CYA Documents - Protect Yourself From Owners
The longer you’re in property management the more you realize that it’s sticky, often hostile, sometimes even litigious. Over 35 years I’ve been burned many times by owners, tenants, vendors, staff and third parties and after the second or third time (I’m a slow learner) I would go back to the attorney and have her draft a document that prevents it from ever happening again. Blaming property managers has reached an all-time high and isn’t going away anytime soon. So, understanding this reality, smart managers need to spend extra time, money and effort building/crafting documents designed to protect themselves, even from the folks they are trying to serve. We’ve pulled these documents from our archives and have listed them here for your review and downloading individually (or in packages by topic). We’ve laid this material out in the Property Management Life Cycle categories for purposes of giving the discussion some order.
Protecting yourself from Owners is what these documents are all about.
These documents are all in Word format (not PDF) so you can add your company name and tweak them to your model. Most were crafted for us by attorney Monica Gilroy in response to someone blaming, suing or terminating us over something we didn’t want to happen again.
The basic property management agreement is on another section of this site. It’s under the title Property Management Agreement .. either ‘Georgia Specific’ or ‘All States Agreement.’
The property management business is a thin-margin, nickel-dime, service business and managers need lots of different ways to generate revenue to survive, including setting up separate businesses that can support (and profit off of) the management business.
We all know that disclosures to our owners is critical to keep your license but often struggle with the question ‘When And How Do I Disclose’ so I can charge fees, receive referral checks, take commissions, make spreads, profit on maintenance, markup ancillary services and make money through outside companies I own. The question is, “what do I say in the PMA (that owners will accept) that permits me to make this additional revenue … and, how can I word it so the owner doesn’t get mad, or the real estate commission come down on me for not disclosing properly?
So, this challenge has three criteria. First, it must allow us to generate profit from any and all sources (including from sister companies we own); secondly, that the owner would be ok with it, and lastly, language that satisfies the real estate commissions requirements for adequate disclosure.
We struggled with this for years and tried lots of different methods of disclosure that met these three criteria. In the mid 90’s, with attorney Monica Gilroys help, we finally settled with this language. Owners feel it’s reasonable and fair; it opens up the floodgates of new revenue streams, and, it satisfies the real estate commission's requirements of Full Disclosure. It’s called a Broad Standing Disclosure.
Some owners think you should manage everything that remotely touches their property. Most have never owned a rental property and have no idea what property managers do. If you don’t manage their expectations they will instinctively ask you to manage mortgage issues, utilities, home warranties, set up bank accounts, file foreign tax compliance forms, manage HOA issues, insurance claims and whatever else needs to be done, in addition to managing the tenant and maintenance. That’s a perfect definition of an asset manager but most owners don’t know the difference and neither do most property managers.
Often, large asset managers (or foreign investors) will ask you to set budgets, estimate NOI, get bids on insurance coverages, manage the code enforcement officer, manage property tax disputes, oversee insurance claims and a whole host of other duties you’re not trained to (or have the experience to) manage. To make it worse, you’re not being paid to do all that stuff for the lousy $70 a month management fee.
Private owners sometimes have the same ideas and need help understanding what you do for the fees they pay you or, better yet, what you don’t do. If you don’t define it, they will, and often their expectations are off the chart and totally unacceptable. If you don’t have a way to explain the limits of your services there will be tension between you and your client as you attempt to quell their unrealistic expectations as they come up. Defining the difference between an asset manager and a property manager is a great way to address the issue.
Managers need a document to send their owners (or make it part of their new owner sign up package) that identifies the differences. Over the years we developed a document differentiating one from the other so the owner can get their heads around what you do and don’t do for your fees. It’s a editable document so you can add your company name, tweak it to your model and publish it.
When owners connect with property managers they bring preexisting relationships with them (third parties they have already established a relationship with where the owner is the customer). Examples might include relationships like mortgage companies, insurance carriers, pest control companies, weed control providers, HOA relationships, builder/home/appliance warranties, tax assessors, code enforcement officers, and many more. The problem is, the owner doesn’t know that you can’t take over those relationships because they are the owner’s pre-existing third party relationship.
Owners love to bully managers into taking on the management of those relationships because they are time consuming and often aggravating to deal with. They naturally think you are supposed to pick up the management of these relationships. After all, aren’t you the property manager? Isn’t that what they are paying for? They aren’t being mean, they just don’t know what a property manager does (and doesn’t do) for their fee so you need to educate them.
