Resident Managers and How Much to Charge for Rent

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Hello All:

I own several multi-family rental properties and have always paid the Resident Manager a salary, including a free apartment.

I have recently acquired a new business partner and we recently purchased a property with 48 units. My partner does not want to give the Manager a free apartment. He wants to charge the Manager full market rent.

I did some research and discovered that the California Industrial Welfare Commission says that a Manager may be charged up to 2/3 the fair market value of the unit but, in no event, shall it be more than $381.20 per month for a single employee or $563.90 for a management team (e.g., husband and wife).

After further research, I discovered that there are actually two (2) exceptions to this rule, which are as follows:

1. Manager must be paid in accordance with state minimum wage requirements for all hours worked. The Owner may deduct up to $381.20 per month as a lodging credit from the Manager's salary, which counts as payment in full for the monthly rent.

2. Manager is paid in accordance with state minimum wage requirements for all hours worked. The Owner pays the Manager by check for all hours worked, and the Manager pays the Owner by a separate check for 2/3 of the fair market value for the apartment.

Does anyone know which of these exceptions is generally followed? I want to ensure that we follow the correct procedure before hiring our new Manager.

Any information that you can share would be greatly appreciated.

Thanks!!