Legal lease signed by manager? Owner wants to remain anonymous

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Legal lease signed by manager? Owner wants to remain anonymous

Garrett M.
Rental Property Investor · Philadelphia, PA · Member since 2015 · 180 posts · 66 votes

Hello BP friends! I need to write a legally binding lease for a single-family property I'm going to be managing for a friend who doesn't want to be named on the lease. I manage my own small portfolio of rentals and I offered a friend to manage their property. Normally my leases are very straightforward, so this is new territory for me. 

To protect myself from liability and also to ensure the lease is legally binding, I need advice on how to write out the lease. I've researched some and read that the owner can grant me the authority to act on their behalf in matters relating to the management of the property. But I can not find guidance on what needs to be disclosed on the lease itself.  Is there a specific lease format for this situation? 

I appreciate any guidance you have! I'm in Philadelphia, Pennsylvania if that has any bearing on the discussion. Thanks.

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Kevin MoyerBusiness Member
Property Manager · Philadelphia, PA · Member since 2019 · 271 posts · 303 votes
6y

It doesn't matter unfortunately. The act doesn't mention compensation, just that property management is a regulated activity. See link to a thread from the renowned @Chris K. with more details here;

https://www.biggerpockets.com/forums/12/topics/435226-pa---laws-surrounding-property-management

Also you should be aware that property management can be more involved than your friend probably realizes, and you are taking on a lot of risk and potential liability by managing property for your friend even as a favor. If someone slips and falls outside the property, or a pipe bursts and damages a tenant's expensive furniture, or a tenant's dog bites a mailman, or a tenant makes a claim for 2x his security deposit for alleged mishandling of funds- you could very well find your name listed at the top of a lawsuit. And your personal insurance might not be willing to step up if they decide you were engaging in a "business activity" without proper coverage. 

Maybe your chances of getting caught by the Real Estate Commission are slim to none, but management does come with some risk. 

If I were going to help a friend for free, I would tell him/her to execute the lease in his/her name and accept all rents/funds. You would certainly be allowed to help with handyman tasks and general upkeep without a license, but be careful about your personal exposure to liability!

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  • Kevin MoyerBusiness Member
    Property Manager · Philadelphia, PA · Member since 2019 · 271 posts · 303 votes
    6y

    Garrett are you licensed by the real estate commission? Property management is a real estate activity that requires a license in Pennsylvania. 

    If so, you can enter into a lease with the tenant with the owner’s written authorization, but you can’t both avoid liability. Whoever signs the lease should be prepared to be sued in the event of a mishandled security deposit, claim of discrimination, electrical fire, etc. 

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  • Kevin MoyerBusiness Member
    Property Manager · Philadelphia, PA · Member since 2019 · 271 posts · 303 votes
    6y

    I should clarify that you are allowed to be a property manager for real estate in your name without a license, but when you act as an agent for another owner you need to be licensed. 

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  • Carl FischerPro Member
    Rental Property Investor · Ambler, PA · Member since 2015 · 2k+ posts · 1k+ votes
    6y

    @Garrett M.

    The owner is on the deed which is public knowledge. Usually a contract between the owner and the property management company is signed. The property management company uses its lease etc. per the terms of the contract. 

    [email protected]215-283-2868
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  • Garrett M.
    OP
    Rental Property Investor · Philadelphia, PA · Member since 2015 · 180 posts · 66 votes
    6y

    @Kevin M.

    Thank you I wasn’t aware that one should be licensed. Does it matter that I’m doing it in a free, voluntary capacity?

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  • Kevin MoyerBusiness Member
    Property Manager · Philadelphia, PA · Member since 2019 · 271 posts · 303 votes
    6y

    It doesn't matter unfortunately. The act doesn't mention compensation, just that property management is a regulated activity. See link to a thread from the renowned @Chris K. with more details here;

    https://www.biggerpockets.com/forums/12/topics/435226-pa---laws-surrounding-property-management

    Also you should be aware that property management can be more involved than your friend probably realizes, and you are taking on a lot of risk and potential liability by managing property for your friend even as a favor. If someone slips and falls outside the property, or a pipe bursts and damages a tenant's expensive furniture, or a tenant's dog bites a mailman, or a tenant makes a claim for 2x his security deposit for alleged mishandling of funds- you could very well find your name listed at the top of a lawsuit. And your personal insurance might not be willing to step up if they decide you were engaging in a "business activity" without proper coverage. 

