Guides
Property management regulation for owners: which authorities to ask about licenses and obligations
Explains which authorities cover each part of a residential property management company's work, what to ask them, and how to keep leases and deposits in order.
What to take away
- A property management company answers to more authorities than most owners expect. The state real estate regulator, the state landlord-tenant statute, the local housing or code office, HUD and the state fair-housing agency, the labor department, and the tax authority each cover a different part of the same lease.
- Managing property for someone else, for a fee, is a licensed activity in many states. Whether the license belongs to the company, the broker, the individual manager, or all three is the first question to put to the state regulator, before the first management agreement is signed.
- Owner money and tenant deposits are the company's largest legal exposure. Trust accounting rules are set by the licensing body and the landlord-tenant statute, not by the accounting software.
- Compliance is organized by the lease. Every clause either has a rule behind it, a record behind it, or is dead weight.
Why a management company has more exposure than a landlord
A landlord managing one building has one lease, one deposit account, and one set of local rules. A management company multiplies that by every owner it serves.
It adds two relationships the landlord never had. One is an agency relationship with the owner, where the company handles money that is not its own. The other is an employment relationship with leasing agents and maintenance staff who act in the company's name.
That is why the licensing question comes first. In most U.S. states, leasing and collecting rent for another person for compensation counts as real estate brokerage. The state real estate commission decides who may do it.
Some states carve out an exemption for salaried on-site employees, or for managers who never negotiate lease terms. Some do not.
The definitions differ enough that a manager licensed in one state cannot assume anything about the next one. Ask the commission directly, in writing, and keep the answer.
The authority map, by what it governs
The table below is the working map for a residential management company. It names the body to ask; it does not state what any body requires, because requirements change by state, by city, and by year.
Who sets each rule
What the company does
- Leases and collects rent
- State real estate commission
- Holds deposits and owner funds
- State landlord-tenant statute
- Screens applicants and advertises
- HUD and fair-housing agency
- Serves notices and files
- State statute and local court
- Employs leasing and maintenance staff
- U.S. Department of Labor
- Maintains units and common areas
- Local building and housing code
Who sets the rule
- Leases and collects rent
- Holds deposits and owner funds
- Screens applicants and advertises
- Serves notices and files
- Employs leasing and maintenance staff
- Maintains units and common areas
The authority map
| What the company does | Who sets the rule | What to ask for |
|---|---|---|
| Leases and collects rent for owners for a fee | State real estate commission or licensing board | Whether the activity needs a broker or property manager license, and who must hold it |
| Holds security deposits and owner funds | State landlord-tenant statute and the licensing board's trust-account rules | Where deposits must be held, whether interest is owed, how records are kept, and how fast the accounting is due at move-out |
| Screens applicants and advertises units | HUD and the state or city fair-housing agency | Protected classes beyond the federal list, rules on criminal and credit screening, and advertising language |
| Serves notices and files for possession | The state landlord-tenant statute and the local court | Notice forms, service methods, cure periods, and what a court expects to see |
| Employs leasing agents and maintenance staff | U.S. Department of Labor and the state labor agency | Wage, overtime, timekeeping, and classification of on-call or resident staff |
| Maintains units and common areas | Local building and housing code office | Inspection cycles, habitability standards, permit thresholds, and lead, smoke, and carbon monoxide rules |
| Sends staff into occupied units and mechanical rooms | Occupational Safety and Health Administration | Hazard programs, lockout of equipment, and recordkeeping for injuries |
| Operates a leasing office open to the public | U.S. Department of Justice ADA guidance and the state accessibility code | Barrier removal in the office and accessible communication for applicants |
| Collects fees, reports owner income, files payroll | IRS and the state revenue department | Reporting of owner income, business registration, and payroll filings |
HUD publishes a plain summary of federal fair-housing rights and obligations, the starting point for the screening row. It covers only the federal floor.
Many states and cities add protected classes, restrict the use of criminal history, or regulate how source of income may be treated. The fair-housing agency for the company's own city is the authority to ask.
The lease is the compliance document
Every rule in the map lands in a clause. The deposit rule goes in the deposit clause, the notice rule in the default clause, and the habitability rule in the maintenance and entry clauses.
A company that adopts a lease form from another state or a stationery store inherits clauses that may be void locally. A void clause is worse than no clause: staff enforce it until a tenant's attorney explains why they cannot.
Three habits keep the lease honest:
- Have a qualified local attorney review the lease form once, then again whenever the statute changes. The review is a business expense that replaces an unknown number of disputes.
- Keep a clause registereach clause, the rule or reason behind it, and the last date someone checked it. A clause with no entry gets removed.
- Enforce what the lease says or amend it. The clause that was never enforced is the one a court reads against the company. Late fees waived for eighteen months, then charged in month nineteen, create an argument the company will lose.
