My last two articles for Professional Management Matters covered “What’s In Your Foundation” and “ Communication in Your Foundation.” 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. It can even be appropriate to eliminate a policy and procedures manual – yes, you are reading this correctly. At the end of this article, find a link to a Property Manager’s point of view.
- 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.
While not every state mandates a policy and procedures manual, many are moving toward this requirement. Check with your state agency to be sure you are in compliance. In addition, if you are going to try for the prestigious NARPM® CRMC (Certified Residential Management Company) designation for your company, creating a manual IS a requirement.
Now, earlier I said there is a reason to eliminate a policy and procedures manual. 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, much like an unearthed land mine lying in wait to explode. 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.
On the LandlordSource blog, you will find an article by Nathan Garrett, Vice President, and former managing broker of Home Finders Leasing and Management, Inc. on how their Policy and Procedures Manual has benefited his company. I think you will find his perspective interesting and well written.
Jean Storms, MPM® is the founder/author of LandlordSource and has been a NARPM® member since January 1993.
Disclaimer: LandlordSource does not represent the article content in this website as legal advice. It is shared information only and up to the reader to use this information responsibly, seeking legal advice as necessary to their business.