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Dismantling Property Management Myths

Growing Your Property Management Business

Robert and Monica take apart the common beliefs about leases, fees, agency and liability that cost managers money.

56 lessons 11h 24m of video 2 modules

Taught byRobert M. Locke, RMP®, MPM® & Monica Gilroy

Read the full transcript

Property Management Myths

Reading Robert Locke, thanks for taking the time to watch these myth videos. We're on myth, numbers 71. Myths are kind of a, things I used to believe were true and after 20, 30 years in the business, found them not to be true. Maybe I can save you a little heartburn by kind of exposing some of these and some of the things I've learned over the 35 years.

Non-Smoking Clause Challenges

This one goes like this, A manager should mandate non-smoking in their lease, right? And I'm gonna really step on some toes today. I know that because there's a whole group of people in the world of property management who really do believe that having a non-smoking clause in the lease is really a good thing and it serves the owner and it serves the manager and it holds the tenant accountable, yada, yada, yada. I'm gonna kind of step on your toes a little bit.

Sorry about that. Here's kinda how this, video started out. I was at a national trainers meeting up in Virginia with Rppa trainers and one of the Rppa members, we were just talking, one of the Rppa members said this. He said, we are totally a non-smoking shop. And what he was saying is this, all of our leases now have a non-smoking clause.

And he was kind of crowing about it, you know, he said, finally we got there and, and he was kind of expecting everybody to applaud him a little bit. And I think there were some people around there kind of like raising an eyebrow saying, huh, why are you doing that? So let's kind of talk through what are the challenges and what should you do about it. Now there's some obvious challenges that we have in letting tenant live in the house and smoke. So let's look at 'em and kind of put our cards on the table.

Number one, tenant leave behind odors. Smoking odors are kind of a tough thing to deal with. Secondly, if you ask an owner, owners love the idea, oh yeah, let's not let up, let's not let a tenant smoke in the house and we can kinda get away with it. But what most people don't realize is there's some liability that we're putting up on ourselves when we have a non-smoking clause in the lease. So let's talk that through a little bit.

Never put language in your lease that you can't monitor or enforce. In other words, I've seen tenant or managers all over the country put all kinds of things in their lease that they have no system in place to monitor, track it or enforce it and really don't intend to. But they don't realize that they're putting liability on themselves that they really hadn't calculated in the discussion of whether or not they should have a non-smoking clause in their lease. Okay?

Owner Expectations

The owner has a reasonable expectation that the, you have a way to track and enforce whatever you put in your lease. So if you put in a lease no pet's over 10 pounds, then you've gotta have a way to either ca carry around a set of scales and weigh that dog every four to six months and enforce it. Or if you say non-smoking and you don't really have a way to quantify it and enforce it, then you've gotta a liability. 'cause the owner expects you to enforce the terms of the lease. In fact, job one, you ask any owner, they would say job one is enforcing the terms of the lease enforcement includes detection, measuring it, quantifying it, proving it, calling

the tenant to task and default the lease and give 'em an opportunity to cure, terminate the lease if they don't and evict the tenant over it. I'm not sure many managers who have a non-smoking clause, every thought in terms of how do I quantify it? How do I prove it? Can I stand before a judge and actually evict somebody over the fact that, you know, there's some smoke smell in the house. I don't know many managers have ever tried to do that before.

It's kind of silly when you think about it. So the question is, why put it in the lease if you have no way to really track it and enforce it and measure it and, and, and hold the tenant accountable? You got some reliability to the owner here 'cause he expects you to enforce the terms of the lease.

Liability Concerns

So what is the liability? Okay? If you don't have a system in place to monitor and enforce the terms you put in your lease, you're exposing yourself to liability to the owner. You can say, we'll do regular visits, you can do a sniff test. I've never found a smoke meter.

I mean, we tried this in our early days and tried to figure out, you know, did they stand outside the sliding glass door in 50 degree weather and smoke and it blew in the house. Did the teenager, was the teenager there the last night when the parents were gone and they left a cigarettes mouth? There's no way to kind of prove this or quantify it. So you get in front of a judge, you know, and the judge is gonna kind of say, how do you, how do you know the tenant smoked in the house? And so there's a real question here.

