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?
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.
“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.
Download (PDF, 417KB)
The Property Management Lifecycle by Crown Investor Institute LLC