The Property Management Function
PROPERTY MANAGEMENT AND THE PROPERTY MANAGER
Supervising the operation of office buildings, shopping centers, warehouses, industrial complexes, and residential properties for the owners of the properties is a complex, demanding, and essential aspect of real estate brokerage activity. The firm or individual who undertakes this task, the property manager, establishes an agency relationship with the property owner by the brokerage engagement commonly known as a management agreement. As an agent, the property manager has a fiduciary responsibility to the owner of the property and must abide by all the requirements of the licenses law including depositing all funds collected on behalf of the owner or principal into a designated and registered trust account.
THE FUNCTIONS AND ACTIVITIES OF THE PROPERTY MANAGER
A property manager’s primary function is to maximize the financial return that the owner will receive from the property over its economic life so that the owner can obtain the desired rate of return from that property. To obtain the highest return from the property, the property manager undertakes or supervises a variety of activities.
|(a)||MARKETING SPACE – In attempting to obtain the maximum revenue possible, the property manager must analyze the market for the property and the competition it faces. The analysis of the competition allows the property manager to identify the market rent for the property; the total rentable space and the vacant space in the market, the physical and locational attributes of the property and its competition, and the cost-effective amenities that will attract prospective tenants. Cost-effective amenities are such items as tennis courts, swimming pools and extra parking space that meet consumer desires and wishes.
Once the property manager obtains the information about the property and its competitors, he or she can affect the property’s potential in the market by modifying the characteristics to gain a competitive edge. This advantage could be an upgrading of the site amenities or the fixtures in the units. A rent differential could also create a competitive edge that reduces vacancies below the level in the market.
When the property manager knows the relative competitive position of the property in the market, he or she needs to establish a primary as well as secondary target market within the population of prospective tenants. Then, he or she needs to determine how to best reach and attract that target market with this information. The manager accomplishes this goal by implementing a marketing plan which includes effective advertising which will emphasize the property’s strong points designed to appeal to the prospective tenants who should be most receptive to the characteristics of the property. For example, a property containing one and two bedroom apartments is more attractive to a one or two person household than it is to a family of four. Advertising a property with that size units should focus on the single person household, younger couples without children or roommate arrangements. To attract members of this population segment to view the property, an advertisement for the property, placed outside the classified ad section, should appear in the entertainment section of the paper as opposed to the family life section of the local newspaper. The manager might also advertise effectively over radio stations identified as those this particular population segment listens to. In short, effective advertising involves analyzing the property’s competitive position, identifying the appropriate target market, and the use of the most cost effective advertising media in which to showcase the property. When placing your ads be careful that your ad only describes the property and does not describe the occupants you are trying to reach. Otherwise you might violate Federal Fair Housing law. In the example above you should note that restricting residency based on the number of children within the household would be a fair housing violation. Finally, the property manager must develop systems to adequately measure the effectiveness of all marketing aspects to assure the best use of marketing and advertising dollars available.
|(b)||MANAGING THE PHYSICAL ASSET – The property manager must be directly involved in the operation and maintenance of the physical property. Seeing to the maintenance and operation of the physical asset involves assuring compliance with all applicable codes, health and safety requirements as well as other governmental requirements, cleaning the common areas of the building and cleaning windows, collecting and removing trash, decorating or redecorating the common areas and entry ways, providing contractually required maintenance as well as implementing a system of preventive maintenance designed to avoid or delay more serious problems in the future.|
|(c)||KEEPING THE FINANCIAL RECORDS OF THE PROPERTY – Typically the property manager keeps the financial records for the property. These records involve documentation of the rent receipts and the operating expenses of the property and accounting for the deposits into and disbursement from the trust accounts. Included among the records of the operating expenses would be work orders for repairs and maintenance and invoices for goods and services.|
|(d)||FINANCIAL ANALYSIS – In addition to keeping records, the owner may request the property manager to provide an analysis of revenues and expenses. For example, apartment revenues may have a cyclical pattern that the owner and property manager need to understand. The rents may be due on the first of the month but the typical tenant may be only able to pay rent on Friday or Saturday after receiving a weekly or biweekly pay check. Consequently the tenants may be able to pay their rent until the 5th or the 6th day of some months. This fact may affect decisions involving granting a grace period and levying late fees. Expenses of maintaining and operating the property may also reflect a cyclical pattern. There may be a normal amount of maintenance and repair expenditures throughout a month, but expenditures might increase in the first week of each month after tenants move out at the end of the month. Maintenance and repair expenditures may be higher in the winter and the summer than in the spring or the fall.
