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Ethics in Property Management Practices

A property manager should be concerned about ethics for several reasons. First, a code of ethics helps build trust with customers, employees, owners and the community. It is also the property manager's responsibility to protect the public from unethical practices. Additionally, when ethics are emphasized from leadership down, it establishes an organizational culture of ethical behavior and protects the organization from risk.

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Angelica Perez
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200 views3 pages

Ethics in Property Management Practices

A property manager should be concerned about ethics for several reasons. First, a code of ethics helps build trust with customers, employees, owners and the community. It is also the property manager's responsibility to protect the public from unethical practices. Additionally, when ethics are emphasized from leadership down, it establishes an organizational culture of ethical behavior and protects the organization from risk.

Uploaded by

Angelica Perez
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd

Perez, Angelica A.

BS – REM 3A

1. Jeff, like most property managers, discovered that he preferred a specific


type of property management. What are the advantages and disadvantages
of working as an employee manager as opposed to working as a third-party
manager?

Employees work part-time or full-time for an agency with a contract of employment,


while third-party managers are employed from outside the company but work for it. To
explain more about contract of employment, a management contract is a type
of outsourcing agreement where you hire a third party, called a management company,
to manage a project, function or work department for you. They are both different from
each other and give several advantages and disadvantages.

Working as an employee advantages can be less cost. The first main advantage of
working as an employee is that it costs less as comparing to the third party manager. As
the employees works inside the organization and third party managers are hired from
other organizations. Second one is they are well known to the organization, the
employees of the organization are well known to the environment. Third one is, working
as an employee are more open, there is more openness among the employees working
in the organization as comparing to the third party manager. Lastly is the payroll, it is
always better to work on direct payroll of company rather than on third party payroll.

Going to its disadvantages, working as an employee is lack in expertise knowledge.


There is a lack of expertise knowledge in the employees as compared to third party
manager as they have more knowledge. Second one is biasedness, sometimes the
biasedness occurs in decision making due to personal likings and disliking for
employees where as it does not happen in the case of third party manager. Third one is
lack of interpersonal skills; there is a lack of interpersonal skills among the employees of
the organization as compared to the third party manager. Lastly is the unfair decision.
Sometimes unfair decisions are taken by the employees working in the organization but
it does not happen with the third party manager.

2. List reasons why property owners would choose to hire a property


manager rather than manage the property themselves.

Owning investment property can be a great way to accomplish your financial goals,
but it takes a lot of work to manage your investment well. That's why successful
investors take the time to research and hire a professional property management
company. Working with a property manager gives you a hands-off approach to your
rental properties. On the other hand, working with a property manager will cost you
money.

There can be many reasons why property owners would choose to hire a property
manager rather than manage property themselves. Some of the reasons are as follows,
first is setting the right rental rates. Property manager helps to set the right rental rates
of the property as they have more knowledge about it. Next is maximizing the
profitability of the money. Most property managers charge a percentage of your
property’s monthly rental rate in exchange for their services. The rate typically runs
anywhere from 6-10%, which is generally less than the money you save by hiring a
professional to take care of your property. Also they do financial record keeping.
Property manager also manages the daily record keeping of the financial transactions
related to property. They have property law and regulations. A property manager has up
to date knowledge about the property laws and the related regulations. They also have
inspection reports. Property managers have to do the daily inspection of the properties
so that in case if there is any fault detected can be easily sought out. They are enabling
the owner to invest in geographically distant properties because mostly the owners are
not able to invest in properties beyond your home area but by hiring the property
manager it becomes easier to invest in geographically distant properties. Lastly, they do
collecting and depositing monthly rent payments on time. Property manager also has to
collect the monthly rent payments from the tenants and depositing it to the owner’s
account.

By hiring a professional property manager, you can add great value to your rental
property investments, which is why so many experienced real estate investors agree
that working with a good management company is the best thing.

