Unlicensed Property Manager Sign Lease As Agent For My LLC?

Question

Hello.  I just recently discovered the biggerpockets.com podcast and instantly became hooked.

My wife and I have a LLC in Louisiana, but we live in San Antonio, Texas.  We just purchased 2 four-plexes in Louisiana and my father-in-law is managing the properties for us.  Is there a way he can legally sign lease agreements as an agent for our LLC without being licensed and without adding him to the LLC?  I looked into doing a power of attorney, but I feel like that grants him more access than I really want him to have.  I only want him to sign lease agreements and possibly appear for us in an eviction hearing.

Robert Leonard · Answer

LA law requires a real estate license to manage property that's not your own in the state of LA. The topic of this thread suggests to me that you already know that.  No matter how many years anybody gets away without it, when something more serious than an eviction comes up, I wouldn't want to be on the wrong side of the law.

If you hire a licensed property manager, it will cost you in the ball park of 8-10% of gross rents.  The licensed PM can legally sign leases and appear in court on your behalf.  You won't save a few bucks by letting your father-in-law "manage" your properties, but you wont have to add him to your LLC or anything else you are uncomfortable with either.

I managed my own properties a long time before I became licensed and still do, but they were never 9-10 hours away from me.  There are benefits to having a professional.  How much does your FIL know about fair housing laws, lead based paint disclosures, sex offender notification, the Americans with Disabilities Act, landlord - tenant law in the state of LA or other local ordinances?  Very often, people think, "this is private property, I can do what I want with my property."  I think there is substantial justification for professional management in your situation.  Your two properties are eight units and that adds up to enough interactions with the renting public to warrant some professional management as a matter of risk management IMO.

Bill Gulley · Answer

Okay, as Curtis mentioned, there are exceptions for "on-site" property managers who are employed by an owner and who do not conduct those services he mentioned for any other property owner.

Your father-in-law is not an "on-site" manager.

Unlocking a door is "showing" the property, that requires a license.

If your LLC owns the property and hires a manager, they need to be licensed, it's not their property.

A POA is not a good idea as a course of conducting business, if you were in the hospital that would be different if you cannot perform, otherwise you're simply trying to circumvent licensing laws.

The best way is to admit your father-in-law to the LLC! His membership can be restricted as to voting rights, powers granted, liability and other matters such as inheritance. Think in terms of common and prefered stock, the Operating Agreement controls the relationship of members and then he can act as a member.

As to evictions, or other legal matters, that's up to the judge to allow a non-attorney member to represent an LLC,

Your concerns of having another member are probably not warranted, but you should consult a LA. attorney.

Hey, in real estate be keen in '16! Good luck :)

Larry H. · Answer

Maybe I am using the term "manager" wrong Robert.  My wife and I deal with all of the issues via phone, text, and email, getting it rented, and anything else that arises.  All he does is show the property, collect rent, and repairs.  Our tenants aren't exactly credit worthy so our rent is 100% cash, and that is not something I want to entrust to a management company.  He's also very good with people and had developed a good rapport with our tenants.  The properties require a lot of attention and not something I would really want to trust to a company where I am just another client.  My father-in-law does a tremendous amount work around the properties and goes above and beyond what I would expect from any management company.  We don't have him do it to save money.  In fact, when we get established a little better I told my wife I want to pay him more because he does such a good job.

Will, I like that idea.  I will look into that option.  For this particular instance that I brought up the question for, it won't be an option because it has to do with state paperwork for the housing authority.

Account Closed · Answer

My property manager is not licensed in the state of Louisiana. They manage over 400 units and have been for about 15 years. I haven't had any issues with them doing evictions for me.

Larry H. · Answer

Leases are not an issue.  A new tenant has state paperwork that needs to be filled out and signed and we were trying to get everything turned in to the state today (Monday).  After talking to the office we found out it wasn't that urgent and we can do everything by email.

Matthew Kreitzer · Answer

You want a non-lawyer to appear on your behalf who is not a CEO of the corporation at court room proceedings? No. I've been very vocal about UPL rules on this forum before, but no. Refer to a local attorney soon.

Dawn Brenengen · Answer

@Larry H. If you simply need him to sign leases, can't you just do that yourself electronically?  I use Docusign, and it's been forever since I've printed and signed anything.

You can always hire an attorney to appear for you in court if there is an eviction.  I guess going this route depends on how regularly this occurs.

Robert Leonard · Answer

Whatever you decide @Larry H. just be certain that you are on the right side of the law by getting legal counsel from an attorney in or near the jurisdiction your properties are in.  There are jurisdictions (parish to parish here) that have very different attitudes toward landlord vs tenant situations.

There are reasons why LA is where it is on this list:

http://www.instituteforlegalreform.com/states

Your tenants are immersed in advertising (billboard, TV, radio, etc.) to  pursue legal action in the event of any accident, injury or incident and with "hungry" attorneys everywhere you turn, you will have to defend yourself sooner or later.

It sounds like your father-in-law is great for the role you want him to play.  It's just that the laws cover some things that seem like an innocent practice that are covered by specific laws.  For example,  "NO PET" policies have different rules under ADA and the Fair Housing laws that mean you have to allow the animal because it's not considered a pet, but a necessity.  Especially when you are participating in housing programs that can make you subject to close scrutiny for specific Fair Housing and ADA requirements.  Again, its a matter of how the local administrators enforce the rules.  It would be nice if they were consistent with how it works, but its implemented differently from place to place.

The bottom line is get legal advice from an attorney you would consider hiring if you were being sued for something that happened at your property.  You might need them again in the future and it never hurts to have the relationship established before you need them.

Roy N. · Answer

@Larry H.

If you make your beau-père a shareholder in the company which owns the property (could be a single, non-voting class, share) and/or make him an officer of the company (Director of Building Maintenance), would Louisiana still require he be licensed to manage the properties?

Unlicensed Property Manager Sign Lease As Agent For My LLC?

Most Popular Reply