Besides the analysis of trends for revenues and expenses, the owner may request the property manager to analyze and to make recommendations about the timing and extent of remodeling and renovation. In response, the property manager will analyze the income and operating costs of the property as is and compare the revenues and operating expenses projected after the rehabilitation or renovation is complete. By performing this cost-benefit analysis, the property manager can advise the owner about the economic feasibility of the renovation. As part of this analysis the property manager might also provide financial information concerning continued ownership of the property as an investment or its possible sale.
In summary, the owner of the property may retain the property manager to perform one or some combination of these four principal activities. The owner may want the property manager to find tenants and to negotiate the rent. Or the owner may require the property manager to market the property, to maintain and repair the improvements, and to maintain the property’s financial records. Or the property owner may require the property manager to do all four activities including giving financial advice and analysis for the operation of the property and its continuation as an active investment.
RESPONSIBILITIES OF THE PROPERTY MANAGER
Related to the activities associated with the day-to-day operation of the property, there are other considerations that are long range concerns of the property owner.
|(a)||THE ECONOMIC PERFORMANCE OF THE PROPERTY – An obvious way that the property manager can enhance the property’s economic performance is to increase rental income and reduce operating expenses. In addition, the property manager can enhance the economic performance of the property by advising the owner as to the proper time to refinance the loan. The property manager may also recommend modifications to the physical structure that increase or maximize the property’s appreciation potential and advise the owner on the appropriate time to sell the property. JAW|
|(b)||THE PLANNING HORIZON FOR THE PROPERTY – The property manager must consider the near term and the long term horizon for the property. Very often, short term solutions to a problem may not be the most beneficial solutions. An obvious example is deferred maintenance that lowers current and near term operating expenses and makes the property more profitable in the short term. At the same time, deferred maintenance very likely increases future operating costs perhaps to a point higher than they would have been if a normal and appropriate maintenance plan existed. Deferred maintenance may also cause future rent levels to fall when the market notices the inferior quality of the space. Thus, this rent decline can cause the long term profitability of the property to decline though the short term profits may have risen as operating costs declined.|
|(c)||INNOVATION – Anticipating changes in the rental market, an effective property manager will find new ways of doing things. The knowledgeable manager understands the economic forces that underlie the supply and demand for the rental space he or she manages. As an innovator, the property manager may identify new target markets, determine new uses of the property, or generate new ideas or procedures to market the property in a changing market environment. This activity may require only a change in the manner of providing information to prospective tenants, or it may require market studies and subsequent recommendations to the property owner about changes in the property.|
|(d)||SOCIAL RESPONSIBILITY – The property manager offers services to an owner, but his or her actions also affect the community. Informed property managers are aware of these impacts. The manner in which the property manager manages the property can create a positive influence in the community in several ways.|
|(1)||The property manager’s firm and the property being managed are both sources of employment to the residents of the community.|
|(2)||Professional property managers employ high ethical and professional standards in their business relationships with the public.|
|(3)||A responsible property manager can improve the quality of life in the community by upgrading the aesthetic value of the properties and by limiting the property’s generation of trash and emission of pollutants into the immediate environment.|
|(4)||The property manager also works with the owner to provide adequate, habitable, and safe rental units to the people in the community and safe and clean retail space and office space for businesses.|
CHARACTERISTICS OF THE PROPERTY MANAGER
Successful property managers exhibit certain personal characteristics and habits that contribute to their success.
|(a)||EFFICIENCY AND EFFECTIVENESS – The property manager demonstrates efficiency when he or she discovers ways of performing basic management tasks at reduced costs. The efficient property manager understands both the maintenance and repair requirements of the building and cost-effective purchasing procedures for the materials and services required. He or she is proficient at collecting rents and knows the laws concerning the enforcement of lease provisions. The effective manager knows what parts of the building exhibit physical deterioration and functional obsolescence and how to cure the physical deterioration and correct the functional obsolescence. He or she also knows where to get the lowest prices for high quality appliances, equipment, materials, and supplies.
The property manager is effective when he or she is an innovator. Effective property management requires the manager to investigate opportunities to generate additional revenue by expanding the market that the property can serve. The effective property manager not only works to solve problems and to do things more efficiently through lower costs but also attempts to understand what creates problems. For example, an efficient property manager who recognizes high vacancy levels in the recent past will work diligently to get desirable vacant space ready for the market as cheaply and as quickly as possible. The effective property manager will do the same thing but will move one step beyond by asking the question, “Why has the property faced high vacancies?”
