Frequently Asked Questions (FAQs) About Property Management
and Property Managers
The Institute of Real Estate Management,
How would you define professional property management?
A: Simply put, professional real estate management is the
administrative operation and maintenance of properties to
meet the objectives of their owners. It also involves planning
for the future of the properties by proposing physical and
fiscal programs that will enhance the value of the real
What are the primary responsibilities of property managers?
A: Their primary responsibilities are: (1) management of
the physical site, (2) management of on-site and off-site
personnel, (3) management of funds and accounts, and (4)
management of leasing activities and tenant services.
What sparked the development of property management as a
function within the real estate industry?
A: The function resulted from a number of factors, but a
major trigger occurred in the 1930s after lenders foreclosed
on thousands of mortgages and discovered that property management
required specialized skills.
Is property management growing as a profession?
A: Yes, it is growing steadily because of these three concurrent
trends: (1) simultaneous growth of the population and its
requirements for space has increased the total number of
all types of buildings, (2) a larger percentage of real
estate is considered investment property and (3) there is
increasingly wide acceptance of the fact that real estate
management requires special training and education.
Generally speaking, what is the primary goal that property
owners and therefore their property managers -- strive
A: That goal is usually for the property to reach its highest
and best use, meaning that it generates the highest Net
Operating Income (NOI) possible and is being used in the
best possible way based on its location, size and design.
How do property managers determine the direction they will
take to achieve their owners and their mutual goals?
A: They typically start by developing a management plan
an analysis of the current physical, fiscal, competitive
and operational conditions of a property expressed in relation
to the owners goals. If these conditions are not compatible
with attaining those goals, real estate managers generally
use the management plan to recommend and support physical,
financial or operational changes. Management plans also
may be developed to evaluate the feasibility or practicality
of plans owners have for their property.
What are the typical components of a management plan?
A: Because of the unique aspects of each property, each
real estate managers management style, and each owners
expectations, there is no definitive form for a management
plan. But the typical components of a plan, in the following
of alternatives, e.g. operational changes, structural
changes and changes in use
Can you describe the management agreement that formalizes
the relationship between property managers and property
A: A management agreement is a binding contract that establishes
the managers legal authority over the operation of
a given property. The manager usually is an agent for the
owner, serving as the owners fiduciary or trustee
of the owners funds and assets associated with the
property. The agreement establishes the relationship between
the owner and the manager for a fixed period, defines the
managers authority and compensation for services provided,
outlines procedures, specifies limits of the managers
authority and actions, and states financial and other obligations
of the property owner.
What are the ramifications of the property managers
role as an agent of -- and therefore fiduciary responsibility
to -- the property owner.
A: In the role of agent, the real estate manager must exercise
a high standard of care in managing both money and property
for the owner (fiduciary capacity). Being a fiduciary creates
certain legal obligations. The manager must be loyal to
the interests of the client and not engage in activities
contrary to that loyalty. This means scrupulous attention
to the handling of the owners funds and not accepting
any fee, commission, discount, gift, or other benefit that
has not been disclosed to and approved by the owner-client.
With ethical practices clearly an important part of professionalism
in property management, how can owners be reasonably confident
that their property managers will hold themselves to a high
A: Owners should be aware that real estate managers who
have earned any one of the three professional credentials
conferred by the Institute of Real Estate Management (IREM®)
the Certified Property Manager® (CPM®) designation,
the Accredited Residential Manager® (ARM®) accreditation
and the Accredited Management Organization® (AMO®)
certification must abide by a Code of Professional
Ethics that is strictly enforced by IREM®. In addition
to the fiduciary responsibility called for as the owners
agent, the CPM® Code of Ethics requires managers to
hold proprietary information in confidence, to maintain
accurate financial and business records for the managed
property, and to protect the owners funds. The Code
also outlines duties to ones employer, to former clients
and employers, and to tenants and others; sets forth requirements
for contracting management and managing the clients
property; and addresses relations with other members of
the profession and compliance with laws and regulations.
When owners or real estate management companies hire property
managers, what types of questions should they ask?
A: The following questions would be appropriate:
- How long
have you been a manager?
- What level
of experience do you have in this particular market and
with this type of property?
- What professional
designations do you hold and from whom?
- Can you provide
examples of the asset improvement you have achieved with
some of the properties youve managed?
- What are
your educational credentials?
- Can you provide
some professional references?