Calendar icon July 3, 2024

Your Guide to Property Management Laws, Regulations, & Rules

Property management activities involve overseeing rental properties, ensuring they’re maintained, residents are managed, and finances are handled effectively. 

While a real estate license is not always necessary to manage rental properties, licensing requirements can vary significantly by state. Typically, states may require property managers to hold a real estate license or work under a licensed broker. Property managers should familiarize themselves with the specific regulations in their state to ensure compliance.

What Are Some Important Property Management Rules and Regulations?

Property management laws encompass various areas, ensuring the safety, rights, and responsibilities of both property managers and tenants. Key areas include:

  • Anti-discriminatory laws: Fair housing laws such as the Federal Fair Housing Amendments Act (FHAA) prevent discrimination based on race, color, national origin, religion, sex, familial status, or disability.
  • Lease paperwork: Legally binding lease agreements must include specific terms and comply with local regulations.
  • Safety, maintenance, and repairs: Property managers must ensure properties meet habitability standards, including weatherproofing, heating, water, and electricity.
  • Financial management: Proper handling of security deposits, monthly rent collection, and financial records is essential to comply with regulations and avoid disputes.

Property management laws by state

Each state has specific property management laws that property managers must adhere to. For instance, in many (but not all) jurisdictions, property managers must obtain a real estate broker license to operate.

These laws are typically drafted and enforced by various regulatory bodies such as the state's Department of Real Estate or similar agencies. 

For instance, the California Department of Real Estate is responsible for regulating real estate activities, brokers, and salespersons, including those who work in property management, while the Texas Real Estate Commission handles these responsibilities in Texas. These agencies ensure compliance with state licensing laws and often provide resources and guidelines for property managers of both residential properties and commercial properties.

Below is a table linking to the respective government sites for state-specific regulations:

State State Body

Alabama

Alabama Real Estate Commission

Alaska

Alaska Real Estate Commission

Arizona

Arizona Department of Real Estate

Arkansas

Arkansas Real Estate Commission

California

California Department of Real Estate

Colorado

Colorado Division of Real Estate

Connecticut

Connecticut Department of Consumer Protection

Delaware

Delaware Real Estate Commission

Florida

Florida Department of Business & Professional Regulation

Georgia

Georgia Real Estate Commission and Appraisers Board

Hawaii

Department of Commerce and Consumer Affairs' Real Estate Branch

Illinois

Illinois Department of Financial and Professional Regulation

Indiana

Indiana Professional Licensing Agency

Iowa

Iowa Department of Inspections, Appeals, & Licensing

Kansas

Kansas Real Estate Commission  (for commercial real estate property management only)

Kentucky

Kentucky Real Estate Commission

Louisiana

Louisiana Real Estate Commission

Michigan

Michigan Department of Licensing and Regulatory Affairs

Minnesota

Minnesota Department of Commerce

Mississippi

Mississippi Real Estate Commission

Missouri

Missouri Division of Professional Registration

Montana

Montana Department of Labor and Industry

Nebraska

Nebraska Real Estate Commission

Nevada

Nevada Real Estate Division

New Hampshire

New Hampshire Real Estate Commission

New Jersey

New Jersey Real Estate Commission

New Mexico

New Mexico Real Estate Commission

New York

New York State Division of Licensing Services

North Carolina

North Carolina Real Estate Commission

North Dakota

North Dakota Real Estate Commission

Ohio

Ohio Division of Real Estate & Professional Licensing

Oklahoma

Oklahoma Real Estate Commission

Oregon

Oregon Real Estate Agency

Pennsylvania

Pennsylvania Real Estate Commission

Rhode Island

Rhode Island Department of Business Regulation

South Carolina

South Carolina Real Estate Commission

South Dakota

South Dakota Real Estate Commission

Tennessee

Tennessee Real Estate Commission

Texas

Texas Real Estate Commission

Utah

Utah Division of Real Estate

Virginia

Virginia Department of Professional and Occupational Regulation

Washington

Washington State Department of Licensing

West Virginia

West Virginia Real Estate Commission

Wisconsin

Wisconsin Department of Safety and Professional Services

Wyoming

Wyoming Real Estate Commission

Note:  This list excludes resources from Idaho, Maine, Maryland, Massachusetts, and Vermont.
 

Tenant screenings

Tenant screenings are a critical step in property management, involving background checks, credit checks, income verification, employment verification, rental history, and proof of ID to assess prospective tenants. 

