Property Operations
Real Estate Property Management on the Exam
Property management questions appear on both national and state exam portions. Here's what the exam tests: management agreements, trust accounts, fiduciary duties, and key tenant rights.
Property Management Overview
A property manager is a real estate licensee hired by an owner to manage their property — finding tenants, collecting rent, maintaining the property, and handling tenant issues. The property manager acts as an agent for the owner, creating a fiduciary relationship.
Most states require a real estate license (salesperson or broker) to engage in property management for compensation. Some states have a separate property management license.
Property Management Key Terms
Management Agreement
The contract between the property owner and the property manager. Specifies the manager's authority, duties, compensation (typically 8–12% of collected rent), and the term of the agreement.
Trust Account
A separate bank account where the property manager holds tenant security deposits and rent collected on behalf of the owner. Commingling is illegal and a serious license law violation.
Security Deposit
Money held by the landlord as security against tenant default or damage. State law regulates maximum amounts (often 1–2 months' rent), how funds must be held, and when they must be returned.
Commingling
Illegally mixing client/trust funds with the property manager's or broker's personal or business funds. One of the most serious license law violations in every state.
Conversion
Illegally using client funds for the agent's own benefit. Even more serious than commingling. Results in license revocation, criminal charges, and civil liability.
Property Management FAQ for the Exam
What is the difference between a property manager and an asset manager?
A property manager handles day-to-day operations — tenant relations, maintenance, rent collection. An asset manager focuses on the investment strategy — acquisition, financing, disposition, and portfolio performance.
What happens to a security deposit when a property is sold?
When ownership transfers, security deposits and any prepaid rent typically must be transferred to the new owner or returned to the tenant. The new owner assumes responsibility for proper handling and return.
What is a property manager's fiduciary duty to the owner?
Loyalty (act in owner's best interest), obedience (follow lawful instructions), disclosure (reveal all material facts), accounting (maintain accurate records and proper trust accounts), and reasonable care (manage competently).