5 Risks for Property Management Newbies
Many sales associates have entered the field of rental property management as a way to shore up income. But do they know the risks?
April 1, 2011
Here Barbara Holland, CPM, of H&L Realty & Management Co. in Las Vegas, identifies some of the biggest liability mistakes common among those who haven’t yet learned the ropes.
- Not having a written property management agreement. Even if you’re just helping out a friend and managing the property for free, you’re walking on thin ice if something comes up—like the need to evict the tenant.
- Using a makeshift lease agreement. These agreements are easy to find on the Internet—maybe too easy. If the agreement isn’t thorough, or if it doesn’t include sections that are required by your state law, you’re leaving yourself exposed.
- Not depositing the security deposit in a proper trust account. The proper place for the money isn’t with the owner. In some states, the trust account money must be in a separate property management trust account and not in the broker’s general sales trust account.
- Not having the tenant sign a move-in and move-out form. This form includes a property condition disclosure. Without it, you have little recourse if a unit is damaged beyond the usual wear and tear.
- Trying to incorporate a lease- purchase arrangement into the lease agreement. There’s nothing wrong with doing this, but it’s complicated, and if it’s not done properly, you could invite trouble. For instance, you could have a difficult time evicting the tenant for nonpayment of rent if the court looks at the arrangement as a purchase agreement.