This process helps ensure that potential renters are reliable and financially responsible. It's important to obtain signed consent before running credit checks, as required by the Fair Credit Reporting Act (FCRA), to comply with legal standards and protect tenant privacy.

Another important guidance is provided by the Fair Housing Act, which prohibits discrimination in housing-related activities based on race, color, national origin, religion, sex, familial status, and disability, ensuring equal access to housing for all individuals.

Learn more about Tenant Screening Tips for PMs

Lease agreements

A lease agreement is a legally binding contract between the landlord and tenant, outlining the terms of the tenancy. Key components of rental agreements include lease terms, rent amount, security deposit regulations, and common clauses such as maintenance responsibilities and lease renewal terms. Regulations governing lease agreements can vary by state, so it's essential to ensure that leases comply with local laws.

For instance, state laws often contain security deposit limits, provisions for the return of unused portions, as well as a clear accounting for any deductions.

Consulting with a lawyer is crucial to ensure your agreement is legally sound and reflects your specific circumstances. 

We’ve shared some relevant resources below:

Financial management

Effective financial management in property management involves establishing clear rent collection procedures and maintaining organized financial records. This includes tracking rent payments, managing tenants’ security deposits, and adhering to landlord-tenant laws to avoid legal disputes and financial penalties. 

Keeping detailed records can help property managers resolve issues efficiently and ensure transparency with tenants and property owners.

Solutions such as property management software can streamline financial operations, automate routine tasks, and perhaps most importantly - ensure accuracy and regulatory compliance with respect to various accounting regulations and legal requirements. 

Evictions

Evictions are a legal process to remove a tenant from a property. Common reasons for eviction from rental units include nonpayment of rent, property damage, lease violations, and criminal activity. 

Property managers must follow their state's rules for eviction notices, such as unconditional quit terminations and termination for lease violations, to ensure the process is lawful and fair.

State laws regarding unconditional quit terminations and terminations for violation of a lease vary widely. Unconditional quit notices typically demand that tenants move out immediately without an opportunity to remedy the violation. States like Indiana and Mississippi allow landlords to issue these notices for serious or repeated violations, with Mississippi requiring 14 days to move out​.

For lease violations, the notice period and the opportunity for tenants to remedy the breach also differ by state. For example, in Kentucky, tenants generally have 15 days of written notice to cure a violation, but if the same violation occurs within six months, landlords can issue a 14-day unconditional quit notice​​. In contrast, states like Iowa and Maine require a seven-day notice period for tenants to address lease violations before eviction proceedings can begin​. In California, on the other hand, tenants must be given three days or more to cure the violation before landlords can file for eviction (source).

These legal nuances emphasize the importance of PMs and tenants understanding their specific state regulations to navigate eviction processes appropriately.

Property maintenance and repairs

Maintaining rental properties is a legal obligation for landlords, ensuring that properties are safe, habitable, and free from hazards like lead, asbestos, and mold. This includes weatherproofing, providing adequate heating and water, and ensuring electrical systems are functional. You can find out more about these issues in our Property Maintenance Guide for PMs

Landlords must also give notice to tenants before entering the property for repairs, as required by most state laws. When in doubt, consult a legal advisor to ascertain the specific laws that apply to you in your state. 

Tenants have the right to a habitable living environment, and failure to meet these standards can lead to legal consequences as well as issues with occupancy rates.

Indeed, when landlords fail to make required repairs, tenants have several options depending on their state's laws. Tenants may withhold rent, make the necessary repairs themselves and deduct the cost from the rent, pay a reduced rent, report the issue to local building inspectors who can order repairs, or even break the lease and move out. Additionally, tenants can sue the landlord for a partial refund of past rent or for damages caused by the substandard conditions, including discomfort and emotional distress.

Second Nature's Guidance

Staying informed about state-specific regulations, maintaining organized records, and ensuring compliance with federal laws such as the Fair Housing Amendments Act is key to successful property management. 

On a practical level, understanding and adhering to property management laws and regulations is crucial for property managers to ensure smooth operations, maintain property value, and foster positive tenant relationships. 

Learn more about property management company best practices, marketing, and more in our Second Nature Community.