3. Why should a property manager be concerned about ethics?

It’s one thing to know a code of ethics. Almost every professional organization or
trade association has one and property management is no different.  Code of Ethics
helps companies and individuals build relationships of trust with their customers,
employees, suppliers, owners and the communities in which they work. Property
manager should be concerned about ethics because it is the responsibility of the
Property Manager to protect the public against fraud, misrepresentation, and unethical
practices in property management.  Every employee will not only understands the code
of ethics, but knows how to apply it and expects ethical behavior not only of themselves,
but everyone around them. It takes a lot more than that, to establish a true code of
ethics in your business. It requires good, ethical leaders at the top; a willingness to
suffer for the sake of doing the right thing; and a relentless renewal of effort in
communicating the organization's ethical values from the top down to all employees.
Anything less puts the entire organization at risk.

Common questions

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Property owners often hire property managers to gain expertise in setting the right rental rates, maximizing profitability, and ensuring compliance with property laws and regulations. Property managers can perform daily inspections, manage financial records, and facilitate investment in geographically distant properties. This delegation is typically cost-effective as managers charge a percentage of rental income, generally less than the savings and efficiencies they generate .

Property managers contribute to setting the right rental rates through their comprehensive understanding of the market conditions, property law, and regional trends. They ensure that rental prices are competitively balanced to attract tenants while maximizing an owner's investment returns. Setting appropriate rates is crucial to avoid vacancies and to maintain a steady income stream for property owners .

Despite the costs of hiring property managers, typically 6-10% of monthly rental income, they deliver financial benefits through optimized rental pricing, reduced vacancy rates, meticulous financial record-keeping, and enhanced property condition management. These efficiencies and expertise often yield savings and increased rental income that exceed the cost of hiring a manager, supporting financial goals of property owners .

Employee managers may exhibit decision-making bias due to personal relationships within the organization, potentially affecting impartiality in management decisions. They might also lack the refined interpersonal skills necessary for broader stakeholder engagement. Conversely, third-party managers, hired for their expertise, often maintain objectivity, minimizing biases and demonstrating superior interpersonal skills due to their professional detachment and broader experience across diverse environments .

Hiring a property manager enables investment in geographically distant properties by handling local investor tasks such as tenant management, rent collection, and property maintenance, thereby removing geographical constraints for property owners. This allows owners to diversify their investment portfolio, leverage different market opportunities, and potentially increase their return on investment by tapping into high-demand areas without needing direct involvement .

Employee managers, working from within the organization, offer lower costs, better familiarity with the company environment, and openness in communication. However, they may lack the expertise, be prone to bias, and face challenges in interpersonal skills. In contrast, third-party managers bring expertise, reduced bias, and enhanced decision-making skills, though often at a higher cost and potentially less integration with the company's culture .

Upholding a strict code of ethics is crucial for property managers to protect public trust and safeguard against fraud, misrepresentation, and unethical practices. Ethical management establishes trustworthy relationships with clients, tenants, and the community. A consistent ethical approach requires leadership commitment, genuine application of ethical standards, and continuous communication of these values across the organization, ensuring that the business operates with integrity and accountability .

Daily property inspections by a property manager prevent long-term damage or issues by identifying and resolving problems promptly, ensuring tenant satisfaction, and maintaining property value. This proactive approach reduces expenses from emergency repairs and enhances tenant retention by ensuring their living conditions remain satisfactory, ultimately safeguarding and potentially increasing the owner's investment .

A property manager enforces ethical standards by ensuring honor and fairness in operations, preventing fraudulent activities, and nurturing trust with stakeholders. Failure to maintain these standards can result in legal issues, diminished reputation, investor losses, and potential market destabilization. Ethical missteps jeopardize both the manager's career and the property owner's assets, emphasizing the need for vigilance and ethical rigor .

Adherence to property laws by managers ensures compliance, minimizing legal risks and penalties that could affect investment profitability. By staying informed about current regulations, property managers prevent costly legal disputes and ensure that operational practices align with legal standards, maintaining the property's marketability and protecting owners from liabilities. This diligence not only secures investments but can also enhance the property's attractiveness to potential renters or buyers .

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