Property Management Duties & Restrictions

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A person with the title of property manager usually has many duties. These can include developing and implementing a management plan, collecting rents, maintaining the property, preparing a budget and leasing spaces. This month, we are going to discuss these duties in the context of Ohio real estate license law, as most of these tasks are accompanied by some specific requirements that must be followed.

Real Estate License

The rules that govern real estate licenses are straight-forward. A person needs to be licensed if they act on behalf of another to sell, exchange, purchase, rent, lease, negotiate, auction, option, operate or manage real estate. The key concept here is “act for another” – if the person owns the property or is a regular salaried employee of an owner, they do not have to be licensed. Other exceptions include people that are court-appointed fiduciaries, public officials performing official duties and attorneys in the performance of their legal duties.

There is often confusion about the different real estate licenses that exist in Ohio. There are just two. A real estate broker license is the broadest. It allows the holder, who, on behalf of another and for a fee, engages in the sale, lease, negotiation or management of real estate. A real estate salesperson license is narrow and only allows the holder to perform these activities.

A salesperson’s license must also be held by a licensed real estate broker. As a result, the overall activity is governed by the real estate broker and the relationship is between the client and the broker. Typically, the real estate salesperson is the one that does the work. So, in terms of a property management assignment, the fiduciary relationship is between the broker and the property owner, but the property manager performs the day-to-day activities.

Administration of Property Management Accounts

Brokerages that perform property management duties for an owner often exercise signature authority for withdrawals from property management accounts that are maintained in the name of the property owner. This facilitates collecting and depositing of rents and payment of regularly occurring expenses such as utilities.

Ohio license law imposes for a few stipulations. First, there must be a written agreement between the manager and the owner that provides for this authority. Second, the agreement must stipulate limits on the amount withdrawn as well as for what purposes. And third, the broker must maintain a ledger sheet for each owner and must provide an account of this ledger to the owner on a regular basis but in no instance, less than once a quarter.

A related item that often causes confusion is the concept of a brokerage property management trust account. This is a required account and is intended to hold things such as security deposits and earnest money deposits. The trust account may be an interest-bearing account, but if any interest is generated, it must be paid to the owners of the properties on a pro rata share no less than once a quarter. And the brokerage is not permitted to hold the broker’s own funds, as this co-mingling is considered unlawful. A trust account is not the same as the property management account. The latter is intended to have funds move in and out on a regular basis and is not required. The former is intended to have funds deposited for safe keeping and is required.

Fair Housing Laws

The fact that property managers often handle leasing duties for residential properties opens up a whole different area of Ohio real estate license law – Fair Housing Laws. There are three primary laws that come into play. The first is the Original Civil Rights Act of 1886, which prohibits any racial discrimination, public or private. The second is the Federal Fair Housing Act of 1968, which makes it unlawful to discriminate because of race, color, sex,national origin, familial status, or disability. And the third is Ohio Civil Rights code, which echo the Federal Fair Housing Act and adds military status as a protected class. Ohio Code also requires all real estate brokerages to prominently display an Equal Housing Opportunity poster at its primary place of business.

While we are on the topic of residential properties, our region includes a significant number of rental properties that contain lead-based paint. Federal law requires lessors to disclose their actual knowledge of lead-based paint hazards for any properties built prior to 1978. And this obligation is passed down to the holder of a real estate license, as they have the responsibility to ensure that the lessor satisfies this obligation.

Given the range of duties provided by property managers, it’s easy to overlook the requirements associated with Ohio real estate license law. Keeping these obligations top of mind ensures that everyone involved is in compliance and fully informed. Ira Krumholz CPM

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