An efficient property manager is reactive. He or she responds to problems and handles those problems in the appropriate manner while attempting to control the cost. The effective property manager is an active agent or force in making things happen. The effective property manager identifies the problem, solves it, and then analyzes the situation to learn the cause of the problem.
|(b)||SOCIABILITY AND COMMUNICATION – A property manager must relate to many people including the property owner, the prospective tenants, the employees of the property management firm, the employees who work at the property, contractors who provide services to the property, and the managers or supervisors of the property management firm where he or she works. To maintain good relationships with these people, the property manager must be a pleasant person who displays a level of confidence and who can communicate effectively.|
|(c)||ATTENTION TO DETAIL – Property management is a detail-oriented business; therefore, a property manager must be able to organize and manage the many details of the operation of a property. This responsibility includes inspecting the financial records; visiting the property to inspect its physical condition and its vacancy level; and responding to problems and issues raised by tenants, the on-site managers, bookkeepers, service contractors, and many others. The property manager’s need for attention to detail increases as the number of properties that he or she manages increases. The pace of activity becomes much greater and the level of detail more extensive as the number of managed properties increases.|
|(d)||NEGOTIATION ABILITY – A property manager represents the property owner in negotiations with a variety of individuals. The property manager may have to negotiate lease terms and rent levels with the tenant as stipulated in the management agreement. The property manager wants the best position for the property owner but must still meet the needs and desires of the tenant in order to get that tenant to sign the lease. The property manager typically represents the owner in negotiations with maintenance and repair contractors. In this situation, the repair and maintenance must be done, but it must be done at the lowest cost with the highest quality. The circumstances may require the property manager to interview and discuss the maintenance or repair job with several providers to find the most suitable provider and to get the service done for the lowest possible price.|
|(e)||ABILITY TO MAKE DECISIONS – The owner may employ the property manager to make decisions regarding financial and physical aspects of the property. These decisions require good information, sound judgment, and timely action. The decision should logically follow from applying judgment to the facts. The worst thing a property manager can do is to put off decisions until the last minute and to vacillate or change his or her mind. Procrastination can irritate the people affected by the problem and can even make things worse. Indecision wastes time, can cause needless concern, and can waste money. The property manager should always have a record of the reason for spending any significant dollar amounts, even on an emergency basis.|
THE PROPERTY MANAGEMENT CONTRACT
The property management agreement is a formal, legal contract defining the relationship between the owner and the manager for a specific property. The contract creates the manager’s legal authority for the operation of that property and relies on the basic principles of contract law discussed in the section on real estate sales contracts. In summary, the management contract must have an offer and acceptance, consideration, reality of consent, legality of object, and competent parties. While not legally required, good business practice demands that the agreement be written.
The Substantive Regulations of the Commission govern the contents of a written property management agreement. [See Rule 520-1-.38.] The contents of a property management agreement include the following major items or provisions:
|(a)||THE NAMES AND SIGNATURES OF THE COMPETENT PARTIES – The written property management agreement contains the name of the manager or the management firm and the owner or the authorized agent of the owner of the property. The owner might be an individual or sole proprietor, a partnership, a limited liability company, or a corporation. Just as with the sales contract, the management contract assumes that the people are legally competent to make this agreement. The owner’s name must appear in the property management contract in the same manner as it does in the warranty deed to the property. Therefore, if a partnership owns the property, each partner’s name must appear in the management agreement; and at least one general partner must sign the document. When a corporation is a party to the agreement, the corporate name must appear in the property management contract; and, a duly authorized corporate officer must sign the agreement. The same requirements apply to the required signatures of the property manager depending upon whether the manager is a sole proprietor, a partnership, a limited liability company, or a corporation.|
|(b)||A DESCRIPTION OF THE PROPERTY – Unlike the sales contract, the warranty deed, and the lease which are legal documents used in transferring a real estate interest from the current owner to the new owner or from the owner to a tenant, the property management contract does not transfer a real estate interest. Therefore, a legal description detailing the nature and extent of the property is not a necessity in a property management agreement. Nevertheless, the agreement must contain a description of the property sufficient to distinguish it from other properties and to identify it for the property manager. In this context, a street address identifying the unit, building, or project may be sufficient.|
