property manegement

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PREPA RED BY:
S IT I HA S N IZA BIN T I ROS MA N
U N IVERS IT I T EK N OLOGI MA RA ( U IT M)
MANAGING OWNER
RELATIONS
TABLE OF CONTENT
1) Nature of the Relationship
2) The Management Contract
3) Take Over Procedures
4) Continuing Owner-manager Relations

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NATURE OF THE RELATIONSHIP
 Three basic relationships can exist between a
property manager and the individual or corporate
owner of a building:
1. Employer-employee arrangement
2. Formal fiduciary relationship (trust)
3. Principal-agent arrangement
Employer-employee Relationship
 The employer-employee relationship is found most
often in banks, colleges, large corporations and other
private institutions that require managerial services
for their properties.
 The employee-manager is directly responsible to the
officers of the owner-employer corporation or
institutions, which may be the principal occupant of
the property.
 No formalized contract is necessary in an employer-
employee relationship.

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Employer-employee Relationship
 The manager should obtain from the employing
corporation written authorization to sign binding
leases.
 This authorization is sometimes limited in the dollar
amount or length of the lease, many lessees,
especially government agencies and corporations,
request a copy of this authorization from the
employee-manager.
Trusts
 A trust is a device by which one person or institution
transfer legal ownership of property to someone else
to hold or manage for the benefit of o third party.
 Trusts are created by written agreements that
establish formal fiduciary relationships.
 In a formal fiduciary relationship, the property
owner, called a trustor, transfers the legal title to
property to a trustee (who will manage the property)
and transfers the equitable title to one or more
beneficiaries.

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Trusts
 Beneficiaries may include the trustor, members of
the trustor’s family, or third parties, such as
organized charities or an employee group.
 Property managers who find opportunities in this
area must take special precautions to learn and
define the legal responsibilities and requirements of
the relationship.
Principle-agent Relationship
 The most common relationship is that of principal-
agent and is created by a written contract signed by
both parties.
 Agency is the word used to describe the special
relationship between the principal (the one who
hires) and the agent (the one who does the work).

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Principle-agent Relationship
 Scope of agency authority
 A general agent can act on behalf of the principal
on a range of matters and can obligate the
principal to any contracts signed by the agent that
are within the scope of that agent’s duties.
Principle-agent Relationship
 Fiduciary duties
 An agent has a fiduciary relationship to his or her
principal, a confidential relationship marked by
trust and confidence that requires the highest
degree of loyalty on the part of the agent.
 The duty of loyalty means that the property
manager must always put the property owner’s
interests first, above his or her own interest.
 The property manager must act without self-
interest.

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Principle-agent Relationship
 Fiduciary duties
 The duty of care requires the property manager to
exercise a reasonable degree of skill while
managing the property.
 The duty of obedience means that the property
manager must carry out, in good faith, the
property owners’ instructions.
 The duty of accounting requires the manager to
accurately report on the status of all funds
received on behalf of or from the property owner
(such fund are deposited into trust accounts).
Principle-agent Relationship
 Fiduciary duties
 The duty of disclosure impose on the property
manager the duty to keep the owner fully
informed of all material facts regarding the
management of the property.

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Principle-agent Relationship
 States statutes
 Each state has licensing laws and regulations
governing the conduct of persons and
organisations acting as real estate agents.
 These laws apply mainly to sales of real estate,
activities of those engaged in leasing, renting or
managing property for others are often included
in the coverage of these laws.
 Property managers should investigate the statutes
of the states where they manage property to be
sure they are in compliance with those laws.
THE MANAGEMENT CONTRACT
 A dated agreement signed by both the manager and
the owner (or the owner’s authorized representative)
defines the relationship between the parties, serves
as a guide for the operation of the property and
provides a basis for the settlement of any future
disputes.
 The terms of management contracts are as varied as
the types of real property and the forms of real estate
ownership.

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THE MANAGEMENT CONTRACT
 Specific circumstances aside, most management
contracts share the following essential elements:
 Identification of the parties and the property;
 Period over which the contract is to run;
 Terms vary
 Termination
THE MANAGEMENT CONTRACT
 Authority and responsibilities of the owner;
 Monthly reports
 Surety bonds
 Handling funds
 Authority to rent, operate and manage
premises
 Expenditures
 Marketing costs
 Agents’ control over personnel

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THE MANAGEMENT CONTRACT
 Responsibilities of the owner;
 Payroll: maintenance, security and supervision
 Insurance: employee and fidelity premiums
 Purchasing: book keeping and auditing
 Building: office telephone
 Advertising for tenants
 Management fees
THE MANAGEMENT CONTRACT
 Fees and leasing/sales commissions;
 Flat or fixed fee versus percentage fee
 Commissions to outside leasing agents
 Early termination
 Antitrust issues

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TAKE OVER PROCEDURES
 The contract between the owner and the property
manager has been signed, the transfer
responsibilities for the property from the owner or
the current manager should take place as soon as
possible.
 The owner should take the responsibility for
providing the manager or management agency with
all data necessary for the efficient operation of the
property.
Minimum Information Required
 The manager should obtain the owner’s name,
address, telephone number, as well as the name,
address and telephone number of the owner’s
attorney, accountant, insurance broker and any
other consultants for the property.
 To assist in calculating the expected income from the
property, the manager must have a listing of all
rental units, copies of the leases and a scheduled of
rental rates for each space.

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Transfer of Working Capital Fund
 A working capital fund for operating expenses is
essential and should be an amount equal to one
month’s uncontrollable expenses, such as debt
service and salaries.
Security Deposits
 Accounting for tenant security deposit balances is an
essential part of any take over.
 Failure to return deposits or pay interest when
required is a violation of the landlord-tenant law and
is grounds for real estates licensee disciplinary action
and may also incur costly monetary damages.

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CONTINUING OWNER-MANAGER RELATIONS
 The manager must then maintain a mutually
satisfactory relationship with the owner.
 The owner or the owner’s authorized representative
should get to know the person or persons who will
actually manage the property.
Monthly Reports
 The principal means of regular communication
between the manager and the owner or owning
corporation is the monthly earnings report.
 This report to the owner usually includes rental
receipts, miscellaneous income, gross income, an
itemized list of all disbursements and operating
expenses, total expenses for the month, cash on hand
at the beginning of the month, amount forwarded to
the principal (owner) and cash balance on hand.

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Personal Contact
 Personal contact with the owner or owner’s
representative can be made by a short visit or a
telephone call.
 A successful property manager must have the ability
to manage human relations, and effective
communication is a large part of this facet of the
property manager’s job.
Personal Contact
 The manager’s ability to care for the property,
coupled with the goodwill arising from personal
contact with the owner, will build a lasting and
mutually profitable business relationship between
the parties.

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The End