When working with clients in California, there’s a significant difference between performing a lease-up service and engaging in full property management duties. While leasing a property ends with finding and placing a tenant, property management involves ongoing responsibilities. It’s crucial for agents to know these distinctions, as failing to stay within the scope of leasing services can lead to unintended property management tasks. Here’s what every agent should know:
Lease-Up Services: Where Duties End
In California, lease-up services typically stop once a tenant is placed in the property. The agent’s responsibility might include:
Marketing the rental property
Showing the property to prospective tenants
Screening and qualifying applicants
Preparing and executing the lease agreement
Collecting the first month’s rent and security deposit
Once these tasks are completed and the tenant moves in, the lease-up service ends, and ongoing duties like handling maintenance requests or rent collection are left to the property owner or a dedicated property manager.
Property Management: Ongoing Responsibilities
Property management, on the other hand, extends well beyond placing a tenant. Full property management includes:
Collecting monthly rent and deposits
Handling maintenance requests and repairs
Addressing tenant issues and conflicts
Conducting property inspections
Renewing leases or managing move-outs
Keeping up with legal compliance, including fair housing laws
Engaging in any of these activities after placing a tenant could unintentionally place an agent in the realm of property management—which comes with additional legal and liability risks.
Common Mistakes: Agents Accidentally Doing Property Management
Many real estate agents might accidentally cross the line into property management without realizing it. For example, answering tenant calls about repairs or rent payments could be seen as taking on a property management role, even if that wasn’t the initial intention. This can lead to legal consequences if the agent’s Errors & Omissions (E&O) insurance doesn’t cover property management activities.
Check Your E&O Insurance and Brokerage Policies
Not all E&O insurance policies cover property management. Before engaging in any activities beyond leasing, agents must ensure that:
Their E&O policy explicitly covers property management tasks.
They understand their brokerage’s policy regarding property management services. Some brokerages may prohibit their agents from performing any property management duties or may require additional insurance or licensing to do so.
Failing to comply with these requirements can expose agents and their brokerages to lawsuits, fines, and violations of California's real estate regulations.
Key Takeaways for Agents
Leasing is a one-time service that ends after placing the tenant, while property management is an ongoing commitment with more complex duties.
Many agents may unintentionally cross into property management, especially if they continue interacting with the tenant after the lease-up process.
Ensure your E&O insurance covers property management activities, and check if your brokerage allows this practice.
If property management is not part of your scope, it’s safer to refer clients to a dedicated property management company.
Understanding these distinctions is crucial for protecting yourself, your license, and your brokerage from unintended legal risks.
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