This document package includes:
- Language for your management agreement explaining your fees do not cover managing the owner’s third party relationships.
- A document for the owner explaining why you can’t manage those relationships to give to your owner either as a housekeeping document or as newsletter copy (for pre-existing clients).
- Training for your staff on why you, as a property manager, can’t take on the management of the relationships as part of the monthly fee.
- Power of Attorney documents for certain relationships that owners may require you to provide.
New Owner Sign Up Housekeeping Docs
(to attach to all PMA's)
We’ve used Housekeeping Documents for 20 years for two important reasons: First, to prevent Document Creep. If you attempt to put Everything in the PMA it will soon become 18 pages long, legal size paper, type size 9, scaring the owners into giving it to their attorney to review before signing. Our PMA is five pages, letter size paper, size 12 type. It’s purposely short to prevent The Fear Factor resulting in unnecessary scrutiny and make the owner more comfortable executing it without their attorney picking it apart. Most of these documents Could be pasted into the PMA, but it would create a much longer and more intimidating document.
Secondly, there are some topics you want the owner to pay special attention to. Review more purposefully. They are on topics that can get you in trouble down the road and you want to address them up front. These are topics that often address litigious issues you want to protect yourself from. Most of them were written by our attorney Monica Gilroy to protect us from litigation.
These Housekeeping Documents carry the same weight as the language in the PMA but they are less … threatening. They still require the owner’s signature, and carry the same protections, but will seem … less important to the owner. Most will introduce you to another fee or charge you might consider adopting.
You can download one document at a time or by the package according to topic.
Owners will forget to tell you about HOA requirements and restrictions regarding leasing in their managed communities. This document has been created in 1996 due to the ever increasing dangers we faced leasing in aggressive HOA-managed communities. Owners forget to tell managers about special signage requirements, special forms the tenant needs to sign, special permits needed to lease in the community and these issues can get managers in all sorts of fistfights. HOA’s are booting tires when dues are not paid, dismantling entry keys to pools and evicting tenants over continuous rule violations and managers need to protect themselves from these HOA (or owner caused) hazards. Managers are getting sued by tenants over loss of right to quiet enjoyment, wrongful dispossessory, harassment and constructive eviction when the HOA’s begins to bare down on them. Managers need a document to protect themselves when owners forget to disclose the presence of an aggressive HOA and the requirements of tenant rules in the community. (You also need to have the tenant sign a document preventing them from suing you if the HOA does them wrong. See our Tenant CYA section for a list of documents to protect yourself in these situations). This is one of the most toxic and litigious battle ground of management exposure in today’s rental market and owners need to notify (and indemnify) managers for the fallout from these issues. HOA’s have hugh power over the owner, and ultimately you, regarding what happens in their communities and they love to wield it without mercy. Don’t get caught up in the fines, assessments and debates without having this protection from the owner.
Any moisture issues the owner has had in (and around) the property, in the past five years, needs to be disclosed to the tenant before they take possession. You need to notify the tenant if the owner has had a flood, leak, mold, water damage etc. Failure to disclose this can have serious consequences and we’ve fought several battles with tenants over this disclosure. Make sure the owner signs this and have the tenant sign a copy before they move in. Tenants get irate when they discover ‘the owner had moisture/mold issues and wet basement with previous tenants’ (or while they lived there) and feel deceived when it’s not disclosed before they took possession. When tenants feel tricked or deceived they talk to lawyers. The manager usually ends up being blamed by the tenant and ends up sharing in their moving costs. Owners don’t think to tell you ‘unless you ask’ so be sure to make an issue out of this. We’ve been burned more than once over this failure to ask, and get hold harmless agreements from the owner. You can use the same owner signed original over and over again so ‘don’t use the original.’ Make copies for future tenants to execute. (Don’t miss the sister document for the tenant signs in the Tenant CYA section)
Tell your owner/client clearly about your trust account requirements and how your state law regulates the management of those funds. NEVER cover their expenses and send them an invoice or you’ll be bankrolling them forever. Make it clear they need to pre-fund maintenance, maintain a minimum account balance (owner reserve) and keep all trust accounts positive. Let them know you will be depositing all funds you receive into a trust account and report to them monthly. This disclosure takes care of all those issues and gives you a document to point back to when they resist depositing money with you before you pull the trigger on normal maintenance and turnkey projects. This is often hard to manage because owners want to stay in control. They want to pay off an invoice, after the job is done, and they verify it. After the job is done is never the time to argue about money. Set this up right and you’ll have no trouble with the administration of your owner’s trust account. Make it clear that you intend to follow the licensing and trust account laws of your state and they need to embrace and cooperate with that effort or find another manager. You are no different than a bank, brokerage house or sales company. You must follow the rules of your licensing bureau and ‘having the money in the owners trust account BEFORE you order the work’ is part of that compliance issue.