And the question is, do we have a reliable way to measure and quantify the smoke, smell enough to make a case in front of the judge for enforcing it? Or are we just putting it in the lease in hopes that the tenant will comply and to kind of make the owner happy? I think that's probably the case. It just kind of sounds good to the owner. Haven't really thought through how much you can quantify it and whether or not you can really enforce it.

Administrative Responsibilities

So the downsides that is this, we adding infant monitoring and administration. When we add non-smoking clause to the lease, we are adding an administrative responsibility to somehow figure out how through property visits and smoke meters and sniff tests that we can kind of quantify whether or not they've been smoking in the house or whether or not they smoke a lot at work and went to a beer party and brought it home in their clothing. Okay? People smell smoke in many different ways.

There are, people can smell it a mile away. And there are other people who smoke. They can walk into a office complex and they can't smell anybody's smoke except everybody can smell their smoke. We add administration, you add liability yourself by implying enforcement.

Owner Misunderstandings

So what's the takeaway? Owners don't know. It belongs in the lease. If you say to an owner, we don't have a non-spoken clause in the lease, you know, they kinda say, oh good, I like that we signed up 2,500 owners. We never tried to put non-spoken clause in a lease.

We never used that as a selling point. You're just using it as a selling point. You need to be really careful with that 'cause there's some serious liability that goes along with it. Number two, punish the 1% of the offenders trying to monitor a hundred percent. If you got a thousand doors and 500 of 'em have, smoking or non-smoking, but they're smoking, you're gonna monitor that.

How in the world are you gonna go around and do sniff tests or we use a smoke meter and figure out who's smoking in the house? I don't know how to do that. I'm pretty good at this deal with the one out of a hundred owners who asked for non-smoking. We have, we fixed this. I'm gonna show you how we did it in a minute.

So there is it to protect yourself. That's the bottom line, isn't it? I'm telling you, this is a CYA issue. You need to protect yourself. There's no revenue in it.

So it's all CYA. So here's what we encourage you to do, by the way, the second half of this, myth video because it's too long, is how to solve the solution. So sign up for our myth video series. Go to training property managers.com/myths, or just go to our product page, find this, dismantling the myths, sign up for the series, it doesn't cost anything, and we'll put in, myth 71 part two, show you how to fix it.

Part 1

Thanks for listening.

About the speakers

Robert M. Locke RMP®, MPM®

Property management trainer and consultant

Residential Management Professional (RMP®) designation, 1998
Master Property Manager (MPM®) designation, 1999
Led Crown Management to the Certified Residential Management Company (CRMC®) designation, 2000
Founded Crown Management in 1980 and grew it to over 1,000 single-family homes under management
Sold Crown Management in 2015 to a Fortune 500 company
Past president and board member, Atlanta chapter of NARPM
Certified instructor, National Association of Residential Property Managers
Georgia Association of Realtors Partner in Education (PIE)
Expert witness on real estate disputes in magistrate, state and federal courts
Licensed in real estate since 1973; B.A. in Business and Marketing, Michigan State University, 1969

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Robert and Monica take apart the common beliefs about leases, fees, agency and liability that cost managers money.

