What about compensation for a resident manager? Should it be an hourly rate and/or reduced rent? Do I need some sort of employment contract?
Compensation for a resident manager may be dependent upon the manager’s duties and responsibilities, the number of hours worked, the work schedule (days and time), on-call availability, employee benefits, and comparable wages/salary paid for similar job positions in the local rental community. Compensation can be paid as a flat salary or by an hourly wage. Owners will need to comply with wage and hour laws, equal pay laws, and other employment related requirements for hours, wages, overtime, holidays and benefits.
The resident manager by definition and design is also a tenant at the property. While some owners may consider offering reduced rent in exchange for manager services, there is consensus that this arrangement is not usually in the best interest of the business or the employee. It is difficult to fully and fairly exchange hours worked for rent allowance and there can be problems with wage and hour laws, possible overtime hours violations, rent control issues in some areas, and issues associated with termination of employment. Owners should ensure all employment obligations are met regarding hours worked and compensation provided.
In some states there are regulations regarding maximum rent charges for a manager who is required to live on-site as a condition of employment. You will need to research your state’s laws regarding any such regulations.
You should make it clear to your new manager that the employment is an at-will agreement. You could legally fire the manager at any given time with or without reason as long as you do not terminate his employment for an illegal reason. Your manager also could exercise his right to quit at any time for any reason with or without notice.
Your obligations as an employer remain the same whether you decide to compensate the resident manager with a reduced rent arrangement or you pay your manager an agreed upon salary/wage and the manager pays full rent for his unit.
Once you and the resident manager have agreed upon terms and conditions of his employment it is a better practice to record all terms and conditions of the work arrangement in a written employment agreement. While an oral agreement between you and the manager regarding his employment is usually legal and binding upon both parties, a written document will help to protect against possible future disputes or claims of unfair treatment.
Remember too that the manager is also your tenant. While the employment agreement covers the employment relationship, you will need a rental agreement with your resident manager for tenancy. The resident manager should be screened to your written tenant screening standards. A month-to-month rental agreement should be drawn for the rental terms and conditions. You or the manager/tenant may terminate the rental agreement as per the required written notice per state statute. The employment agreement and the month-to-month rental agreement serve two distinct business functions and should not be combined into one document, although depending on terms of employment, it is sometimes important to cross-reference between the employment and rental documents.