Owners love to leave personal property behind thinking it will still be there when they return. It seldom is and guess who they want to hold responsible for protecting and managing it? YOU of course. No matter what you say to them, they think you should be the guardian of their stuff, and see to it that it gets returned in good shape. Protect yourself. Take yourself off the hook in advance and make it clear ‘you’re not the manager of their personal property.’ For years we tried to accomplish this with a stip in the management agreement but it didn’t work. You need to draw their special attention to this Issue and this document accomplishes that. This document tells them to take their personal property out or don’t expect to see it ever again. They will leave stuff locked in a closet in the basement and expect you to manage it as well. They will expect you to manage the water leaks and mold on their stuff in their Owner’s Closet and blame you when the rodents find their way in. Make it clear you’ll list items they leave behind but they can’t hold you accountable when it turns up missing or broken.
Note: when the sheriff and his boys start tossing out the tenant’s stuff they seldom ask “is this yours, or the owners.” You need this document to protect yourself.
One of the huge risks managers bare today is renting a property, move the family in, then watching as it goes into foreclosure and the tenant gets evicted by the lender. We’ve had it happen more than we’d like to admit. If you don’t protect yourself you will get sued by the tenant for violation of your promise of quiet enjoyment, unlawful dispossessory or constructive eviction. When the owner signs this document they are promising the mortgage is current; if it goes into foreclosure they will notify you immediately (not that it will help any), and (here is the big one) they will pay your attorney fees if you get sued by the tenant over the foreclosure issues. Don’t make the mistake of thinking, “if the owner loses the home in a foreclosure they won’t have any money to defend you, so why go through the effort.” Wrong!!! Many landlords have great credit, own their own home, have good paying jobs and will still let their rentals go into foreclosure. Don’t think they are broke just because they let the rental go back to the bank. Having them defend you is good protection and they will sign this without question if they think they will not be foreclosed on. If they hesitate signing this you should be suspicious and do more research. Get this signed up front and protect yourself from the carnage of a foreclosure.
The IRS requires that you report to them (with a copy to your owner) at the end of every year, regarding how much rent you collected from the tenant on their behalf. Your report is due to the IRS before January 31st and the penalties against YOU for failure to report are substantial. This is the document the owner signs acknowledging this report and your requirement to send it to the IRS. Make sure they sign it or you will have a very unhappy owner when you do your reporting.
Houses built before 1978 often had lead in the paint which has been discovered to be toxic and a serious health hazard for kids under 8 and pregnant women. Federal law requires that you have the owner and tenant sign this to disclose the potential presence of (or lack of) this poison in the home. The owner signs this document to reveal to you (and the tenant) any knowledge they have regarding any lead paint in their home. Copy the original the owner signs and have every tenant sign (a copy) before you move them in. Use the same original over and over. Just have the tenant sign a copy and keep it with other important tenant documents.
Every one of these documents is the result of getting burned, blamed, fined or fired for something we either didn’t do right or didn’t disclose adequately. You can have your attorney draft each of these documents and tweak them over the next 10 years as you go through your learning curves, or, download them and be up and running instantly. It’s not a matter of IF you’ll need them, but WHEN. Protecting Yourself is a full time effort in property management.
Never manage a rental unless the owner/client adds your company name to their landlord policy as an additional insured. This is standard practice for the insurance companies and will do it at no cost to your client. When this authorization is signed by the owner you’ll send it to their insurance agent who will add you on the policy and send you a declaration page (Dec Page) evidencing your coverage. Don’t manage the property without it. Other managers understand this and so does the insurance carrier. It’s the owner that is new to this process. Don’t let the owner talk you out of it. E&O policies and General Liability policies for property managers often mandate that this is in place or your coverage is diminished (or voided). You’re not covered for property damage because you don’t own the property. You’re just covered for liability when someone is caught in a fire, falls off the deck or drowns in the tub. We’ve had all these things happen and the owner's policy covered us instead of our GL policy. Make it clear to the owner that insurers understand this and will add you without cost.