 

Keep learning

Chambers Theory Endorses Second Nature’s Resident Benefits Package

Chambers Theory is a world-renowned property management team with clients in more than 30 countries worldwide. They specialize in serving the U.S. military, State Department, and Foreign Services families. Their motto “Real Estate With Intelligence” is more than just a saying. It’s on full display through the introductory videos for landlords and residents on their website in seven languages (Spanish, Portuguese, Italian, Vietnamese, French, Croatian, and English) - all spoken fluently by their own property management (PM) team. Since its founding in 2018, Chambers Theory has been achieving extraordinary performance benchmarks. They’ve led the marketplace in delivering the “Golden Triangle of Success” to their clients, which means the lowest vacancy, the highest average rents, and the highest quality of tenants of any property management firm in its same service area. They’ve also donated over $100,000 to local charities and community organizations, while also leading the way in promoting sustainability practices in real estate and property management services. Their outstanding team attributes their success to their ability to develop and utilize their emotional intelligence skills to capacity to care with all their interactions with both landlords and residents. That’s why they fully endorse the Resident Benefits Package at Second Nature! Find out more about what a Resident Benefits Package is, its benefits, and how it can help create a Triple Win for you, as well as your residents and investors. Related: The State of Resident Experience Report

Calendar icon July 18, 2024

Read more

Investor Experience Platform™️ IXP™️

An Investor Experience Platform™️ (IXP) in property management is a suite of products, services, and benefits offered by property management companies to property investors. Just like a resident benefits package is a way to drive value for residents, investors, and property managers, the IBP™️ is an innovative approach to property management that focuses on driving value for an investor's assets and turning that value into profit for the property management company. In this article, we’ll dig into the different features that an Investor Experience Platform™️ can include, and how those benefit not just investors, but property managers and residents, too. What Is an Investor Experience Platform™️ (IXP)? As stated above, an Investor Experience Platform™️ (IXP™️) is a comprehensive suite of services that offer property investors higher quality property management, stability, and profit. An IBP™️ typically includes concierge-level services beyond basic property management – such as property insurance policies, eviction guarantees, rent guarantees, maintenance plans, asset performance reports, etc. These services are aimed at maximizing the investor’s assets, stability and convenience, profitability, and peace of mind in managing their properties. They're commonly managed through an investor experience platform to securely manage and monitor the performance of these assets online, which we'll discuss later. The first step to outlining an IBP™️ is to define what your basic management fee means and covers. If the answer is, it’s collecting rent, handling maintenance, and general communication – does that include maintenance coordination or is that a separate fee? Does it include asset reporting or is that an additional service? In your management agreement, define what the management fee is, what it covers, and how much it is. An IBP™️ can be an effective tool for articulating the new and differentiated things that an investor wouldn’t be able to do on their own and that you are offering beyond basic property management. Articulate your unique and differentiated services (IBP™️) and use that as a tool for positioning and charging for what it’s worth. What’s Included in An Investor Experience Platform™️? An Investor Experience Platform™️ should include a range of solutions to help deliver consistency, insight, and asset protection to a property owner’s portfolio. After all, professional property managers don’t have to be functional managers of a home – they can be strategic partners in the management of financial assets. You might hear services similar to the IBP™️ called an “owner benefit package,” but at Second Nature, we believe that the “investor” term is useful in encouraging a longer-term mindset, and emphasizes the economic value professional property management can bring. According to Eric Wetherington, VP of Strategic Initiatives at PURE Property Management: “As property managers, we need to think more like asset managers. This client made an investment, and we should be guiding that client through managing that investment, not just collecting rent.” To build and manage a winning IBP™️, property managers need an Investor Experience Platform that unlocks scalable product and service customization, digitized onboarding, accounting policy automation, and more. In addition, Investor Experience Platforms provide transparency and convenience for your investors. Here are some of the most valuable services that property managers can offer through an innovative Investor Experience Platform™️. Property insurance program Similar to offering a renters insurance program through an RBP in the lease agreement, property management companies can offer an insurance plan to investors to cut costs and ensure the safety of their assets. Most management agreements will include the requirement that the investor carries insurance on the property and that the property manager is additionally insured. But what if you as the property manager could help manage that for the investor – at scale? Property Insurance for investors should have dynamic pricing based on individual investors’s property portfolio and needs. The benefit beyond flexibility is the savings they’ll see on their premiums while also getting insurance that’s tailored to the needs of their specific property class. At Second Nature, we work primarily