|(c)||THE TERM OF THE AGREEMENT – The management agreement must explicitly state the term of the agency relationship in the document. It must include language that identifies the time when the management agreement takes effect and when and by what process the management agreement will terminate. Although the exact length of time and the method of termination is an issue for the negotiation process, the agreement must be specific as to the terms and conditions for each party to the agreement to terminate it before the expiration date. If the owner hires the property manager to overcome a serious problem with the property such as a high level of vacancies or extensive physical deterioration and functional obsolescence, the manager will want a term of sufficient length to allow him or her to solve the problem and move the property to its market potential.|
|(d)||THE RESPONSIBILITIES OF THE PROPERTY MANAGER – The property management contract must specify the duties and responsibilities of the property manager. These responsibilities typically fall under three major headings: General Property Management Functions, Financial Activities, and Reports to the Owner.|
|(1)||GENERAL PROPERTY MANAGEMENT FUNCTIONS – This part of the management agreement authorizes the property manager to advertise the space in the property, to negotiate and execute leases in the owner’s behalf, to hire and supervise the on-site staff, to administer the payroll for the employees working on the property, and to perform all necessary repairs and replacements to preserve the property.|
|(2)||FINANCIAL ACTIVITIES – The agreement also provides the property manager with the owner’s approval to handle the financial aspects of managing the property. The agreement must specify the terms and conditions on which the property manager will remit income from the property to the owner, the property manager’s authority to make payments to third parties, and the sources of the funds to make those payments. The most significant of these financial activities is establishing bank accounts for the property. The property manager customarily establishes an operating trust account and a second trust account to hold tenant security deposits separate from the property’s operating funds unless the management agreement and the leases specify that the owner will hold the security deposits. The management agreement may also give the property manager authority to create a separate trust account for reserve funds for replacing appliances, carpeting, and other short lived items such as roof covering, windows, and entry ways. This authority to handle the financial accounts and activities of the property relates to the property manager’s role in collecting rents; imposing late charges on delinquent rents; collecting funds for checks returned for not sufficient funds; and paying for utilities, maintenance and repair, and other expenses of the property. One or more of these trust accounts may be interest bearing accounts. Whenever this is the case it is important that the management agreement, and the lease, disclose which party will receive the interest income from that trust account. Typically, the contract contains language specifying the maximum amount that the property manager may spend without prior approval of ownership.|
|(3)||REPORTS TO THE OWNER – The property management agreement must also specify how and when the manager will provide reports of income and expenses to the owner. Many agreements require the property manager to generate reports to the owner on a monthly or a quarterly basis. The reports summarize the general operations of the property in narrative form, they present a record of the income received by the property from rents and other sources, and they provide records of the disbursements made by the property manager for the general operation of the property. The number of these written reports and their formats are part of the negotiation between the owner and the property manager, but the Commission requires at least an annual report. The IRS also has regulations requiring reports of income to owners.|
|(e)||RESPONSIBILITIES AND OBLIGATIONS OF THE OWNER – This part of the property management agreement identifies the owner’s responsibilities as well as the authority and responsibility that the owner does not pass to the property manager. Items appearing in this section of the agreement may include (1) the owner’s responsibility to maintain adequate and appropriate insurance coverage for the property even though the property manager pays for these insurance policies out of the operating account for the property; (2) the owner’s indemnifying and holding the agent harmless in any law suits filed in connection with the property and agreeing to pay for any expenses incurred by the agent such as attorney’s fees when the agent is representing the owner in any such suit; (3) the owner’s retaining full responsibility for compliance of the property with regard to any state or local statutes and ordinances regarding zoning, subdivision regulations, construction codes, and occupancy codes; and (4) the owner’s identifying the authority he or she gives to the property manager with regard to structural changes that affect the property.|
|(f)||COMPENSATION FOR MANAGEMENT SERVICES — In many instances the manager and the owner of the property agree to a separate percentage fee for the leasing of space if done by the manager. These leasing commissions could arise from new leases or lease extensions, renewals, and renegotiations. The management agreement may also provide for compensation either on a percentage or flat fee basis for the property manager’s work in rehabilitating, renovating, or modernizing the building beyond the normal leasing and managing activities. In cases of multi-family management, the property management company is seldom given any additional remuneration for leasing. It’s part of the services provided for fee.