You’ll need a form for the owner to describe all the features of their property including number of bedrooms, baths, schools, community amenities, which appliances are included, utilities included and other features. Don’t let them ‘push this off on you.’ If there is an error they will blame YOU and THEY should have the information in THEIR files. Often you’ll advertise a property with a washer/dryer and the owner will take it, leaving you to buy one for the tenant (or other crazy things like this). We’ve made the mistake many times of identifying the wrong schools, listing the microwave when the owner takes them, forgetting that the security system was the tenant's expense and so on. There are lots of ways to screw this up so make the owner complete it. There is more than one way to do this. This format is sufficient for most rental houses but will need to be tweaked by you to fit your model.
Buy Package # 1 which includes items 1-9
New Owner Sign Up Housekeeping Documents (attach to all PMA’s) which includes documents 1-9. The price for buying each document individually would total $150.00, or you can purchase the complete package for $125.00 (Subscribers get another 20% off all Document Packages)
We spent thousands for the development of these documents. You can have them for pennies on the dollar.
New Owner Sign Up Ancillary Docs
(use them when appropriate)
Owners frequently want you to put a ‘non smoking stipulation’ in the lease to prevent tenants from stinking up their property. Managers have learned ‘you never to add a stipulation to a lease you have no system in place to monitor it and really can’t enforce,’ and a non-smoking stipulation is one of them. If the owner insists, you need to have them sign a disclosure that although you’ll accommodate them and add it to the lease, there is no way to enforce it. Make sure they don’t have a case against you for failure to enforce a lease that You Can’t Enforce, when the tenant violates the stipulation and leaves smoke smells throughout the property. This provides a way to give them what they want but protect yourself when it doesn’t work.
Whether you do the assessment, or have staff do it, you need a checklist (and training document) to use when visiting a prospective property to access whether or not you want to manage it. We’ve been asked to lease houses that have been vacant for years and owners think ‘they were ok when they last saw them so they should be find today. This package has two parts. A training write-up addressing the issues of ‘it’s your job to examine the property and tell the broker whether we want it or not’ as well as ‘the actual checklist for the inspection.’ Someone needs to methodically walk the property and conscientiously look for things that would keep you from managing it as a rental, and/or list the things that need to be addressed before you’ll start marketing. This is a long list of things to watch out for including things like dead trees or tree limbs hanging over the home, deep ditches around the home, open holes in the yard that can hurt children, mildew on siding, damp basements, three story decks, missing electrical plates and more. Unlike sales listings, you don’t just say ‘yes’ to every owner that calls. Protect yourself and prevent claims from tenants of negligence regarding habitability issues. This is about protecting yourself from owners who don’t care or don’t understand the issues of safety and habitability.
Many owners think you are their asset Manager and should take care of everything that has anything to do with their property. You need to make it clear that there are things you can’t (and shouldn’t) take charge of including things like their mortgage, insurance, HOA, utilities, Home Warranties and more. Make it clear up front that you are the property manager and what that doesn’t include. You will eliminate confusion and improve communication if you make this clear before you take on their property. This document begins the process of limiting what the owner expects you to do for your fees. Owner’s love to ask you to manage their HOA’s, Home Warranties, Utilities and more. If you don’t begin this push-back ‘up front’ to put a limit on these requests or demands, you’ll fight with the owner on exactly what it is you do for the fees they pay. They love to ask, “what am I paying you for anyway” meaning ‘you should manage everything that remotely touches their property.’ This document begins that ‘limiting’ discussion. (This is a shorter version of the document posted above called Asset Manager vs Property Manager)
Often you’ll find yourself in a situation where ‘one of the owners wants you to deal with the other one’ and not be involved in any decisions. Or, you’ll be receiving orders from several owners and you’ll want to ‘reduce the confusion and designate one to do all the talking.’ Managing for two or three owners is often chaotic like kids listening to two parents who don’t agree. A power of attorney is the solution and they are easy to fill out. This is one our attorney crafted years ago just for owners to identify ‘who is doing the talking’ or ‘I’m traveling a lot, take orders from my brother.’ You don’t want to follow those instructions without a document protecting yourself if the designate does something stupid and makes a bad decision for the owner. When in doubt you’ll be blamed for listening to the wrong person and take the hit for the consequences. Get it in writing. Use a POA. They are simple to complete and will cover you when things go wrong.