    Maybe your chances of getting caught by the Real Estate Commission are slim to none, but management does come with some risk. 

    If I were going to help a friend for free, I would tell him/her to execute the lease in his/her name and accept all rents/funds. You would certainly be allowed to help with handyman tasks and general upkeep without a license, but be careful about your personal exposure to liability!

    Otter Property Management4.8633 Reviews
    WebsiteView Page
    6Reply
  • Michael Noto
    Real Estate Agent · Southington, CT · Member since 2008 · 5k+ posts · 3k+ votes
    6y

    @Garrett M. Tell him to chill out with the anonymous stuff. It is public record that he purchased the property. Your buddy is way overthinking this. 

    3Reply
  • Chris K.
    Attorney · Nashville, TN · Member since 2015 · 1k+ posts · 1k+ votes
    6y

    @Garrett M.

    The fact that you are doing it for free doesn't really matter. The idea behind these laws is to protect both the landlord and the tenants from property managers that do not know what they are doing. To take a somewhat extreme example, imagine someone performing free surgery without proper training. Maybe the person's heart is in the right place. But we wouldn't feel comfortable having that person perform surgery without medical training. 

    Now the Ron Swanson in me says these laws can get rather extreme. But until we have a libertarian coup in Pennsylvania, it is what it is. 

    You could try to see if you guys can do something to rely on the owner or employee exception. But that has its own set of headaches as well. 

    Disclaimer: While I’m an attorney licensed to practice in PA, I’m not your attorney. What I wrote above does not create an attorney/client relationship between us. I wrote the above for informational purposes. Do not rely on it for legal advice. Always consult with your attorney before you rely on the above information.

    2Reply
  • David Avetisyan
    Rental Property Investor · Glendale, CA · Member since 2013 · 685 posts · 334 votes
    6y

    Eventually when the property address is googled, the owners name will appear. 

    You will need to be a licensed RE. Owner will need to establish an Corp/LLC or you'll need a DBA.

    To your success! 
     

    0Reply
  • Joe SplitrockPro Member
    Moderator
    Rental Property Investor · Sioux Falls, SD · Member since 2015 · 9k+ posts · 18k+ votes
    6y

    @Garrett M. you cannot legally manage their property without proper licensing. It doesn't matter what method of compensation you are receiving, even if it is nothing. And from a practical standpoint, taking on risk with receiving nothing is a bad deal for you. If you were a licensed property manager, you need liability insurance at a minimum. Even at that point, you are an agent representing the owner. 

    I think the bigger concern here is that you are intending to write your own agreement. Apparently in addition to being an unlicensed property manager, you are an unlicensed attorney, which can be more dangerous. My advice is seek legal council for the best way to structure legal entities and the lease to maximize owner protection. 

    I think you and your friend are trying to save a few dollars, but in business you will learn those short cuts will cost you way more in the long run. If you are not getting paid, I would step away from this quickly. There is no upside for you here. Even if you are the signed party, that just transfers liability to you.

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  • Garrett M.
    OP
    Rental Property Investor · Philadelphia, PA · Member since 2015 · 180 posts · 66 votes
    6y

    @Kevin M.

    Thank you!! Great info and excellent link to @Chris K. Previous discussion of the subject. Super appreciate your help with this.

    1Reply
  • Garrett M.
    OP
    Rental Property Investor · Philadelphia, PA · Member since 2015 · 180 posts · 66 votes
    6y

    @Carl Fischer Thank you for your advice

    0Reply
  • Garrett M.
    OP
    Rental Property Investor · Philadelphia, PA · Member since 2015 · 180 posts · 66 votes
    6y

    @Joe Splitrock

    Thanks. You raise some good points. The lease I was intending to use was the state lease developed by Bigger Pockets. I am happy to have access to the wisdom of this great group of people. Thanks again.

    1Reply
  • Joe SplitrockPro Member
    Moderator
    Rental Property Investor · Sioux Falls, SD · Member since 2015 · 9k+ posts · 18k+ votes
    6y
    Originally posted by @Garrett M.:

    @Joe Splitrock

    Thanks. You raise some good points. The lease I was intending to use was the state lease developed by Bigger Pockets. I am happy to have access to the wisdom of this great group of people. Thanks again.

    The lease in that case should be fine, you just need to make sure the lease parties are properly called out. A lease is with the owner or an agent of the owner. Either way, I think it is hard for them to be anonymous. Even LLC are generally a matter of public record who owns them. A trust might be one way to hide identity, but your friend should really talk to their attorney about this.

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