There are many different ways that property managers can earn income from managing properties. The important issue is for the property manager to fully disclose all of those ways the manager is compensated within the management agreement.
|(g)||THE PROPERTY MANAGER AS LICENSEE – – Georgia law (43-40-29) lists the people that can manage property for an owner while not having an active real estate license. For the most part, to manage property for others requires an active broker’s license. The broker can hire other licensees or un-licensed employees to assist in the management of the property or properties. Under 43-40-20 the broker’s unlicensed assistants are limited to performing these functions:
(10) Any individual employed by a broker to assist in property management services on property on which the broker has a written management agreement that the broker procured from and negotiated with the owner, provided that such individual’s activities are explicitly authorized by the broker in a written agreement between the broker and the employee and provided that such activities are limited to one or more of the following:(A) Delivering a lease application, a lease, or any amendment thereto to any person;(B) Receiving a lease application, a lease, or any amendment thereto, a security deposit, rental payment, or any related payment for delivery to and made payable to the broker or the owner;(C) Showing a rental unit to any person, provided that the employee is acting under the direct instructions of the broker, and executing leases or rental agreements;
(D) Providing information authorized by the broker about a rental unit, a lease application, or a lease;
(E) Providing information to a tenant about the status of such tenant’s security deposit or rent payments or to an owner about the owner’s financial accounts and payments from the owner’s tenants; and
(F) Performing any ministerial acts that are explicitly authorized by the broker in a written agreement between the broker and the employee.
Any broker utilizing the services of such an employee shall be held responsible under this chapter for the activities of that individual;
Any other functions or activities performed on behalf of the property owner, such as explaining the meaning of any terms of the agreement or any negotiations, require the person to be licensed. The broker needs to have a written agreement between the broker and any licensed agents or un-licensed assistants setting out their limitations, obligations, and authority.
THE PROPERTY MANAGEMENT PLAN
The property manager must understand the nature and extent of the management services that the owner wants. The property management plan is the vehicle by which the property manager and the owner reach agreement about those services. Drafting the property management plan is a complex undertaking. The best place to start is with a preliminary plan that then becomes the basis for discussion between the property manager and the owner. Based on their discussions, the owner and the property manager redraft the preliminary plan to meet their needs. This revision process can produce the final management plan although the final plan will often need last minute modifications.
The final management plan becomes the working document that meets the needs of the owner and the property manager simultaneously. The management plan can be short and directed toward one or two activities, or it can be comprehensive, requiring the property manager to undertake a variety of tasks. Usually the management plan addresses the owner’s objectives and participation in the management, analyses of the local economy and the neighborhood, the competition, consumer preferences, property maintenance requirements, tenant policies, financial management, administration and staff, and reporting requirements.
|(a)||OWNERSHIP AND THE OWNER’S PARTICIPATION – This section of the property management plan specifically identifies the owner of the property who can be an individual, a partnership, a limited liability company, or a corporation. It also discusses the nature and the degree of the owner’s participation in the management of the property. The items addressed in this section of the plan can be (1) the level of decision-making the owner wants to undertake and the areas in which the owner wants to make decisions; (2) the number of meetings the owner would like to have and phone calls that the owner would like to receive from the property manager; (3) the nature and extent of the written reports that the property manager must provide; and (4) the number or frequency of the reports.|
|(b)||OWNER’S OBJECTIVES – In this section of the management plan, the property manager must specifically identify the owner’s objectives for the property. In most instances these objectives are financial. The items for discussion in this section concern such things as annual cash flows, rates of return on the investment, levels of appreciation, and the anticipated holding period for the property.|
|(c)||LOCAL ECONOMIC AND NEIGHBORHOOD ANALYSIS – The property management plan considers the economic and demographic factors in the local economy and in the neighborhood that can affect the property’s economic performance. This section may include analysis of such items as employment and population growth and significant changes in such underlying economic factors as the influx or the exodus of major employers, new residential construction, new commercial development, and new transportation systems and highways.|
|(d)||SURVEY OF THE COMPETITION – This section provides a detailed analysis of the competition that the subject property faces in its market area. If the subject property is an apartment building, the survey of competition would include information on the financial, structural, site, and locational characteristics of other apartment buildings that directly compete with the subject property. The orientation of the survey of competition includes both existing properties as well as properties under construction and competitive properties that could be built on currently available sites.|
