It goes without saying - no one cares more about your real estate investments than you. And perhaps the only people who care almost as much as you about your real estate investments are your close friends and relatives. As an owner of rental properties, you may use this logic to consider paying a friend, over a licensed agent, to perform property management tasks.
Having a friend or family member assist with management should be taken cautiously. There are many factors and legal implications to consider.
For all states, except Idaho, Maine, Maryland, Massachusetts, and Vermont, you need either a Property Management license or a Real Estate Brokers license in order to carry out property management tasks. Please consult the local property management laws for your area to confirm. According to All Property Management, you may need a license to perform any of these activities:
- Marketing the property to potential tenants
- Showing the property to prospective tenants
- Negotiating lease terms
- Paying for services using the property's rent payments
- Depositing the rent into a trust, signing checks, or withdrawing money from the bank account
Performing Unlicensed Tasks
If a friend or family member supports your rental by performing unlicensed tasks, then it is recommended they understand Fair Housing Laws. You are inevitably responsible for their actions when they are interacting with leads and tenants.
Fair Housing Laws
Did you know?
You can get sued for a friend putting up a property sign stating, “children are not allowed to ride their bikes.” And, it is illegal for a family member to inform a passerby that you are only looking for a couple without children to live on the premise. The last thing you want is a lawsuit.
It’s important that anyone who is on the property understands and abides by all Fair Housing Laws to prevent liability issues. The best way to acquaint them with Fair Housing is for them to read about it. Craigslist's Fair Housing helps articulate what you need to know at the Federal and State levels.
Challenges with management
Your friend may offer assistance, as a favor to you or as a way to make extra income. You should remain diligent in determining if you want to bestow this responsibility on your friends as there is liability and difficulty in managing properties.
Some of the more challenging tasks in property management:
- Eviction proceedings due to non-payment by the tenant
- Emergencies that require immediate decision making
- Extended vacancy requiring more showings than anticipated
- Neighbor complaints regarding your tenants’ behavior or actions
It’s important to make sure that you have oversight and control in the decision-making power. In the event of an eviction, a process server, a licensed agent, or you should serve the paperwork. For maintenance emergencies, you should already have a list of scenarios and what should be done in each case. This authorization of power cannot be delegated to someone without a license.
Competency with maintenance
An integral part of management is the general health of the structure, which includes:
- Rectifying maintenance requests from the tenant
- Completing recommended preventative maintenance and safety
- Recognizing the right tradesman and ensuring a fair price
If you have someone helping coordinate maintenance, then you want to be well versed on local maintenance rates and practices. You do not want a contractor to take advantage of ignorance related to fair market rates for repair work.
Safety systems should be in good working condition and confirmed to have no deficiencies which could present a safety liability. This includes a confirmation that:
- All safety systems are in proper working order
- Amoke/CO2 detectors are working
- Fire extinguishers have been checked
- Railings are securely attached and not at risk of breaking off
- Additions and alterations, such as stairs and railings, are up to code
- Tubs and showers are not abnormally slippery
- Sharp edges do not exist around the house
- Chemicals and dangerous objects are not left from prior tenants/renovations
You are legally liable for actionsIf you do not take anything else away from this article, understand that you are ultimately liable for all actions. If a friend is not licensed with errors & omissions insurance, liability will fall on you for their legal infractions or neglect causing harm to an individual.
These are the most important considerations to keep in mind when deciding who and how your property is managed. The safest scenario is to have transparency into who, how, and what is going on with your rentals, even if you are not onsite.
Hemlane can provide a risk-mitigated management solution for you and your family, providing flexibility and introductions to licensed professionals for local support.
Photo cred: Christin Hume