Roles and Responsibilities of a Property Manager

Property management functions can be handled in-house or contracted out to a third party. When they are contracted out, both the owner and manager need clear written policies and procedures that incorporate all tasks to be performed by each party and identify who performs them. The owner must adopt effective policies so the development will be in compliance long-term. Owners should be aware of the affordability period, rents, and tenant-income requirements. Many funders have tools and products to use as a reference to help you keep your policies and procedures in compliance with their requirements. If your project is using funding from the Mississippi Home Corporation, you should reference their Housing Tax Credits Compliance Manual.

When evaluating whether to contract property management, consider your experience managing similar developments within the same geographic area and whether you have the necessary staff and capacity. Established professional property management firms may bring proven resources, connections, and management structures, although these options may be more limited in rural areas. Handling duties in-house, however, may be a more cost-efficient approach and the time commitment will vary by development model.

Whether you contract or have internal staff manage the property, you will need to set clear expectations of what the day-to-day tasks and responsibilities of the property manager are.

The key activities of a Property Manager include:

• Collecting rent

• Developing and maintaining updated policies and procedures that are compliant with applicable funding sources or affordable housing program requirements

• Ensuring property compliance with all applicable regulations

• Maintaining tenant files and property records, including following required or recommended file retention periods

• Providing preventative and routine maintenance and repairs

• Providing appropriate tenant and stakeholder communication and customer service

• Preparing a business continuity plan in the case of a natural disaster

There are a few common services that can be offered to build transparent relationships between tenants and owners and build the capacity for the community to navigate rental terms successfully. Resident-centered management practices to strengthen tenant and owner relationships include:

• Resolve tenant issues in a timely manner

• Provide strong, quality service while setting appropriate expectations about that service

• Provide routine and cost-efficient maintenance to maintain high-quality housing

In addition, property managers should execute the functions in a way that addresses unique resident needs and makes all residents feel welcome. The Southeastern Affordable Housing Management Association offers fair housing and compliance training throughout the region.

Property Management Agreement

During the property management selection process, examine the management company’s goals and mission. Ideally, the management company you select will have similar goals to your organization. Once you’ve selected a property management company, work to align your goals and mission. If there are any priorities or housing needs that are not part of the property management company’s standard process, give these areas additional focus.

One of your first tasks upon choosing a property management company will be to develop a management agreement. This agreement formalizes specific management and administrative services provided and the fee(s) for those services. The agreement will also detail provisions for termination and conflict resolution.

Also, meet with regulatory agencies to review your lease language and addendums, such as the Violence Against Women Act (VAWA). This is often a requirement if the project is state-funded, but these reviews are helpful regardless. The outcomes should be documented so that you can learn from them and apply those lessons across your portfolio.

You or your property management company will establish tenant-selection and eligibility policies and procedures. Based on your mission and funding sources, you will set priorities or preferences on applicants that will be eligible or rank higher in preference for your development. Similarly, you will establish ongoing occupancy requirements that follow any local, state, or federal funding regulations. You will create a lease agreement that may include the following sections:

• Landlord and tenant rights and responsibilities

• Rent or deed restrictions

• Eligibility and occupancy guidelines

• Tenant selection process

You will also need formal processes for handling grievances and evictions equitably. Property management may offer alternative options that avoid triggering the eviction process. Clearly communicate these alternative options and the eviction process with tenants.

Marketing and Tenant Selection

There will need to be established tenant-selection and eligibility policies and procedures in place. Based on your mission and funding sources, you will set priorities or preferences on applicants that will be eligible or rank higher in preference for your development. Similarly, you will establish ongoing occupancy requirements that follow any local, state, or federal funding regulations.

Fair Housing

It is important that your tenant selection processes are in compliance with the Fair Housing Act. Housing providers who refuse to rent of sell homes to people based on race, color, national origin, religion, sex, familial status or disability are violating the federal fair housing laws and HUD can pursue enforcement actions against them.

HUD has a resource to help you understand the Fair Housing Rights and Obligations.

Since you are developing in the state of Mississippi, you must also be sure that you are in compliance with the Mississippi State Landlord-Tenant Law,

Resident Services

A property can provide resident services to enhance a resident’s quality of life. When engaging future residents and local housing stakeholders there is an opportunity to identify services needed for future residents. Services might include:

• Childcare

• Financial services and education

• Job training and career development

• Health and wellness

• Community empowerment and space

• Access to transportation

• Access to internet

For these services to become a reality, they need to be appropriately planned and budgeted. Selecting a service provider already established within the community offers an advantageous position as they can provide a level of expertise based on previous experience. Once the type of resident service is selected, there needs to be consideration of staffing capacity, space and a general operating costs factor within the operating budget.

Wait list

Maintaining an active waiting list helps to shorten turnover times and can provide valuable data related to future housing needs. You may want to consider collecting information that relates to the populations that you are prioritizing as part of your waitlist data collection.