with single-family rental properties and small multi-family residences. Property Insurance Programs can bring scale that will drive economic value for the investor over what they could get retail on their own. They’d still have the option to go get their own insurance that meets requirements, but they can pay you a small fee to manage it for them. Rent guarantee An IBP™️ can include a number of financial guarantees to protect property investors and drive ancillary revenue for PMCs. A rent guarantee, or rent protection, ensures a consistent rental income to investors by protecting them against resident defaults or non-payment of rent. If a resident fails to pay rent, the property management company covers the unpaid amount and takes necessary steps for eviction or collection, providing financial security and minimizing the risk for property owners. Rent guarantees work for professional property management companies that have enough properties to balance the loss of rent if a resident doesn’t pay. The risk is low and the additional profit from fees for this guarantee can have a very high ROI, while driving satisfaction and stability for the investor. Plus, if you’re using services in an RBP to help incentivize on-time rent payments, you’ll rarely find yourself out in the cold. Eviction protection guarantee An eviction protection guarantee also goes beyond the normal scope of property management services and can be used as a secondary source of revenue. Eviction Protection is a service provided by property management companies to property investors that offers additional security and financial protection in the event of an eviction. Under this guarantee, the property management company assumes the costs associated with the eviction process, including legal fees and court expenses. It helps alleviate the financial burden on property investors and provides peace of mind by ensuring that they are safeguarded against potential losses resulting from resident evictions. The eviction guarantee helps protect property owners from the complexities and potential costs associated with evictions, ensuring a smooth and efficient resolution to tenant-related issues. Pet guarantees & other guarantees A pet guarantee is a service offered by property management companies to property investors that aims to address any potential issues related to allowing pets in rental properties. It typically involves implementing policies and procedures to ensure responsible pet ownership, such as thorough pet screening, pet agreements, and collecting additional pet deposits or fees. The pet guarantee may also include services like pet damage insurance or assistance with pet-related issues during the lease term. It provides property investors with a framework to accommodate residents with pets while minimizing risks and maintaining the condition of the property. For many residents, finding a pet-friendly apartment increases retention and profitability. They’re willing to stay longer and pay more for a pet-friendly place. And–get this–pet damage is less likely to happen than damage from kids! It’s not a huge risk to the asset, but can provide a big benefit in terms of satisfied, longer-term residents. Maintenance plan Home warranties are a four-letter word for property managers. They’re a massive headache to deal with, and yet there’s high demand for them among property investors. Because of that, most property managers charge a fee for home warranties, for each they have to file. Imagine if there was a world where home warranties weren’t needed. Here’s the thing: Professional property managers already have the vendor network and the know-how to coordinate maintenance jobs. What they don’t usually have is a product that’s priced to give the investor the experience they want. Let’s say right now an investor is paying $50 a month for a cheap home warranty. The warranty only covers 40% of issues and it creates all these extra people and friction in the middle. For anything moderately significant that goes wrong with a property, PMCs generally must contact the investor for permission to get work done. It’s all a massive hassle and loses time in maintenance requests that leave residents frustrated. What if there was a product that costs, say, $150 to $200 a month but it actually covered everything? Instead of having sudden expenses and emergencies, this maintenance plan smooths out the experience and makes it more predictable for the investor. For PMs, it means taking the initiative on fixes without waiting for approval. Imagine a world where you didn’t have to get owner approvals for 95% of maintenance issues – because they’re already budgeted for and already paid for. For residents, it means better maintenance, and faster. Another Triple Win! Asset performance reports Another piece focuses on property managers as asset managers. Think about any investment app, like Robinhood, Acorns, etc. You can log in to these apps any time, 24/7, and see how your stock and investments are performing. In most investment classes, you can see in real time how your assets are performing. Why shouldn’t property investors have that as well? An IBP™️ can include exactly that: a dashboard or online portal that shows investors regular reports on how their property is doing. They could get updates on the value of their home over time, the home price appreciation, rent price over time, and project rent growth, typically maintenance costs and how they’re doing against that, and more. Resident Benefits Package Another piece to include in your IBP™️ is to highlight the benefits of your resident benefits package to your investors. Explain how features like a filter delivery program protect their assets and reduce HVAC repair costs. Show how a renters insurance program can ensure coverage and protection. Give numbers on how credit reporting incentivizes on-time rental payments and helps ensure financially stable renters. Explain how a movie-in concierge saves both time, headache, and money. Each of the pillars of an RBP is critical to encouraging better resident