Do I need to present the management agreement to the tenants if I am the owner of the management company?

Question

I have a rental property under my name. I plan to have a LLC sign the rental agreement with the tenants. I am the owner for the LLC.

I will issue a management agreement between me and the LLC.

Do I need to present the management agreement to the tenants?

Bill Gulley · Answer

You can have a different lease with the LLC. Since it is to a company I would then argue the commercial nature of the lease without respect to the property type (ask your attorney). If that is the case your LLC can then be responsible for PITI as well as maintenance. This would allow the company to have maintenance done and run the costs through the company books. Another issue is that if any building permit is ever required or any code issues arise, the lease to a company can provide the authority to get that accomplished, meaning the company can contract work to be done. The lease to the tenant from the company is a residential lease that would not afford those aspects mentioned for the company. Chris, yes, certainly it is state by state, lucky NC has seen the issues and has accounted for them, many see it as an opportunity to churn a little business for a certain group that usually makes up a few of the law makers....LOL! All in all, I'd rather see you deed the property to your LLC, if any bank issue came up, if it messed up thier feathers, you could deed it back and play dumb and if you could justify the deed transfer as part of your estate plan, there would be no issue! ;)

Chris Martin · Answer

Good points, Bill. I don't know how a judge would handle, say, an eviction, in this circumstance. The let/sub-let idea is the best idea for this scenario. Eve could carry the documentation to court and present it in case it was necessary. Regarding "...the trend is that as a seperate entity the LLC has to be represented by an attorney, you can be a witness, but unless you are an attorney you can't represent the company." I think this is true in many cases. Fortunately for us in NC, we haved statutory relief under Agency power of managers for some (like small claims) legal items.

Bill Gulley · Answer

Oooops! Wait a minute, does your LLC (you) have a RE license for the LLC to manage properties it doesn't own, after all, your company is not you, it's a seperate entity. BTW, placing personal assets in the company to earn income from, without some type of assignment or lease can become a comingling of assets issue. It goes both ways and not just cash. And yes, the trend is that as a seperate entity the LLC has to be represented by an attorney, you can be a witness, but unless you are an attorney you can't represent the company. Eve, you asked basically the same thing in another thread requiring much the same response. Your lease is invalid as the company has no rights to let or convey any leasehold interest. :) Again, lease the property to the LLC then sub-let, a sandwich lease/master lease arrangement. :)

Eve W. · Answer

Chris Martin · Answer

Eve Zhao assuming you have signature authority for the LLC, you sign your name then your authority (e.g. "manager", or "member/manager", or "agent") next to (or below) your signature.

Eve W. · Answer

Since the LLC will be the lessor, how is it going to be signed? Do I personally sign the lease contract as the representative of the LLC or do I need to get a seal for the LLC and use it on the contract? I am not sure how it work in practice.

Joel Owens · Answer

I guess it depends on the court. Here in Georgia it depends on who you put is evicting when you go to court. If an LLC etc. then you need to show you are the attorney representing the LLC, or the property management company, or a member of the LLC so the judge knows you have the authority to discuss the case on the plaintiffs behalf. Every court system has it's own little ways of doing things and interpreting provisions of the laws etc.

Chris Martin · Answer

Eve. No, they just get a copy of the lease. Kyle J. at least here in NC, the small claims court has never asked for a managment agreement for any case I've seen (and I've seen quite a few). If Eve is a manager/member, that's all the court may ask. It's different in superior court, but evictions generally don't go there.

Kyle J. · Answer

I wouldn't think the tenants would need to see that. It'd probably only come up in court if you ever had to go for any reason (i.e. eviction, etc), just to verify that you have the right to act on behalf of the LLC.

Matt Devincenzo · Answer

I doubt very much that the tenants will even know what it is if you did give it to them. I wouldn't worry about it unless someone was to ask for it but I doubt any would.