What do I need to know about hiring a resident manager?

If you haven’t already done so, you need to research state and local laws regarding real property management in general and those specific to the issue of resident managers.  In some states and cities a landlord may be required to hire a manager for rental properties having a specified number of units. Most states require that a property manager be licensed as a real estate broker or as a salesperson working for a broker who has legal responsibility for the management. However, most states allow use of a non-licensed person who legally resides on a rental property to manage that particular property, but only the property on which the person is a resident. In other words, the person cannot manage a legally separate property even if the property owned by the same owner is nearby.

A resident manager is generally considered an employee, not an independent contractor. Therefore you will be the employer of the resident manager. You will have many of the same obligations for federal, state, and local new hire reporting; fair labor standards and wage and hour laws (including minimum wage and overtime requirements); income tax reporting; payroll reporting including withholdings for Social Security, Medicare, and Unemployment taxes; Workers’ Compensation insurance; employee sick leave or other benefits; general business recordkeeping and reporting; and any other legally required employer obligations as does any other employer. Since some of these items might vary by the state, county, or municipality in which the property is located, you must know the rules for that location.

While hiring a manager can free you from many time consuming aspects of property management, it may also create work of its own. Transferring tasks to your manager does not necessarily reduce your own work load. Your work load changes from performing landlord tasks to supervising the tasks of your resident manager and deal with employment and tax law issues.

That being said, many landlords can benefit from hiring a resident manager to handle routine day to day rental operations. You set the responsibilities and duties of the resident manager according to your business needs and per applicable laws.

You should recognize that business liability risks increase as more responsibility and authority is transferred to the manager. Owners are potentially liable for violations of landlord-tenant statutes, fair housing laws, and health & safety laws and for any injury or damages that their employees cause. You must ensure that your resident manager fully understands applicable laws and performs according to compliance standards.

Employers can be held liable for negligent hiring or tortuous acts of their employees if the acts occur when the employee is acting within the course and scope of employment. Therefore you should have risk management measures in place to help protect against potential liabilities of your manager’s acts.

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