The Resident Manager Contract
Suppose you own a 40-unit apartment complex. You notice that the units are not renting very quickly, your vacancy rate is high, and for some reason, your collections are very low. As you are auditing your year-end books, you discover that your on-site manager has been pocketing the laundry room machine income. As you dig further, you find that rent money is missing. You decide to fire the manager.
You rummage through your files to find your manager agreement and find...nothing. Now you are stumped. It’s midnight and you worry about it all night. In the morning you call your attorney and ask, “How do I fire these managers? Can I get my money back?”
The attorney will probably say, “Sure you can fire them, but will you let them stay on site?” You respond, “Of course not! I want them out.”
Oregon law provides for a 24-hour notice of eviction for on-site managers (ORS 91.120) so you can give them written notice that they have to move. It may take a week to go through the court system if they are recalcitrant. The same section also says that you can move them out using the rules you defined in your written employment contract. The law reads that “A landlord…may only evict an employee…after 24 hours following written notice of the termination of the employment or as set forth in a written employment contract, whichever is longer.”
Luckily, you found out that you had problem managers. Maybe you could have prevented the problem with better screening? You definitely could have protected yourself better. The place to start is with a written resident manager contact.
Define your priorities
Fill vacant units
Represent the property in its best light
Keep the grounds picked up
Decide who will collect rent
Maintain positive tenant relations
Maintain effective communication with property manager and/or owner
Check applications
Then describe your compensation package. Will the rent be free as part of the compensation package? What will you pay in cash? What will you pay for cleaning and painting of vacant units, and what was included in the base pay as far as hours expected for showing the vacant units, cleaning, painting, landscaping and office hours? Discuss the status of unemployment taxes and workman’s compensation. Explain when payday is. Describe the hire date.
Describe details
General:
Office hours
Pay
Compliance with fair housing guidelines
Repairs and cleaning responsibilities and commensurate pay
Security regarding keys and rental agreements
Rental:
Inspect vacant units upon move out
Show vacant units (keep vacant units clean, smelling fresh, and dusted)
Be available to show units, take telephone calls, and set appointments with prospective tenants to show units
Take applications, fill out rental agreements, renew leases, and check applications
Maintenance:
Interior
Splash pan replacement
Toilet seats
Light bulbs
Smoke detector inspection and replacement
Change locks
Exterior
Light bulbs
Clean parking lot
Patrol grounds for litter
Clean laundry rooms
Vacuum and dust hallways
Supervise landscaping
Keep inventory of all tools and supplies that belong to property
Once you have plotted out the nitty gritty of the job, you need to address the details. For instance, it’s important to clarify vacation details; how long vacations can be and who will watch the property while the manager is gone.
Drug testing is an important part of your policy. You may want to run a criminal check and credit check on your future manager as part of the hiring process, just like you would for any tenant.
Cancellation of the contract
Managers can be dismissed for insubordination, fraud, conversion, lewd or violent behavior, drug use, failure to report, and/or failure to follow instructions. Be sure to explain that you have the right to dismiss the manager with 24 hours written notice.
Explain how the manager can resign, depending upon employment and/or residency.
Address what happens to the manager if the property is sold or if there is a change in property management companies.
Finally, you may want to define the walk-through of the property when the manager is leaving. You will want to collect keys, check the rent collections, collect petty cash, walk through vacant units, review pending applications, perform an exterior walk-through and check the toll and supply inventory.
Save yourself headaches
Having a written contract with your resident manager will save you from the headaches of having a relationship with someone that you cannot control. Remember that the manager controls the rental income of your property, the tenant selection, and the condition of the property. They need guidelines from you. They need to know what you expect and what will happen when the relationship no longer works for the both of you. Setting the rules will insure a smoother-running property and a better return on your investment.
Clifford A. Hockley, CPM, CCIM, MBA
Cliff is a Certified Property Manager® (CPM) and a Certified Commercial Investment Member (CCIM). Cliff joined Bluestone and Hockley Real Estate Services 1986 and successfully merged that company with Criteria Properties in 2021.
He has extensive experience representing property owners in the sale and purchase of warehouse, office, and retail properties, as well as mobile home parks and residential properties. Cliff’s clients include financial institutions, government agencies, private investors and nonprofit organizations. He is a Senior Advisor for SVN | Bluestone.
Cliff holds an MBA from Willamette University and a BS in Political Science from Claremont McKenna College. He is a frequent contributor to industry newsletters and served as adjunct professor at Portland State University, where he taught real estate-related topics. Cliff is the author of two books, 21 Fables and Successful Real Estate Investing; Invest Wisely Avoid Costly Mistakes and Make Money, books that helps investors navigate the rough shoals of real estate ownership. He is the managing member of a real estate consulting practice, Cliff Hockley Consulting, LLC., designed to help investors and commercial brokerage owners successfully navigate their businesses. He can be reached at 503-267-1909 , Cliffhockley@gmail.com or Cliff.Hockley@SVN.com.
