Real estate property management has many different sides for which a person may be hired — to provide brokerage services, to assist in handling maintenance, or assist in janitorial-type services. 

Who needs a license? 

A property manager who signs or negotiates leases on behalf of a property owner must either be a licensed broker or a licensed salesperson associated with a brokerage firm.

Who does not need a license? 

A license is not required for the custodian, employee, rental agent or property manager who merely coordinates maintenance services, shows residential rental units to prospective tenants, gives out basic information, takes rental applications, accepts rental deposit checks but not cash, and facilitates the owner’s and tenant’s execution of a rental agreement or lease. Wis. Stat. § 452.01(3)(e) provides that a broker does not include, “Any custodian, janitor, employee or agent of the owner or manager of a residential building who exhibits a residential unit therein to prospective tenants, accepts applications for leases and furnishes such prospective tenants with information relative to the rental of such unit, terms and conditions.”

If there will be any services that require a real estate license, an individual with a sales license would conduct those services under the firm with which the agent is associated. Only licensees with a broker’s license and the written consent of the firm may engage in independent practice. For more information about independent practice, read “Beyond the Looking Glass: Chapter 452 changes modernizing business entity licensing,” in the March 2016 issue of Wisconsin Real Estate Magazine at www.wra.org/WREM/Mar16/Chap452 and the May 2016 Legal Update, “Firm Management Under the 2016 Modernization Act,” at www.wra.org/LU1605. 

If brokerage services will be offered, the agent then needs to determine if the agent will be acting as a rental agent or as a property manager. If the owner is looking for a property manager, the licensee should enter into a property management agreement with the property owner. On the other hand, a WB-37 Exclusive Listing Contract for Lease of Real Property authorizes a broker to advertise a rental property, get it leased and handle the rental funds, which include security deposit and rents. The authorization in a property management situation is typically far more extensive.

Property managers generally are expected to handle not only recruitment of tenants and execution of leases, but also most, if not all, aspects of the day-to-day operations of the rental property. This will often include responsibility for lawn care, snow removal, repairs, general maintenance, tenancy complaints and terminations, on-site staff, and bookkeeping for the entire property or complex. The WB-37 and a property management agreement will usually overlap to the extent that they both authorize the agent to advertise vacancies, take tenant applications, qualify and approve tenants, receive earnest money and security deposits, execute leases on behalf of the owner, and collect rents. The property management agreement, however, will go beyond this authorization and will empower the property manager to perform additional services on behalf of the owner. A WB-37 is not required for property managers who lease properties under the authority of a property management agreement. 

Both the WB-37 and the WRA-created Property Management Agreement (WRA-PMA) are available in in zipForm. 

What account does the money go into? 

While this article discusses the money collected by the licensed property manager, where does the money go? Does it go into an IBRETA, non-IBRETA, personal account, or some other type of account? 

Rental application deposits, security deposits and rent may be deposited into one of the following three accounts, regardless of whether the owner is a third-party owner or a real estate licensee:

1. A traditional non-interest-bearing trust account, in other words, the regular trust account with which licensees are historically familiar. 
2. An interest-bearing trust account if the broker obtains the written consent of the parties for whom the funds are being held. This authorization must specify how and to whom the interest will be paid. No interest may be paid to or provided in any way for the benefit of the broker. This type of account will be needed for brokers in communities that require that interest be paid on security deposits. See Wis. Admin. Code § REEB 18.031(3). 
3. The rental owner’s account. “Owner’s account” is defined as an account maintained by the rental property owner for the deposit and disbursement of the owner’s funds. A broker may deposit rental application deposits, security deposits and rent into the owner’s account as long as these checks are payable to one or more of the owners or to the owner’s account, as authorized in Wis. Admin. Code § REEB 18.031(5).

Do you as a licensee own all or some of the rental? 

If you’re a licensee who has an ownership interest in the rental property, keep in mind that Wis. Admin. Code § REEB 18.031(4) provides, “SECURITY DEPOSITS. A licensee having an ownership interest in a rental property shall either place security deposits related to that property in a real estate trust account or shall provide in a lease for security deposits to be held in an account maintained in the name of the owner or owners.”

This can easily be incorporated into a lease. For example, the information could be inserted into one of the special conditions sections of the WRA’s residential lease (WRA-NRL). This form is also available in zipForm. The state of Wisconsin does not have a state-approved (WB) lease. Therefore, Wisconsin licensees may use a lease created by their firm or an attorney. Be very careful if you choose not to use a state-specific lease agreement because it may not include specific language that is statutorily required to be included in Wisconsin leases. 

For more information about rental agents, see pages 3-4 of Legal Update 03.07, “Residential Rental Primer,” at www.wra.org/LU0307. Further information on property management can be found in Legal Update 01.02, “Lease Listing & Property Management,” at www.wra.org/LU0102.

Cori Lamont is Director of Corporate and Regulatory Affairs for the WRA.