Note: Don’t let an attorney (or broker) tell you that filling out a POA for a property management function is the practice of law. It is not. We agent's fill out lots of standard forms and this is just one more that we need to operate our business properly. If you don’t charge for filling one out you can’t be accused of trying to be an attorney. (No one in their right mind would want to be accused of being an attorney) Get used to using these. They are a great tool with lots of uses in managing rentals both for the owner and tenant side of the business. If you use an attorney every time you need a POA in property management you’ll be paying a fortune.
Remember, this POA isn’t for transferring title, and it’s NOT being recorded. It’s for a simple property management application. We offer a blank one as well as a complete one with instructor notes. It’s easier than you think and eliminates the chaos of trying to take your instructions from two or three owners.
Don’t change your management agreement for anyone. Leave all the
language as it is, even when you want to cut a deal with an investor/
/negotiator/ bank/ large player. Use an addendum and attach it to the management agreement with whatever changes you want to make. There are strong protections in a well crafted PMA and you don’t want to tinker with the basic language. Here is the right document to make your changes to fees etc. It modifies the management agreement without carving it up. You don’t want another party crossing out important language in the original document because it’s hard to figure out what to leave, how it’s going to affect the whole agreement and erode important protections for you. Add this page, make specific changes and leave the basic document alone. This document will get the job done without diluting all the protection laid out in your property management agreement.
Hot tubs can be a nightmare for property managers. Most managers have concluded they won’t manage pools for obvious reasons, while many have decided to manage hot tubs under certain conditions. We’ve done both and have concluded we will manage hot tubs but only under certain conditions. This training document (and exhibit to the management agreement) covers these conditions including insurance coverage with a hot tub warranty or rider, releases of liabilities from the owner plus protections for the manager from bad repairmen. Manage them if you want but do it with the appropriate protections for you and your company. (see our tenant CYA document packages for the tenant hot tub document).
Often you will have a client with an ever growing list of properties to manage like builders, banks, large investors and REIT’s. We use to execute a new management agreement with each new property. That process was laborious, generated way too much paper and was certainly time consuming. Our attorney drafted a simple document that allows us to ‘add a new property to an existing management agreement’ and avoid all the duplication. This simplifies the process and saves you from over-documenting each transaction. Owners love it as it saves them from having to go through a completely new set of documents each time they give you a new property. You still need separate housekeeping documents, like lead paint and a features page, but you save time by just adding new properties to an existing document. I recommend just copying the original management agreement to the new file and attaching this addendum. You may want to add a special stipulation to the original management agreement that anticipates future additions like “this agreement will be sufficient for future properties to be added by the owner by the execution of a separate addendum.”
Every office needs to develop an internal tracking form to assure all the owner sign up documents are in the file and all the issues have been addressed. This is a checklist for the staff person to use to make sure utilities are on, keys are located, rental comps have been pulled and every owner document is signed, dated and in the file. You will tweak this to your model and your’s will evolve over time. It will remind you of seldom used documents you’ll miss without this kind of checklist. This is a great way to get started.
Managers should be slow to change their PMA as the new-year rolls around. If you’re going to add some kind of special pricing or guarantees for the upcoming year do it as an exhibit to the agreement rather than changing your basic document. Don’t change the basic agreement unless you’re really making global permanent changes. Resist changing the original document for anyone. Think globally and clarify your adjustments on a separate document. Be slow to change the basic PMA. This document will be added to your PMA as an exhibit and detail any alterations you want to make to the PMA.
Package # 2 Includes Items 10-18
New Owner Sign Up Ancillary Documents (use them when appropriate) which includes documents 10-18. The price for buying each document individually would total $120.00, or you can purchase the complete package for $100.00 (Subscribers get another 20% off all Document Packages).
We spent thousands for the development of these documents. You can have them for pennies on the dollar.
