Apartment Management and Landlord Manual: Human Resources

It is your staff who must make things work. Personnel policies in them selves will not make employees work harder or more skillfully; they will help minimize disputes and confusion while ensuring uniform treatment of employees and establishing a professional level of employment practices. The following discussion focuses on the key areas these policies should address.

HIRING

Before making any hiring decisions, it is wise to check the qualifications of all applicants. Be aware that federal law prohibits discrimination in employment. Complaints by applicants or employees claiming discrimination can be filed through a state commission, an office of the Equal Employment Opportunity Commission (EEOC) or federal court (state laws on filing vary). It’s important to treat all potential employees the same, so none of your actions can be interpreted as discriminatory. The “EOE” (Equal Opportunity Employer) abbreviation is something you may want to include in advertising and application materials. Know the laws as they apply to your situation.

Screening Applicants

Obviously, it pays to find the right employees and there are means to locate the best people. Consider the following items:

• Application form. Be aware of what you can and cannot ask; check federal, state, and local laws governing hiring. In most cases, the standard application form you can purchase from local stationery or office supply stores will meet current requirements.

• References. Talk to the applicant’s previous employer, if possible, or a reference who is not a relative. If the applicant has worked in property management before, ask the previous employer to list the applicant’s strong and weak points. Pay particular attention to the answers you get.

• Credit bureau. A credit bureau check can provide information regarding judgments, bankruptcy, and general credit history. The in formation should not be used for making the decision of hiring un less it is relevant to the job (e.g., when the employee will have access to money or merchandise). If used for hiring there are specific disclosure requirements that must be followed as outlined in the Fair Credit Reporting Act. It is illegal in most states to refuse employment because of an employee’s past; therefore, a credit check is of limited value and only serves to forewarn you that there may be trouble ahead.

• Criminal check. This can be done when required by business necessity (e.g., bonding requirements). Prior convictions should not be an absolute bar to employment. Consideration must be given to the nature of the position, how serious the prior offense was, and how recently the offense was committed.

• Bonding. Any employee who deals with money or is responsible for major expenses should be bonded.

• Tests. Some companies require applicants to take a battery of psychological and personality tests. These have their limitations but may he useful in giving you more insight regarding the applicant.

• Polygraph tests. Federal law prohibits the use of employee lie detector tests in most business situations. This practice, when used previously, almost always had a negative effect on the employees, so the loss of this technique should not be missed. In situations in which the employer has suffered an economic loss, polygraph tests are permissible after providing notice and meeting a number of other restrictions.

A much surer way of avoiding dishonest personnel would he to simply take a little extra time, carefully performing reference and background checks prior to making hiring decisions.

Matching the Individual to the Job

Employees must fit the development. The reverse is also true. Before you make a decision regarding employees, you should sit down and write a description of the types of people who currently reside in the complex.

Your choice for manager should be shaped by that resident profile. The manager should be comfortable with the rent levels being charged. For example, if the rents are in the $900 range, your manager should be comfortable with that figure; someone who would only pay a rent of $450 may not be. The subject of value will constantly surface; it is essential that the manager is not intimidated by a high rent or, on the other hand, does not belittle the residents because the rent level seems low.

Follow the same advice when choosing leasing agents. This position is one of the most important posts that you will fill. The rental agent is the only staff member whose job is to bring in new residents. The wrong choice can mean poor rental results, the wrong clientele, or both. I conducted a series of rental agent evaluations for one of my major clients—a developer of comparatively high-rent apartments for successful professionals—and the results were startling. The agents had all been through rather extensive training and knew the neighborhood and product well. However, they were uncomfortable with the rent level and would only announce the rents timidly when asked directly. Our survey revealed that because these people were being paid by the hour, and most of them worked part-time, they were troubled by the concept of monthly rent exceeding their total monthly earnings. If a leasing agent is at all troubled by the rent level, it will be virtually impossible for that agent to help a prospect over that hurdle, or for that matter to understand the motivations of people in higher income brackets.

The leasing agent’s demeanor should match your tenant profile. People need help and counsel in making major decisions about housing, but they will rarely take advice from someone who is not at least their age or who has not attained their achievement level. Don’t expect an inexperienced rental agent to be able to provide the right touch or invoke the necessary urgency with an established, very sophisticated renter. Don’t confuse a very helpful, energetic, and highly personable clerk with a professional rental agent who can make the difference between a signature and prospects who leave “to think about it.” When times are tough, the match-up of the rental agent to the desired customer is critical. This is especially true at the high end of the market.

