An Introduction to Property Management: What You Need to Do Before the Lease is Signed Presented by the VAR Legal Team This Course is Brought to You as a Member Benefit by the Virginia Association of REALTORS® Residential Property Management Licensing & Ethics Requirements VRLTA vs. Common Law Agency Disclosures Escrow Is a License Required? A “real estate salesperson” is “any person … who for compensation or valuable consideration is employed either directly or indirectly by, or affiliated as an independent contractor with, a real estate broker … to lease, rent or offer for rent any real estate, or to negotiate leases thereof, or of the improvements thereon.” Is a License Required? Showing Property Answering questions about leases Discussing, explaining, interpreting, or negotiating leases, property management agreements, or other contracts Negotiating management fees Broker Supervision VREB Regulations prohibit a licensee from negotiating leases for a third party through an unlicensed firm or without a principal broker Broker Supervision The supervising broker is responsible for ensuring that brokerage services are carried out competently and in accordance with the law. If the broker is unfamiliar with the area of practice it will be very difficult for her to ensure compliance with the law. Code of Ethics: Article 11 The services which REALTORS® provide to their clients and customers shall conform to the standards of practice and competence which are reasonably expected in the specific real estate disciplines in which they engage; specifically, residential real estate brokerage, real property management, commercial and industrial real estate brokerage, land brokerage, real estate appraisal, real estate counseling, real estate syndication, real estate auction, and international real estate. Code of Ethics: Article 11 REALTORS® shall not undertake to provide specialized professional services concerning a type of property or service that is outside their field of competence unless they engage the assistance of one who is competent on such types of property or service, or unless the facts are fully disclosed to the client. Any persons engaged to provide such assistance shall be so identified to the client and their contribution to the assignment should be set forth. (Amended 1/10) Common Law – Landlord Tenant Tenant entitled to exclusive & peaceful enjoyment of the premises Tenant consent required for Landlord to access the property Tenant accepted the property as is Tenant obligated to maintain and repair the property, Landlord owed no duty of repair or replacement except to maintain common areas Common Law – Landlord Tenant Any holdover was assumed to be for the same term Courts or reasonable & peaceful self-help were remedies for non-payment Tenant abandonment Purposes of the VRLTA Simplify, clarify, modernize and revise the law governing dwelling units Encourage landlords and tenants to maintain and improve the quality of housing Establish a single body of law on landlord and tenant law throughout the Commonwealth VRLTA The VRLTA applies to all rental agreements entered into on or after July 1, 1974, which are not exempted under the statute The law allows landlords who are otherwise exempt from the VRLTA to “opt-into” statutory coverage in the lease if they so wish In the event the VRLTA is silent on something, the common law will control VRLTA Exemptions Residence at public or private institutions if incidental to detention, medical, geriatric, educational, religious or similar services (i.e. jails, hospitals, schools) VRLTA Exemptions Occupancy under a contract of sale if the occupant is the purchaser (i.e. presettlement occupancy agreements) VRLTA Exemptions Occupancy by a member of a fraternal or social organization VRLTA Exemptions Occupancy in a hotel, motel, extended stay facility, vacation residential facility, boarding house, or similar lodging (less than 90 days) VRLTA Exemptions Occupancy by employee of landlord whose right to occupy is conditioned upon employment in and about the premises VRLTA Exemptions Occupancy by an owner of a condominium unit or cooperative VRLTA Exemptions Premises used primarily in connection with business, commercial or agricultural purposes VRLTA Exemptions Public housing subject to regulation by HUD VRLTA Exemptions Occupancy by tenant who pays no rent VRLTA Exemptions Campground VRLTA Exemptions Where owner/landlord owns property in their own name, and owns no more than 2 single family residences subject to rental Common Law VRLTA No statutory requirements for Statutory requirements for security deposits security deposits No statutory requirements for Statutory requirements for inspections inspections Landlord has no right to access Landlord is allowed reasonable the property except as set out in access to the property with the lease safeguards If one party fails to sign or deliver If either party fails to sign the the lease, rent term is month to lease, but Landlord accepts rent month unless court finds from the tenant who has signed, otherwise or tenant takes possession, lease has same effect as if it were signed for up to one year Landlord Disclosures Defective Drywall Mold Mortgage Default, Acceleration, or Foreclosure Methamphetamine Lead Based Paint Hazards Landlord Disclosures – VRLTA ONLY Name & Address of any person authorized to manage the property Name & Address of Owner’s authorized agent (e.g. receipt of service, notice, demands) Military Air Installation Property Manager Disclosures Material adverse facts pertaining to the physical condition of the property of which there is actual knowledge Designated and dual agency relationships Disclosure of brokerage relationship to unrepresented parties Personal interest in the property Escrow & VREB Regulations Federally insured separate escrow account where all rental payments, rental security deposits, application deposits, prepaid rent are deposited Account must be in the Firm’s or Sole Proprietorship’s licensed name Balance sufficient to account for all funds designated to be held Escrow & VREB Regulations Principal Broker must have signatory authority Accounts, checks, and bank statements must be labeled “escrow” Account must be designated “escrow” with the financial institution where it is established Escrow & VREB Regulations Security deposits, prepaid rent or escrow fund advances MUST be deposited into the escrow account within 5 business banking days of receipt, unless all parties agree otherwise in writing Application deposits must be placed in escrow within 5 business banking days of the date of approval of the rental application by the landlord, unless all parties agree otherwise in writing Escrow & VREB Regulations Licensee cannot receive commission from the security deposit or any other money paid to the licensee as part of the lease, unless otherwise agreed to in writing. Escrow & VREB Regulations Unless Landlord has become entitled to receive it, the security deposit or prepaid rent cannot be removed from the escrow account without written consent of the tenant Application Fees Nonrefundable fee Paid by Tenant to Landlord or Property Manager for consideration as a tenant Cannot exceed $50, exclusive of landlord’s actual out of pocket expenses (or $32 for HUD housing) Application Deposits Refundable deposit Paid by tenant to landlord or property manager for consideration as a tenant If tenant fails to rent, must be refunded, minus actual damages and/or expenses, within 20 days of failure to rent or rejection (10 days if tenant paid cash, certified check, cashier’s check, or money order) Applicant remedies Security Deposits Refundable deposit Paid by tenant to landlord or property manager to secure the performance of the terms and conditions of the lease Considered an application deposit until commencement date of the lease Cannot include insurance policy Cannot exceed 2 month’s rent Prepaid Rent Landlord – Tenant agreement in writing Must be placed in escrow by end of 5th business banking day following receipt Must remain in escrow account until rent is due Cannot be removed without tenant’s written consent Questions?.