|(e)||CONSUMER RESEARCH – Consumer research starts with an analysis and an understanding of the current tenants of the owner’s property. Important information about the current tenants would be who they are and why they chose to occupy space in the subject property. The research can then compare the information about existing tenants to information on prospective tenants in the competing properties and properties within the market area. Important questions focus on whether the property is meeting the needs of the existing tenants or whether the subject property is attracting tenants that are different from other tenants in the immediate area. For example, a high-rise apartment complex in an area having only low-rise apartments may be attracting a different type of tenant. A new high-rise office building in an office market might attract a different type of tenant than is currently renting space in the nearby older low-rise office buildings. The survey of competition provides detailed information on existing market rent levels and a basis for a detailed comparison of the attributes of the subject property against those attributes of the competitive properties. This comparison may yield information that points out whether the subject property is better or worse than the competitive properties in the mind of the consumer. If a competitive differential exists, the property manager should exploit these favorable attributes to obtain higher occupancy levels and higher rent levels. On the other hand, if the attributes of the subject property are inferior to those of the competition, the property manager can use that information to devise a strategy to upgrade the subject property.|
|(f)||MAINTENANCE REQUIREMENTS – This section of the property management plan begins with the inspection of the property and the identification of any needed repairs. This inspection includes both the building’s structure and the mechanical systems. The plan recommends the procedure to accomplish the repairs and identifies a maintenance program to reduce the need for future repairs. In other words, the maintenance requirement section of the property management plan discusses both corrective maintenance and repair and preventive maintenance programs to reduce the operating expenses. The maintenance requirement section can also address the need for capital improvements such as bathroom and kitchen modernizations in apartment buildings, common area upgrades in shopping centers, lobby renovations in office buildings, and changes in loading bays in industrial buildings. The survey of the competition and the consumer research sections of the management plan provide information to justify the need for such capital improvements.|
|(g)||TENANT RELATIONSHIPS AND POLICIES – The first important aspect of this section of the management plan is a description of the advertising, marketing, and leasing plan for the property. Information for this presentation comes from the survey of competition and consumer research sections of the plan. The property manager identifies the anticipated market rent, the nature and amount of on-site amenities, and the typical term of the lease. The issue of tenant relationships also includes rent collection policies, late fees, security deposit requirements, rules and regulations governing tenant behavior, and the role the property manager will play in any dispossessory proceedings.|
|(h)||FINANCIAL MANAGEMENT – Financial management focuses on a variety of items including the accounting system, the nature and the frequency of financial reports to the owner, the property manager’s role in the preparation of operating budgets, the purchasing procedures and any limitations imposed on the property manager’s authority in this area, the owner’s responsibility for insurance and the property manager’s role in paying the premiums out of the operating budget, and the funding of capital improvements.|
|(i)||ADMINISTRATION AND STAFF – This section of the plan identifies the nature of the property management provider. If the property manager is an employee of a property management firm, the plan will describe the organizational structure of the management company and identify the specific person involved with the on-site management of the property. This section of the management plan also provides detailed information on the hours of operation for the management office (both on-site and company headquarters) and the level of on-site staff requirements.|
|(j)||COMMUNICATION AND REPORTING – This section identifies the nature and number of required reports. It outlines the circumstances under which the property manager must give advance notice of expenditures to the owner. The plan will also state whether either the property manager or the property owner requires a schedule of face-to-face meetings on a monthly, quarterly or annual basis and specify the schedule of these meetings. The reporting section should also specifically identify the individual to whom the property manager reports if that individual is not the owner. If the owner is a corporation, the management plan should identify the individual or individuals within the corporate structure to whom the property manager communicates. Additionally, the property manager and the property owner can specify the type of reports the property manager will send to the property owner and the time period for delivering those reports. For example, some reports may be monthly, while others are quarterly or annual. The most common reports are the rent roll, the schedule of disbursements, a schedule of miscellaneous revenues, period-to-period comparative financial statements, the property balance sheet, cash reconciliation, the property statement of owner’s equity, and the property’s payroll.|
THE PROPERTY MANAGEMENT FIRM’S OPERATIONS MANUAL
Directly related to the property management plan provided by the property manager to the property owner is the property manager’s set of operational procedures. The property management firm should have a detailed operations manual in place before generating a management plan and entering into a management agreement. The operations manual refers to the procedures for collecting information and processing that information that underlies the management plan and the management agreement. The content of the operations manual closely parallels the discussion of the management plan in the previous section. The operations manual addresses such issues as the following:
|(b)||leasing and move-in policies,|
|(c)||move-out and subleasing policies,|
|(d)||rent collection and recording procedures,|
|(f)||recordkeeping, budgets and operating statements,|
|(g)||maintenance and security policies and procedures,|
|(h)||purchasing and disbursements,|
|(i)||the on-site management office, if applicable, and|
|(l)||emergency and disaster planning and procedures|
The operations manual guides the development of the property management plan. More detailed discussions of these topics appear in the following chapters in this section of the guide.