What is a Policy and Procedures Manual?
A property management policy and procedures manual is a living document that defines company philosophy, mission, office organization and operations. The manual also dives into the broad scope of professionally managing property and working with investors.
Why do I need a Policy and Procedures Manual?
Not surprisingly, a crucial building block in a real estate/property management foundation is a well-written and effective policy and procedures manual, the focus of this article.
If you don’t think you have the time or money to create a policy manual, reconsider this outlook. There are at least three reasons you should make the effort and find the resources to implement this important document into your real estate/property management business.
- There are fires continually erupting in your business causing delays and chaos for personnel. This is generally the result of poorly defined policies and procedures for owners, tenants, vendors, personnel, and applicants, as well as poor company organization. Without a manual, personnel lack an overview of the business, sound training, and a resource for answers. When chaos reigns, retaining personnel and clients becomes a problem and ultimately, this affects your bottom line.
- There is little or no documentation to refute or defend legal issues. Chances are that if you have fires, you are defending Fair Housing complaints or other legal actions. This is a huge time buster. Without policies and procedures in place, a property management business is extremely vulnerable and at high risk. Think of the weak links the “legal beagles” can find in your business when there is a lack of documentation, policies, procedures, and systems. An effective policy and procedures manual can provide a solid risk management tool and reduce your financial liability.
- There could be a violation of state law. Several states now require a policies and procedures manual. Arizona and Texas are two good examples of mandated policy and procedures manuals. Surprisingly, California (usually the leader in legislation) does not have this requirement but when there is a state audit, it is generally something every auditor generally wants to review. Therefore, it may not be required by law but a policy manual is a respected document referenced by many legal entities.
When to Update Your Policies and Procedures
You may recall that the goal was to provide an effective and well-written policy and procedures manual. If you have any document lying around the office or stored on a computer that is never used and is completely out of date, you should take action immediately.
If personnel do happen to read an outdated manual, it will only cause confusion and add to the chaos. If reviewed by a legal entity, an obsolete document becomes a huge LIABILITY! You should eliminate this danger! Either update it or replace it with new effective policy and procedures manual that will help personnel and reduce risk. Once you have a reliable manual in place, use it, and keep it current by reviewing and updating it periodically.
Risk Management and your Policy and Procedure Manual
Avoiding lawsuits often depends on having systems in place. First, you need a policy and procedure manual. When you go to get your Errors & Omissions (E&O) insurance, they’ll ask on the form if you have a manual. If you do, you typically get discounted rates on your E&O insurance. That’s because having this procedure manual in place demonstrates to insurance companies that you know what you’re doing.
They see you as less of a risk and you are more prepared to deal with risks when they are presented to you.
Policies and Procedures and Fair Housing
You also want a policies and procedures manual in place because it will protect you from potential fair housing lawsuits. If you have written policies that demonstrate how you market, screen, and lease to applicants and tenants, you’ll have documentation that shows discrimination would be impossible in your company. You can also use your manual to ensure you’re working with licensed and insured vendors. It helps to keep your employees adequately trained and aware of how things must be done.
Planning an Exit Strategy with Policies and Procedures
A policies and procedures manual can help you at every step of your property management business: hiring and training employees, working with owners and eventually, planning your exit strategy. If you’re a sole proprietor, the first thing you need to do is to begin getting things that are in your head out of your head and onto paper. That includes all your policies and procedures. Put together your procedures checklist and all of the policies that have helped you run your company.
Start putting those policies and procedures in place so you can begin delegating your responsibilities down to employees. Or, if you need to hire someone, you can use those same tools to train the new team members so you don’t have that fear of losing control.
We believe that the time and money spent in creating a property management policy and procedures manual is an excellent investment, especially in the areas of scalability, customer service, and risk mitigation.
There are some excellent resources available for creating your company’s policy and procedures manual such as the manual available here at PM Made Easy. We found the PM Made Easy manual to be very thorough. It contains excellent sample policies for the majority of topics that a property management company will need to cover.
It is also very easy to edit, allowing for easy changes and the addition of new policies and local and state laws. By following the simple instructions that come with the manual, revisions can easily be made and the Table of Contents can easily be kept up to date. We now have a living document that enhances our corporate culture and creates synergy within our organization!
Kathleen Richards, is the owner of PM Made Easy and The Property Management Coach. With her 13 years as a broker/owner of a property management company she speaks from experience. Kathleen authored, Property Management A-Z and teaches regularly at community colleges and conferences on property management topics. She is active in her field and holds professional designations as Master Property Manager (MPM®) and Residential Management Professional (RMP®) and her company held the coveted, Certified Residential Management Company (CRMC®) designation from NARPM®. She is currently a National Instructor for NARPM® and is honored to be sharing best practices with other NARPM® professionals. Kathleen has served at the local and state level on the boards for NARPM® (National Association of Residential Property Managers)