The On-Site Manager & Property Owner Relationship
The topic of the on-site manager and landlord relationship has long been discussed in varies articles and in newsletters published by the Apartment Owners Association and the Apartment Association of Greater Los Angeles. Many owners, however, still put themselves at risk by not properly following the law. The laws states (1) property owners must have a “responsible party” for properties with 16+ units - most owners abide by this. (2) the on-site manager must be paid minimum wage for their services - this part of the law is not followed in many cases.
Many owners are still giving managers free units in exchange for their services. Here is what we recommend.
On-Site Manager Agreement: All owners must have a written agreement with their on-site manager that outlines the number of days worked per day/week, the value of the apartment, specified compensation (needs to be equal or greater than the minimum wage) and a list of their job duties. An on-site manager agreement should in place regardless of the number of units at the building. Boiler plate management agreements are readily available on the AOA or AAGLA websites.
Payments to On-Site Manager: California law states that a landlord may reduce the monthly wages owed to the on-site manager by either two-thirds the ordinary rent value of the unit or $564.81 for individuals and $835.49 for couples, whichever is less.
Let's say, for example, the rent established in the on-site manager agreement is $1500 per month. Two-thirds of the rent would be $1000. If an individual on-site manager works 60 hours in a month and the minimum wage is $10 per hour, the landlord would owe the on-site manager: $600 (60 x $10) - $564.81 = $35.19.
California Labor Code states that a landlord may charge up to two-thirds of the ordinary rental value of the unit without regards to the credit of $564.82 (individuals) and $835.49 (couples), provided that the landlord and on-site manager exchange separate checks. The landlord must pay the on-site manager the current minimum wage of $10 per hour (increases to $10.50 in July 2017) for hours worked, and the on-site manager must pay the landlord rent. With this agreement, the on-site manager is considered an employee, so the landlord must pay/deduct payroll taxes.
Workers’ Compensation: Landlords need to maintain a workers’ compensation policy in case the on-site manager or employees accidentally injure themselves at the property.
Recording Managers Hours: Landlords must keep accurate time sheets and records of the hours worked by the on-site manager. The on-site manager can do it the old fashion way (pen and paper) or through online programs like Clockspot. Clockspot is a virtual time clock that makes time sheets and payroll simple. On-site managers can download the App and clock in and out. Meanwhile, landlords can remotely see who is clocked in and monitor their employees’ tasks. On-site manager hours need to be clearly posted outside their unit/office.
What if the on-site manager is spending hours, sleeping, cooking, eating and watching TV while waiting for the repairman? Should he/she be compensated for their time?
The Court decided that an owner or management company is not required to compensate the on-site manager, even though the manager may be “waiting” for a repairman or “waiting” for a prospective tenant to arrive. The time the on-site manager spends with the repairman or showing a prospective tenant a unit needs to be compensated.
Recommendation: FOLLOW THE LAW.
Iconic Investments
16530 Ventura Blvd
Suite #409
Encino, CA 91436
T: 747-444-3303
E: info@iconicinv.com
W: www.iconicinv.com
Iconic Investments is a Los Angeles-based boutique commercial real estate brokerage firm focusing on multi-family properties of 15 to 100 units throughout Los Angeles in all different sub-markets. Iconic represents multi-family property owners in dispositions, acquisitions, and 1031 exchanges.