You know the drill. You’re knee-deep in tenant complaints, juggling maintenance requests, and managing rent collection, all while keeping an eye on the bottom line. It’s a lot of work, and if you’re in this game, you need all the help you can get. But what if that help comes in the form of an unlicensed property manager? What can they do, and what should they avoid like the plague? Understanding the boundaries of what an unlicensed property manager can and can’t do can save you from legal headaches, protect your investment, and keep your business running smoothly.
What Exactly Is an Unlicensed Property Manager?
Many property managers are familiar with the concept of licensure. A licensed property manager has completed specific educational requirements, passed an exam, and is authorized by the state to perform certain property management tasks. But not every state requires a license for property management, and in some cases, individuals might work under the supervision of a licensed broker or property manager without holding a license themselves.
These unlicensed property managers can provide a range of valuable services, especially in markets where licensing is not required or when they work under a licensed supervisor. However, their scope of work is limited by law, and it’s crucial to understand these limitations.
The Do’s: Tasks an Unlicensed Property Manager Can Handle
- Administrative Tasks Start with the basics. Administrative tasks form the backbone of property management, and unlicensed individuals can handle these without stepping into legally murky waters. This includes answering phones, scheduling appointments, managing records, and handling correspondence. These tasks are crucial for keeping operations smooth and don’t require a license.
- Maintenance Coordination Getting that leaky faucet fixed or arranging for snow removal in the dead of winter can be done by an unlicensed manager. They can take maintenance requests from tenants, coordinate with contractors, and ensure that repairs are completed in a timely manner. The key here is that they are not making decisions about the scope of work or costs but are simply facilitating the process.
- Showing Rental Properties An unlicensed property manager can show properties to potential tenants, but with some caveats. They can walk prospects through the property, answer basic questions about the property itself, and provide rental applications. However, they should not discuss lease terms, negotiate rent, or enter into any kind of contractual agreement. Essentially, they are there to open the door and answer questions, not to close the deal.
- Collecting Rent Handling rent collection is another area where an unlicensed property manager can be of help. They can receive rent payments, issue receipts, and deposit the funds into the appropriate account. Rent collection is a straightforward task that doesn’t require a license, as long as the unlicensed manager isn’t responsible for determining rent prices or negotiating payment terms.
- Conducting Inspections Property inspections are critical to maintaining the value of your assets. An unlicensed manager can conduct move-in and move-out inspections, routine inspections, and even document the condition of the property with photos or reports. They can also compile this information and pass it along to the property owner or a licensed manager for review.
- Handling Basic Tenant Relations Good tenant relations are key to reducing turnover and maintaining a profitable property. An unlicensed manager can handle tenant communication, from responding to inquiries and complaints to delivering notices of upcoming inspections or maintenance. Keeping the lines of communication open helps prevent misunderstandings and keeps tenants happy.
The Don’ts: Tasks That Require a Licensed Property Manager
- Negotiating Lease Terms Negotiation is a skill, and in the world of property management, it’s also a regulated activity. An unlicensed property manager should never negotiate lease terms or rental rates. These activities often involve legal implications and financial decisions that require the expertise of a licensed professional. If negotiations are necessary, an unlicensed manager should pass the task off to someone with the appropriate credentials.
- Drafting and Signing Leases Creating and signing lease agreements is another area where licensing matters. Leases are legal contracts, and drafting them without a license could not only be illegal but could also open you up to significant liability. Only a licensed property manager or broker should be involved in the creation and execution of lease agreements.
- Handling Trust Funds Trust funds, which include security deposits and prepaid rent, are a critical part of property management. Mishandling these funds can lead to severe penalties, including losing your license if you have one. An unlicensed property manager should not be involved in managing or disbursing trust funds. They can, however, deposit checks into the appropriate accounts under the supervision of a licensed manager.
- Advertising and Marketing Properties Advertising properties might seem straightforward, but it’s a task best left to licensed professionals. Crafting advertisements, determining where and how to market a property, and setting rental prices require knowledge of the market and often involve compliance with state and federal laws, including Fair Housing laws. Unlicensed managers should refrain from creating or posting advertisements to avoid crossing into areas of liability.
- Negotiating Contracts with Vendors Vendor management is more than just arranging for services. It often involves negotiating contracts and payment terms, which require legal knowledge and the ability to protect the property owner’s interests. An unlicensed manager should not engage in negotiating contracts with vendors. Instead, they can assist by gathering bids and providing recommendations, leaving the final decisions and negotiations to a licensed individual.
- Managing Evictions Evictions are one of the most legally sensitive areas in property management. Handling an eviction involves navigating state and local laws, filing court paperwork, and possibly representing the property owner in court. An unlicensed property manager should never attempt to manage an eviction. Any involvement should be strictly administrative, such as coordinating with legal professionals and serving notices as directed by a licensed manager or attorney.
The Risks of Overstepping Boundaries
Crossing the line into activities that require a license isn’t just a matter of breaking the rules; it’s a legal risk. Property owners and managers who allow unlicensed individuals to perform tasks that require a license could face fines, legal action, and even the loss of licensure. The risks extend beyond just financial penalties; they can also damage your reputation and relationships with clients.
In states with strict licensing requirements, the regulatory agencies don’t take kindly to unauthorized activities. Property management is a highly regulated industry because it involves the handling of significant assets and impacts the lives of tenants. As such, there is little room for error when it comes to who can do what.
How to Use Unlicensed Property Managers Effectively
Unlicensed property managers can be a tremendous asset when used correctly. The key is to leverage their skills in areas that don’t require licensure while ensuring that any activities that do require a license are handled by a qualified professional. Clear communication, proper training, and ongoing supervision are crucial to making this work.
Start by clearly defining the roles and responsibilities of your unlicensed staff. Outline the tasks they can handle independently and those that require oversight or should be deferred to a licensed manager. Training is also essential. Even if a task doesn’t require a license, it should still be done competently and professionally. Provide unlicensed managers with the knowledge they need to excel in their roles, including understanding the limitations of what they can legally do.
Regular check-ins and supervision help ensure that everyone stays within their legal boundaries. Encourage unlicensed managers to ask questions and seek guidance when they are unsure about a task. Better to pause and verify than to risk overstepping the law.
Conclusion
Using unlicensed property managers effectively comes down to understanding the do’s and don’ts of their role. By recognizing the boundaries of what an unlicensed manager can do, property owners and licensed managers can avoid legal pitfalls, protect their investments, and ensure that their properties are managed efficiently and within the law.
Stay within the rules, and you’ll find that unlicensed property managers can be a valuable part of your team, handling the day-to-day tasks that keep your operations running smoothly without stepping into legally risky territory. This approach will keep your business on the right side of the law while allowing you to make the most of your resources.