New Owner Sign Up Entity Docs
(use them when appropriate)
For asset protection purposes many owners will title their property into a trust. When you see this in the tax records, or on the title page of their deed, you need to remember ‘an individual’s signature on your management agreement is not adequate documentation.’ You can be accused of malpractice or incompetence if you don’t get the listing/management agreement right. Claims from someone that “I’m the real owner behind the scenes, take your instructions from me” isn’t good enough when the title is in an entity or trust. It’s your job to ‘get it right’ and there is no closing attorney to look over your shoulder protecting you from documentation errors or fraud. You need a Certification of Trust, with a signature, witness and notary for your file to protect yourself when things go south and you have an issue with an owner or tenant. Make sure you’re dealing with the right person, with the right authority, and sending the money to the right account before you take on the property titled in a trust. There’s a lot of money at stake and people get real mad when it goes to the wrong account. Make them fill out this certification and swear, in front of a notary, they are the person you can trust for ownership decisions for the trust.
Every builder, bank, developer, REIT (and many private owners) hold title to their property in a Corporation. It’s your job to get the paperwork right or you’ll pay a price if you skip over this because you don’t know what to do. Require the one claiming to be in charge to complete and execute a corporate resolution. People working out of a corporation know this is expected so don’t disappoint them. They had to execute one of these to open a bank account, get an EIN number and take title of the property. These documents will protect you when things go wrong and they are simple to fill out. Get the person ‘claiming ownership’ (or signing authority) to complete it, execute it, get a witness and notary for your protection and stick it in your file for safe-keeping. You’ll sleep better knowing you have crossed all the t’s and dotted all the i’s.
Often a property is held in a Limited Liability Company (LLC) for asset protection or to hide the identity of the real owner. Many investors use this strategy to mask who the owner is. Hiding title is a popular form of creating anonymity and this often confuses the property manager. Don’t become one of the tricked ones in the long list of owners wishing to remain anonymous. It’s your job as the licensed professional to get the paperwork right or you’ll pay a stiff price for failing to. You have no closing attorney to figure this out for you so you must do it yourself. Require the one claiming to be in charge to complete and execute this LLC affidavit and keep it in your records. These documents will protect you when things go wrong and they are simple to fill out. Get the person claiming ownership (or signing authority) to complete it, execute it in front of a witness and notary for your protection. You’ll sleep better knowing you have crossed all the t’s and dotted all the i’s.
Package # 3 Includes Items 19-21
New Owner Sign Up Entity Documents (use them when appropriate) which includes documents 19-21. The price for buying each document individually would total $90.00, or you can purchase the complete package for $70.00 (Subscribers get another 20% off all Document Packages).
We spent thousands for the development of these documents. You can have them for pennies on the dollar.
SUPER Package # 4 Includes Items 1-21 (All of Packages 1-3)
All the New Owner Sign Up Documents which includes documents 1-21. The price for buying each document individually would total $360.00, or you can purchase the complete package for $285.00 (Subscribers get another 20% off all Document Packages). We spent thousands for the development of these documents. You can have them for pennies on the dollar.
Property managers often collaborate with the owner on approving and denying applications and need to make sure they don’t violate the tenant’s rights of privacy, or the Fair Credit Reporting Act, when doing so. Owners often bully new managers into thinking that they, the owner, require the tenant’s information so they can make a fully informed approval or denial decision. It is quite natural for owners to think they are in control and if the manager caves in and passes the tenants information to the owner, they could find themselves in serious trouble with the law. Owners are not accustomed to hearing real estate agents tell them “no” and often push hard to get the tenant’s information and remain in control. If you want to keep your license, keep from having a claim from the Federal Trade Commission (the enforcers of the Fair Credit Reporting Act) and spend lots of money in attorney fees defending yourself, you’ll learn to tactfully refuse the owner and do the job they hired you for, which includes keeping them out of trouble with the law.
No matter what your model, there are some important rules you must follow when presenting applications to the owner. There is certain information you should never share with the owner under any conditions and some things you don’t want to miss passing over to them. Knowing the difference is the topic of this package. We’ll answer the question what’s the safe way to satisfy the owner’s appetite for information, without exposing yourself (and them) to violations of the Fair Credit Reporting Act, HUD, Americans with Disabilities Act, Servicemembers Civil Relief Act and a host of other laws that govern the handling of the applicant’s personal information.