Property Management Overview

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Questions and Answers

Match the type of property ownership with its characteristic:

Sole proprietorship = Most common form of business entity Business syndicate = Group of investors pooling capital Corporation = Ownership through stock shares Limited liability company (LLC) = Protects personal assets from business debts

Match the type of business with its feature:

Sole proprietorship = Unlimited liability Business syndicate = Common types include LLC and trusts Corporation = Dividends distributed to shareholders Limited partnership = Some partners have limited liability

Match the term with its definition:

Unlimited liability = Owner's personal liability for business debts Syndicator = Organizer of an investment syndicate Articles of incorporation = Document establishing a corporation Closely-held corporation = Company with few shareholders

Match the advantage or disadvantage with the property ownership type:

Sole proprietorship = Complete control over operations Business syndicate = Access to more expensive properties Corporation = Limited control and privacy LLC = Personal assets protected Signup and view all the answers

Match the following business types with their liability characteristics:

Sole proprietorship = Unlimited liability General partnership = Each partner responsible for debts Limited liability company (LLC) = Limited liability for members Corporation = Shareholder liability limited to investment Signup and view all the answers

Match the following terms with their definitions:

Special agent = An agent who has limited authority to do a specific thing or conduct a specific transaction Fiduciary = A person who stands in a special position of trust and confidence in relation to someone else Independent contractor = A person hired to perform a task and use his own judgment in completing it Trustee = A person who holds legal title to property on behalf of beneficiaries Signup and view all the answers

Match the following fiduciary duties with their descriptions:

Care and skill = Performing duties with competence and attention Loyalty = Putting the interests of the principal above one’s own Obedience = Following the lawful instructions of the principal Disclosure of material facts = Revealing important information that could affect the principal's decision Signup and view all the answers

Match the following terms with their corresponding roles:

Employee = A person hired to perform tasks under close supervision Fee manager = A property manager who usually works as an independent contractor Principal = The person who delegates authority to the agent Agent = A person authorized to act on behalf of the principal Signup and view all the answers

Match the following responsibilities with their applicable roles:

Property manager = To manage the financial and physical aspects of a client's property Trustee = To hold and manage property on behalf of beneficiaries Employer = To supervise and control the work of an employee Agent = To act within the scope of their authority as delegated by the principal Signup and view all the answers

Match the following types of agents with their characteristics:

General agent = Has broad authority to act on behalf of the principal Special agent = Has limited authority for specific tasks or transactions Universal agent = Has the authority to perform any acts on behalf of the principal Specific agent = Authorized only for particular tasks outlined by the principal Signup and view all the answers

Study Notes

Learning Objectives

Students will be able to contrast ownership, liability, and management characteristics of business entities employing a property manager
Students will be able to explain the agency relationship between a property manager and client, and list fiduciary duties
Students will be able to distinguish between independent contractors and employees
Students will be able to explain the steps involved in developing a management proposal
Students will be able to describe property manager's responsibilities and property owner's obligations in a property management agreement
Students will be able to discuss manager's obligations in establishing and maintaining a system for client records and reports
Students will be able to analyze what happens when a management agreement is terminated naturally or prematurely by a party

Suggested Lesson Plan

Students should review Exercise 3.1 and the previous chapter, "The Economics of Real Estate Investment"
Students should receive an overview of Chapter 3, "Working with Management Clients," and a review of chapter learning objectives

Types of Property Owners

Sole Proprietorship: Owned by one individual, easy to form. Advantages: low administrative and legal costs, complete control. Disadvantages: limited resources, unlimited liability.
General Partnerships: Two or more owners. Advantages: Relatively easy to set up. Disadvantages: unlimited liability
Corporations: An entity separate from its owners. Advantages: limited liability. Disadvantages: double taxation, more complex to set up.
Limited Partnerships: Two or more partners. General partners actively participate, limited partners have limited liabilities.
Limited Liability Companies (LLCs): Combines advantages of corporations and general partnerships, with limited liability and relative ease of formation.
Trusts: Managed by trustees, for the benefit of beneficiaries. One or more owners.
Joint Ventures: Temporary business arrangements for a specific project. May be similar to partnerships.

The Legal Relationship Between Manager and Client

Agency relationship: Exists when one person authorizes another to represent him in dealings.
Employment status: The way the property manager is employed (e.g., contractor, employee).
Trustee: Holds legal title to property, responsible for management on behalf of beneficiaries.

Key Concepts

Fiduciary Duty: Duty of utmost good faith, loyalty, and confidentiality toward the principal.
Principal: The party who authorizes the agent.
Agent: The party who acts on behalf of the principal.
Third Party; Not involved in agency relationship but may deal with one of the parties

Working with a New Client

Developing a Management Proposal
Identifying Client Goals
Evaluating the Property
Preparing a Management Proposal

Management Agreement

Contract between property owner and manager. Defines the working relationship. Contains terms and conditions.
Includes manager compensation, responsibilities, and owner obligations
Includes a definite termination date
Discusses what occurs if management agreement expires or terminates.

Communicating with the Client

Reports; Required by agreement, frequency depends on client's involvement.
Keeping in touch; via email, phone, or in-person meetings.
Consultation and Decision Making; involving client on non-routine decisions

Terminating a Manager-Client Relationship

Handover process
Returning keys.
Transfer of records and financial accounts.
Addressing potential damages or breaches.
Contractual agreements defining expiration or termination.

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Description

This quiz evaluates your understanding of key concepts in property management, including the roles of property managers, the agency relationship with clients, and fiduciary duties. You will also explore the differences between independent contractors and employees, property management agreements, and the implications of terminating management agreements.