behavior, increasing renter retention and lease renewal rates, reducing vacancies, and more – all primary goals for a property investor. A note about Rent Advance Programs There’s been due buzz about “Rent Advance” offerings, though many advise caution when approaching this financial product. It works in some ways like cash advance programs, which can satisfy urgent needs, but not be more valuable for anyone long term. The way it works is PMs offer to send a year of rent upfront to the investor in a big chunk, and collect monthly from the resident. The investor typically pays a 5-10% premium on the advance, which can be their entire expected return. So the question becomes, where do they put that cash to get a better return instead? Another thing to think about is who would actually use this product. Investors who don’t have enough cash on hand? How does that benefit anyone in the long run? What happens when there’s a big maintenance bill later? Does this encourage better decisions and practices by the investor? To date, there’s been pretty low adoption of this program, which is another sign it may not be hugely beneficial to everyone involved. But plenty of innovations start that way, evolve, and find traction. One case where it might be a value generator is if an investor is looking to take a cash advance and put it toward a down payment for another house. That would benefit the property manager as well, promising more business, and the PM could offer a lower rate for getting more properties to make the financing more attractive than hard money loans or other alternatives. The jury is still out here, it’s an interesting one to track. How Can Investors and Property Managers Benefit From an Investor Experience Platform™️? Investors and property managers can benefit from an Investor Experience Platform™️ in several ways. They’re also great for residents in the sense they build more stability and quality into the renting process. Here are just some of the benefits of an IBP™️. Enhanced investor attraction An Investor Experience Platform™️ provides incentives and advantages that can attract more investors. Financial guarantees and protections against the risks associated with evictions or late payments can increase stability, while services like a maintenance plan can ensure premium care of their property assets without increasing their workload. By offering attractive perks, property managers can differentiate their offerings and generate greater investor interest. Increased investor retention Both IBP™️s and RBPs help build loyalty with residents and investors. By fostering a strong relationship and demonstrating ongoing value, property managers can build trust and loyalty among investors, and retain them over the long term. IBP™️s help establish the stability, transparency, and asset growth for a real estate investment that an investor hopes to achieve. Improved property performance An Investor Experience Platform™️ can also contribute to improved property performance. For example, by offering discounted property management fees or access to professional services at reduced rates, property managers can help investors optimize their returns and reduce costs. Additionally, incentives such as rent guarantees or eviction protection can mitigate risk for investors and attract more capital to the property. Streamlined communication and transparency A well-designed Investor Experience Platform™️ facilitates effective communication and promotes transparency between property managers and investors. This can involve regular reporting on financial performance, property updates, and the sharing of relevant market insights. Transparent and consistent communication builds trust and confidence among investors, fostering a positive and long-lasting relationship. Competitive advantage A comprehensive Investor Experience Platform™️ can give property managers a competitive edge in the market. When investors have access to exclusive benefits and advantages, they are more likely to choose a property managed by a company that offers a compelling package – and to recommend it to others. Say hello to increased investment inflow and a stronger market position for your PMC. Should You Make an Investor Experience Platform™️ Mandatory? The first thing most property managers ask us when we’re talking about an RBP or an IBP™️ is: Should I make this mandatory for all investors or do I make it a flexible opt-in/opt-out program? Unlike RBPs, where best practices are more proven and established, different PMs are taking different approaches with their IBP™️s. Some have a mandatory level of service set at a flat price. Others may say they’re fine offering a base level of service without these differentiated products, giving investors the choice to simply pay a baseline management fee and opt out of the IBP™️ premium service. Some may offer a baseline to all investors and then give them the chance to opt in for premium IBP™️ services. There are a lot of ways to do it. With the RBP, we’ve found that making it mandatory does not generate nearly as much pushback as people expect – and can be a strong value add overall. Final Thoughts About an Investor Experience Platform™️ The Investor Experience Platform™️ is an innovative way to generate ancillary income and create more value for investors and residents. Similar to Second Nature’s premier Resident Benefits Package, the IBP™️ can deliver high-quality service for investor experience – and help create a triple win for investors, residents, and property management companies. The IBP™️ reinforces the value of a professional property management company for investors and helps differentiate you from the crowd. Stay tuned to learn more about the latest in the IBP™️ space, or learn more about how a resident benefits package can launch a whole new level of value for your PMC.

Calendar icon July 17, 2024

Read more

Receive articles straight to your inbox

Deliver the ultimate resident experience

Our Resident Benefits Package gives residents everything they want without all the work.