Financial Management

Property management also entails proper financial management, which includes developing an annual budget, maintaining operating and emergency reserves, and maintaining accountability for finances. Asset management includes activities that maintain and enhance a property over its lifetime.

An operating budget is included as part of the pro forma package and can be used to identify ongoing expenses and assess the risk of operating expense shortfalls. An initial operation budget can be made with a budget estimate that will be adjusted as you determine the revenue generation needed to cover expenses. Once the property is operating, the adjustments to the operating budget will need to be monitored based on the development’s operating expenses and adjusted when necessary.

Rent collection and vacancy rates are key performance indicators in financial management. Management must monitor the rent collection rate on a regular basis and the lease agreement should establish guidelines for the rent collection process. Monitoring and managing vacancy rates allows property owners and managers to identify market trends, adjust rents, improve marketing strategies, and address tenant retention issues.

Suggested practices for rent collection include:

• Having a flexible grace period prior to charging a late fee can reduce turnover rates and help set realistic expectations with tenants.

• Promoting alternative payment options for tenants, including in-person, mail-in, or drop-off

• Connect tenants with local housing or financial counseling

To sustain the long-term viability of your development, you should have operating and replacement reserves to cover anticipated and unexpected losses over the course of time. Some funders require minimum operating reserves equal to at least six months of projected annual operating expenses and six months of debt service payments. Replacement reserves are established on a per unit per annum basis and should be reflected in your operating pro forma.

Compliance

Compliance encompasses how your development is meeting agreed-upon funding source restrictions and requirements. This means working with both your tenants and funders to provide all of the necessary documentation. While compliance can be tedious at times, it’s important to remember that affordable housing receives certain benefits in return for certain obligations to low-income residents. This process is focused on ensuring your obligations are being met. Areas to monitor compliance are:

• Land Use Restriction Agreement (LURA)

• Certifying Household Incomes

• Exemptions

• Post Year 15 LIHTC Compliance

This is only an overview; it is recommended that you seek out the services of an attorney and/or accountant who specializes in the relevant programs and work with them on any complex problems that may arise. In general, it is wise to survey your contract documents, including your Land Use Restriction Agreement, to determine which has the strictest compliance. Use that document as a primary check for whether you’re in compliance. Be sure to note any additional considerations not covered by the strictest agreement.

Vacant units typically need to be filled within 30 days. You will need to make sure that the affordable rental units are being filled first and demonstrate that you are marketing just as fairly to low-income households as to market-rate households. Vacant units can usually remain open longer if there is unusual damage, and up to 6 to 12 months if there’s been methamphetamine use.

Land Use Restriction Agreement

A Land Use Restrictive Agreement (LURA) is a legal document that documents the land use restrictions in a public record and that runs with the land. Through this document, the restrictions that were agreed upon with a funder when the land was acquired or developed as affordable remain with the land despite change in ownership.

USDA program restrictions are recorded in a Rental Use Covenant (RUC) which operates similarly to a LURA.

For all rental properties, the LURA/RUC might be verified and enforced on a regular basis by a funding agency. Items that are often reviewed for compliance include: current year income & rental limits, household application, verification forms, tenant income certification (TIC).

Certifying Household Incomes

There are several steps you need to take to report on the families living in your property:

• Determine number of household members

• Ask about temporarily absent family members

• Note any permanently confined family members

• Identify any live-in aides, and provide verification

Incomes

The household’s annual income at the date of move-in must fall within the income limit for that household’s AMI designation, number of household members, and county or state. Then, the rent can be determined based on the same factors and the number of bedrooms. According to the Hold Harmless rule, once a project is placed in service, if the income limits decrease in the county or state, the project may continue to use the original income limits.

Any low-income designated units must be rent-restricted based on Fair Market Rents (FMRs) and Area Median Income (AMI) standards. Ideally, that rent does not exceed 30 percent of the household’s income.

Post 15 Year LIHTC Compliance

It is important to note that compliance on a LIHTC property might change but does not go away once a LIHTC property reaches “Year 15.” There are often longer-term restrictions outlined in LURAs or RUCs.

Noncompliance

When potential or confirmed noncompliance is identified by an auditor or funding agency, the identified issues must be sufficiently corrected and documented by the owner within an agency’s required timeframes. Typically, the compliance officer or program reviewer will notify the property owner of the non-compliance and specify a correction period. By the end of the correction period, the owner must submit a complete response and submit supporting documentation to demonstrate that noncompliance has been cured. When a complete response is received, the agency will confirm whether the noncompliance has been resolved and determine if any of the specific findings or deficiencies must be reported to other agencies.

The following may mean you are out of compliance with LIHTC:

• If you cannot fill a vacant unit after a certain number of days

• Increasing tenant rent outside of lease renewal

• A lack of current year income verification

• Incomplete household application

• Incomplete or out of date verification forms

• Physical condition of the building is in disrepair

• Non-compliance with ADA regulations