Owner funds and deposits: the trust-account discipline
The licensing board usually has a view on how a licensee holds other people's money, and the landlord-tenant statute has a separate view on tenant deposits. The company has to satisfy both. The discipline looks like this whatever the local detail:
Trust-account discipline
- Operating money, owner money, and tenant deposits sit in separate accounts. The company never borrows from one to cover another, even for a day.
- Every deposit is tracked by tenant, unit, owner, date received, and amount, so a move-out accounting can be produced in minutes rather than reconstructed from bank statements.
- Every owner statement reconciles to the bank. The reconciliation is dated and signed by a named person.
- The management agreement says in plain words who holds the deposit, in whose name, and what happens to it if the owner sells or the agreement ends.
Where the statute sets a deadline for returning the deposit and the itemized accounting, the company's move-out process has to finish inside it with margin to spare. Find the deadline in the state landlord-tenant statute, write it on the move-out checklist, and treat it as the earliest date, not the latest.
People, hazards, and the office
Management company staff enter occupied homes, work near water heaters and electrical panels, and carry keys to strangers' property.
OSHA's recommended safety and health program structure fits the trade. Name hazards by task: roof access, confined crawl spaces, lockout during repair, lone entry to occupied units. Pick controls, train the people who do the task, and keep training records.
The leasing office is a public accommodation. The Justice Department's ADA guide for small businesses explains the readily achievable barrier-removal concept for an existing office; the state accessibility code may add to it. The office is also where applicants first meet the company, and the fair-housing obligation to communicate accessibly starts at the door.
Employment rules follow the staff. The Labor Department's compliance guidance for new and small employers covers the federal wage and hour floor; the state labor agency covers the rest.
Two questions bite this trade in particular: whether a resident manager who receives a rent credit is an employee owed wages for on-call time, and whether a maintenance technician who uses his own truck is an employee or a contractor. Get both answered by the agency or an employment attorney before hiring.
A staged sequence for a new company
The order matters because each stage produces a document the next stage needs.
Staged sequence for a new company
- Licensingconfirm and obtain required licenses
- Entity and taxregister business and EIN
- Accountsopen operating, owner, deposit accounts
- Lease and management agreementattorney review
- Screening policywrite and check fair housing
- Office and locationpick accessible leasing office
- Staffclassify roles and train on rules
- Recordsdecide what to keep and how long
- Licensing.Confirm with the state real estate commission what license the company, the responsible broker, and each manager need. Obtain them. Record the renewal dates.
- Entity and tax.Register the business, obtain the federal employer identification number, and register with the state revenue department. The startup and market guide covers this sequence in more detail.
- Accounts.Open the operating, owner-funds, and deposit accounts. Confirm with the licensing board and the statute that the deposit account meets their rules.
- Lease and management agreement.Have both reviewed by a local attorney. Build the clause register.
- Screening policy.Write a single screening standard and apply it to every applicant. Check it against HUD guidance and the local fair-housing agency's rules before the first application arrives.
- Office and location.Pick a leasing office with the location criteria that matter for the trade, including accessibility and parking for applicants.
- Staff.Classify roles, set timekeeping, and train on fair housing, safety, and entry rules before anyone touches a key.
- Records.Decide what is kept, for how long, and where. Retention periods come from the statute of limitations on lease claims, the licensing board's rules, and the tax authority. Ask each.
How to know the system is working
The measures are few and they are all records:
- Time to produce a complete deposit accounting for any tenant who moved out in the last year.
- Number of clauses in the clause register without a checked date in the past twelve months.
- Number of staff whose fair-housing or safety training record is older than the company's own refresh interval.
- Bank reconciliations completed and signed on time, out of twelve.
- License renewal dates that passed without a renewal filedthe acceptable number is zero.
A company that can pull those five numbers in an afternoon is compliant in the way that matters. One that cannot is guessing.
Common questions
Does the owner of the building need a license too?
Generally an owner managing their own property is treated differently from a company managing for others, but the state real estate commission draws that line and definitions vary. Ask the commission for the company's own state and put the answer in the file.
Can the company use one lease form for every owner?
One form is easier to administer and easier to keep current, provided a local attorney reviewed it and the management agreement gives the company authority to use it. An owner who insists on his own lease brings his own clauses, and the company must decide whether it can enforce them.
Who is liable when a leasing agent says something discriminatory?
The company, the broker, and often the owner, in addition to the agent. That is why the screening standard is written down and why training records exist. HUD and the state fair-housing agency handle complaints; a qualified attorney handles the company's response.
What happens to the deposits if the company loses an owner?
The management agreement should say. Typically the deposit transfers to the owner or the successor manager with a written accounting, but the statute may set the mechanics and the tenant may be owed notice. Check the statute before the transfer, not after.
Where does this article stop and legal advice begin?
Here. This page explains which authority governs each part of the work and what to ask. It states no deposit limit, notice period, or eviction rule, because each is set by the reader's own state and city. A qualified local attorney is the source for the rule itself.
