of view of the property manager, what might this indicate?
rents should be raised. Although a high percentage of occupancy may appear to indicate an effective rental program, it also might mean that rental rates are too low. Anytime the occupancy level exceeds 95%, serious consideration should be given to raising the rents, but only after a survey of the competitive space available in the neighborhood.
In managing property, unexpected variable expenses such as repairs, decorating, and supplies can be addressed using a cash
reserve fund.
deciding that the risk is too small to do anything about it
retain it
Agent Alice is a property manager at A-1 apartments. She is creating an operating budget for the following year and should do which of the following to deal with renovation or modernization of the units?
set a capital expenditures budget. If an owner and a property manager decide that modernization or renovation of the property will enhance its value, the manager should budget money to cover the costs of remodeling. In the case of large-scale construction, the expenses charged against the property's income should be spread over several years.
reserve fund
should be created to address unanticipated expenses, such as repairs, decorating, and supplies. used to determine the amount of the budget previous yearly expense
Rental rates are influenced primarily by
supply and demand
Which of the following is a legitimate reason for rejecting a residential tenant?
tenant has too many debts. Conviction of a crime that was a threat to property in the *past five years*, including manufacture or distribution of a controlled substance is a valid reason for rejecting an applicant. An arrest is not a conviction. Current drug use is also a valid cause for rejection.
If the rejection was based on an applicant's credit score,
that score, along with key factors that adversely affected the credit score, must be included in the rejection notice.
An estimate of income and expenses and a consideration of the owner's long-range plans for the property are contained in
the budget. The budget can be used to gauge how successfully the management plan is working.
The frequency and detail of the manager's periodic reports to the owner about the operations and financial position of the property should be determined by
the owner and the manager together.
If a property owner rejects an applicant based upon information other than a credit report
the owner must either disclose the reason or tell the applicant that she has the right to submit a request for disclosure of the reason for rejection.
Which of the following is NOT a legitimate reason to reject someone as a tenant?
too many calls to police to defend against spousal abuse unsatisfactory references, evictions, frequent moves, bad credit report or too may debts, length of time at current employment too short, smokers, no verifiable source of income or insufficient income, too many vehicles for the available parking space, pets, current drug users conviction of a crime. (arrest is not a conviction)
taking out an insurance policy
transfer it
multiperil policies
type of insurance that packages several types of coverage into one policy
casualty insurance
type of policy that protects a property owner or other person from loss or injury sustained as a result of theft, vandalism, or similar occurrences.
fire and extended coverage insurance
type of policy to protect against fire, hail, windstorm, and other damage.
depreciated cost
value of a property after deducting an allowance for depreciation
It is the obligation of the property manager to reach agreement with the property owner that the building
will be strategically marketed and maintained according to neighborhood quality, local demographics, need, and capacity to pay. The manager's chief job is to control revenue and expenses to secure the building owner's bottom line.
standard fee schedule for property management services
would be price-fixing, which is illegal under the antitrust laws.
Must a professional management company have a "supervising broker" on staff, or may it simply hire individuals who have sales licenses?
yes, management companies must have supervising brokers who are responsible for the actions of the sales agents. Property managers and supervisors must be knowledgeable about a number of issues, not the least of which is fair housing law, as well as accounting practices.
