Emailed questions from Property Management Pros
As anyone who has ever attended one of my property management classes knows, I welcome questions from the property management community in Nevada, and elsewhere. No, I don’t give legal advice, but I enjoy answering practical questions about the landlord/tenant business, fair housing, rental agreements, management contracts, policies and procedures, risk reduction, and other issues important to our industry. Whenever I do this, I learn something new.
This morning, it occurred to me that, if one person is asking, there may be ten with the same question who are not asking. Odds are, they’ll benefit from the information shared in these email exchanges, too. So, with that in mind, here’s a sampling of questions recently emailed to me, and my responses.
Security Deposits
QUESTION: “The way I understand NRS 118A.242, I am allowed to collect a deposit that doesn’t exceed 3 months’ rent. Does this amount include the first month’s rent?”
ANSWER: “… the ‘three times periodic rent’ limitation does NOT include the current period’s rent. In other words, if the rent is $1,000, the security deposit, last month’s rent, and any other deposit you might collect cannot exceed $3,000.”
Tenants in Foreclosed Properties
QUESTION: “Where can I find the law that pertains to how a landlord must deal with the tenant regarding his lease term, security deposit, etc. when the property is in foreclosure?”
ANSWER: “There are two laws governing the treatment of tenants in foreclosed properties; one state and one federal. The state Landlord/Tenant Law (NRS 118A.275) which requires the landlord to disclose foreclosure proceedings to a tenant , and the federal law, “Protecting Tenants at Foreclosure Act” which went into effect in 2009. In most cases, tenants will have a minimum of 90 days in a foreclosed property before they can be required to vacate.”
Trust Accounts
QUESTION: “Can trust accounts be a savings account and/or checking account?”
ANSWER: “All trust accounts must be FDIC insured, and in a Nevada bank. The Real Estate Division does not specify whether the accounts must/may be savings or checking. However, savings accounts typically don’t anticipate a large number of deposits and withdrawals every month. Most managers set up trust accounts as checking accounts. Talk to your banking representative, and read NRED’s publication on trust accounts for more information.”
When do you need a Property Management Permit?
QUESTION: “Do you know how many properties you can manage without having a real estate license and Property Management Permit? I thought I heard it was 5, but I can’t find anything to confirm that information.”
ANSWER: “In Nevada, even if you manage only ONE property for a client, you must have a real estate license and Property Management Permit. This is true, even if you don’t get paid for managing the property. Check out NRS 645.019 and 645.0192 for clarification.
Have a Question?
This is just a sampling of the many questions I get on a regular basis. I hope it’s helpful to you in your property management business. In a future blog post, I’ll post a few more of the more common questions I’ve received. If you have a question you’d like to ask, I’ll do my best answer and/or point you to sources that can provide the answer for you. Please leave a comment on this post, or email me directly. Thanks for reading!
Hi Judy, thanks so much for all your helpful posts! My question pertains to the Trust Account checking vs savings account… if one obtains a savings account to operate (i.e. for Security Deposits), then NRS says that any interest cannot be kept by the management company. Conversely, the GLVAR form for Property Management Agreement states that any interest gained from trust accounts may be kept by the Manager. How is this possible?
Hi, Heidi – I’m not aware of anything in NRS that says the management company cannot collect interest on its trust accounts. The problem lies in proper accounting and liquidity of the funds. Most PMs that I know manage multiple properties for multiple owners, with multiple tenants – all this money goes into just a couple of trust accounts. How does the property manager account for interest on the money, per deposit, on any given day? It’s a constantly changing dynamic, and an accounting nightmare, in my view. Also, it seems to me you’d need to have not only your owners’ approval to collect interest on their funds, but tenants’ approval to collect interest on their security deposits. For the small amount of profit that might be gained by doing that… what is the cost in client/customer good will and confidence? This is the main reason I’ve never “gone there” with interest on trust funds. If you do decide to explore this further, I urge you to seek legal counsel, as there are some federal laws that may impact your banking activity, as well. Thanks for reading, and for posting a comment!
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