Curriculum

The myths54 lessons · 11h 10m

You Should Mandate a Non-Smoking Clause in the Lease (Myth 71, Part 1) Free 7:21
You Should Mandate a Non-Smoking Clause in the Lease (Myth 71, Part 2) Locked 6:52
Once the PMA Is Executed, You Can't Change It (2017 Version) Locked 17:18
I Should Require Renters Insurance for Every Tenant Locked 16:57
There Is No Safe Way to Pass the Tenant's Personal Information to the Owner Locked 13:14
If My Volume Generates Vendor Discounts, I Should Pass Them On to My Clients Locked 9:27
Large Investors Must Use Your Qualifying Guidelines Locked 9:41
A Smart Property Manager Would Approve an Application From Their Real Estate Commissioner Locked 4:22
The Owner Should Approve Applications Locked 22:55
If the Owner Violates Fair Housing Law When Approving an Applicant, the Agent Isn't Liable Locked 14:33
Generating More Revenue Means Being Deceptive or Tricky Locked 5:18
My Family Lived With Those Defects, So Can the Tenant Locked 17:34
Having a Scope of Service Isn't That Important Locked 13:14
If I Follow My Client's Directive (Agency Law), I'm Not Liable for Their Bad Decisions Locked 7:41
My Management Agreement and Lease Should Be Drafted or Reviewed by a Lawyer Locked 31:53
Ethical Property Managers Never Make Undisclosed Profits Locked 8:35
You Should Get the Tenant's Permission to Photograph Their Household Furnishings Locked 12:35
If the Tenant Moves In Early, You Should Prorate the Rent Locked 14:34
The Pet Fee Belongs to the Manager Locked 11:52
Property Managers Don't Deserve a Big Renewal Fee When Tenants Stay Locked 18:27
Once the PMA Is Executed, You Can't Change It Locked 10:04
Managers Should Manage Utilities for the Owner, Right? Locked 15:32
At Move-Out Inspection, Let the Owner See the Property Just as the Tenant Left It Locked 8:14
A Property Manager Can Start the Turnkey Before Receiving Funding From the Owner Locked 18:34
If I Get the Tenant's Permission, I Can Safely Give Their Personal Information to the Owner Locked 19:42
There Is Only One Way to Structure a Lease Locked 22:22
If an Owner Terminates Me, I Must Get the Tenant to Release the Security Deposit to the Owner Locked 12:24
If a Property Appears to Be Going Into Foreclosure, I Can Lock Up the Owner's Trust Account Locked 15:38
As the Owner's Agent, I Must Forward All Funds I Receive, Including Prepaid Rent Locked 6:29
A PM Should Put Pet Weight Restrictions in the Lease Locked 10:05
I Should Let the Owner Terminate Without Penalty Locked 12:26
If the Owner Violates Fair Housing Law in Approving or Denying an Applicant, the Agent Is Not Liable Locked 14:33
If I Follow My Client's Directive (Agency Law), I Am Not Liable for Their Bad Decisions Locked 7:41
A PM Should Not Expect a Monthly Management Fee During a Vacancy Locked 11:29
You Should Have a No-Smoking Clause in the Lease Locked 17:54
Ownership Equals Knowing How to Operate Locked 14:52
A Professional Manager Should Manage Utilities Between Tenants Locked 13:03
I Need to Understand EBITDA to Value My Company Locked 13:05
A Manager Should Put Pet Weight Restrictions in the Lease Locked 13:25
When I Sell, the Buyer Will Want the Whole Company Locked 17:30
A Good Manager Should Set a Minimum Credit Score to Approve Applicants Locked 8:50
I Use a Tenant Screening Service, So I Don't Need Written Qualifying Guidelines Locked 8:37
To Sell My Management Accounts, I Need an Assignability Clause Locked 17:37
A Manager Can Never Pass an Applicant's Personal Information to the Owner Locked 7:51
I Must Apply the Same Qualifying Standards to Every Applicant Every Time Locked 10:15
My Goal Is More Properties Locked 15:32
My State Law Prevents Me From Reporting Current Tenants Locked 7:31
All Credit Reporting Is the Same Locked 11:07
I Need the Tenant's Permission to Report Locked 5:49
I Need a Judgment to File Negative Reports to the Credit Bureau Locked 6:50
My Management Agreement and Lease Already Have Language About Collections Locked 9:26
I Need the Tenant's Permission Before I Start Marking Their Credit Locked 5:35
You Deserve a Big Renewal Fee (Myth 33) Locked 9:05
I Should Put All the Tenant's Promises in the Lease (Part B) Locked 6:34

Recordings and extras2 lessons · 14 min

Myths Introduction Locked 4:30
Myth 21: Rent Start Date Must Be the Same as Move-In Date Locked 9:17

Robert M. Locke, RMP®, MPM®

National property management trainer and landlord-tenant litigator. Built Crown Management to 1,000 houses and sold it in 2015 to a Fortune 500 company.

Monica Gilroy

Real estate trial lawyer, general counsel for NARPM’s Atlanta chapter and frequent NARPM speaker. Twenty years co-developing these documents and courses with Robert.