Yes, a family member can be your property manager without legal repercussions. They do, however, require extensive knowledge about managing properties and, in most cases, a real estate licence.
This guide highlights the difference between relying on a family member as your real estate agent and hiring a professional property management company.
Family Members and Managing Properties
When it comes to managing properties, there’s often a misconception that only licensed professionals can handle the job.
However, the reality is that there are generally no legal issues preventing family members from taking on the role of property manager.
This means that if you have a trusted family member who is willing and capable of managing your rental properties, there’s no law explicitly stopping them. However, it’s important to be aware of the rules regarding property management in your area.
While there might be no legal barrier to family members becoming property managers, they may still need to get certain licences or certifications, especially if they are not listed as owners of the properties they manage.
In many places, people who manage properties for money need to have a real estate licence or other relevant qualifications.
Should You Let a Family Member Be Your Property Manager?
The suitability of having a family member as your property manager depends on your unique circumstances and preferences.
Family ties can bring a sense of trust and familiarity to the management relationship. However, it’s important to acknowledge the potential downsides of mixing family and business.
Conflicts of interest, disagreements, and misunderstandings can arise, potentially straining personal relationships.
Advantages of Having a Family Member as a Property Manager
Here’s why it can be feasible to have a family member as your manager:
Convenience and Trust
Unlike hiring a professional property manager who may be a stranger, entrusting the management of your properties to a family member can offer a sense of familiarity and comfort.
Family members are often readily accessible and can be reached easily in case of emergencies or urgent matters related to property management.
This accessibility can contribute to a smoother and more efficient communication process, as there is an established level of trust and understanding between family members.
Lower Management Fees
Another significant advantage of having a family member as your property manager is the potential for lower management fees.
In many cases, family members may be willing to manage your properties for a reduced fee or even for free. This can result in substantial cost savings over time, especially for property owners who own multiple rental units or properties with high rental incomes.
Also, family members may be more inclined to prioritise your financial interests and minimise unnecessary expenses, resulting in greater efficiency and profitability for your rental properties.
Disadvantages of Having a Family Member as a Property Manager
Here’s why you may be better off hiring a property management company:
Lack of Professionalism
One of the primary disadvantages of having a family member serve as your property manager is the potential lack of professionalism compared to hiring a licensed property management professional.
Family members may possess good intentions and a genuine desire to help, but they may lack the formal training, expertise, and industry knowledge necessary to effectively manage rental properties.
In comparison, professional property managers undergo specialised training and education to learn about landlord-tenant laws, property maintenance best practices, financial management, and other essential aspects of property management.
They also stay updated on changes in regulations and market trends to ensure compliance and optimise property performance.
Potential for Conflict
Mixing business and family dynamics can create tension, disagreements, and strained personal relationships, particularly when issues arise related to property management decisions or financial matters.
Conflicts may arise due to differing expectations, communication breakdowns, or disagreements over management strategies.
Family members may feel pressured to prioritise their personal relationships over their professional responsibilities, leading to biased decision-making or favouritism towards certain tenants or properties.
Perception of Favouritism
Having a family member as your property manager can raise concerns about the perception of favouritism among tenants and other stakeholders.
Even if your family member strives to maintain impartiality and fairness in their decision-making, there may be a perception that they are prioritising your interests or giving preferential treatment to certain tenants.
Tenants may feel that they are at a disadvantage compared to other tenants if they believe that your family member property manager is more lenient with you or your properties.
This perception of favouritism can erode trust between tenants and the property management, leading to dissatisfaction, complaints, and even legal disputes.
Legal and Regulatory Risks
Entrusting a family member with property management responsibilities can expose property owners to legal and regulatory risks.
This is especially common if the family member lacks the necessary expertise and knowledge to navigate complex legal requirements and regulations governing rental properties.
In contrast, professional property managers are typically well-versed in landlord-tenant laws, fair housing regulations, lease agreements, eviction procedures, and other legal obligations that govern property management activities.
Common legal and regulatory risks associated with having a family member as your property manager include:
- Non-compliance with Landlord-Tenant Laws: Ignorance of landlord-tenant laws can lead to violations related to lease agreements, security deposits, rent increases, eviction procedures, and maintenance obligations, resulting in legal disputes and financial penalties.
- Fair Housing Violations: Discrimination in tenant selection or treatment based on protected characteristics such as race, religion, gender, or disability can result in fair housing complaints and legal actions against the property owner.
- Improper Documentation and Record-Keeping: Inadequate documentation of rental agreements, tenant communications, property maintenance, and financial transactions can make it challenging to defend against legal claims or audits by regulatory authorities.
- Negligent Property Maintenance: Failure to address maintenance issues promptly or maintain safe and habitable living conditions can result in tenant injuries, property damage, and legal liabilities for the property owner.
The Verdict
Family members can be property managers, but the feasibility of that remains situational. If your family member possesses the required skills, knowledge, and training in managing real estate, and if there’s no relationship stress between the two of you, it’ll work.
However, in most cases, hiring a professional property management company can be the better option. The process is a lot more streamlined, and they stay updated with all legal changes.