Job Descriptions

A job description is rarely a complete list of job responsibilities. Although most personnel manuals recommend that you have job descriptions, it’s important to be aware of the problems that job descriptions may create; difficulties arise from the restrictive nature of any finite job description. Management personnel are called upon to perform a variety of duties, some of which can’t be anticipated or formalized into a job description. An employee may balk at a request to perform a certain activity because “it wasn’t in the job description.” When you choose to put a job description in writing, be sure to make it as broad as possible.

PERSONNEL POLICIES

Policies are necessary tools for managing any staff. Like other policies in apartment management, employee policies are usually developed by the owner or in cooperation with the owner. It’s a good idea to provide employees with a handbook setting guidelines for behavior and explaining the benefits provided.

Scheduling

When scheduling staff, remember that the apartment management business must be able to effectively serve both the prospect and the existing residents. It is amazing that some residential management professionals will complain of poor rental results and search for ways to increase prospect traffic, hut they won’t work on the most important day of the week, Sunday. Granted, there are situations in which Sunday is not a business day, but these are rare occurrences indeed. More often than not, a manager will say that Sunday is not a business day in his or her area when in fact business could be brisk on Sunday if the office were open. Also, you must be aware that your Sunday staff must he top notch. A property simply can not afford to have the rental office staffed with part-time rental agents during the times when most prospects do their serious looking. Some managers choose not to work on Sunday, even though the office is open. Sunday may not be producing any better results than other days, but it might be because the second-string staff is on duty then.

Besides renting, there are many other duties that can be better accomplished on Sunday. For example, most managers complain that there is a lack of uninterrupted time in which they can accomplish much needed planning or paperwork. Between 7:30 and 9:30 A.M. on Sunday morning, the manager is almost guaranteed some “quiet time.” Sunday is also an excellent time to get out and meet the residents and handle renewals, solve problems, etc. This does not mean a six-day week. The work week of a great many managers runs from Sunday through Thursday.

Just as the presence of the manager is needed on Sunday, the property should have the benefit of its maintenance chief all day on Saturday. Many residents are reluctant to have people in their apartments when they themselves are not present. Perhaps they are experiencing a problem that is complicated and is best explained in person. Saturday is often perfect for that. Saturday service in an apartment complex is a must if you plan to retain the maximum number of existing residents. The convenience of your maintenance chief should not be a factor in deciding the level of service you’re offering to your customer. The Saturday schedule should not be a partial day even though the rental office may not be open the full day. Typical hours for maintenance staff might be 7:30 A.M. to 4:00 P.M. Tuesday through Saturday.

Determining On-Site Staff

Living on-site was almost standard for apartment managers in the early years of the rental apartment business. The managers, often a “Ma and Pa” team, handled all rental and maintenance duties. This was basically a seven-day-a-week commitment. As apartment developments grew larger, the staff grew as well. Living on-site remained commonplace, but there were many exceptions. In this section, we’ll examine the pros and cons of living on-site.

With a manager living on-site, you will always have someone available to handle the inevitable after-hours problems. The manager can witness the ways different facilities are used or abused during peak activity times. Monitoring parking patterns and night lighting is often ignored when the manager returns home at the end of the workday.

There are distinct disadvantages to having someone live on-site, burn out being perhaps the greatest. Working and living in the same place, especially in a business that involves a constant flow of problems, takes a heavy toll. Some managers become hermits and practically hide from ten ants in an attempt to preserve some semblance of a private life. Some become hostile in an effort to keep intrusions to a minimum, while others strike up acquaintances with the existing residents. All of these reactions will have a negative impact on the complex. Many managers want to own their own homes. Others may have families too large for the apartments available. Rules requiring the on-site residence of a manager or a maintenance chief should be flexible. In most developments of any size, on-site personnel are important. Nevertheless, latitude should be exercised when assigning on-site duties.

It is a problem when staff members think themselves better than the residents and prefer not to live with them; this is almost instantly detected by the residents. Ultimately, there will be associated costs when residents sense that the staff has a low opinion of them. Turnover is almost certain to increase its difficult for people to feel good about their homes when the management displays even a hint of a belittling attitude.

When staff members live on-site, the location of their housing unit is the next decision to be made. Most managers live very close to the rental office or in a building that has a special view or some extra feature or appointment. This happens for two basic reasons. First of all, the manager’s apartment was most likely part of the initial construction package. These early buildings often received very special treatment as they were being used to demonstrate the quality standards that were to follow.

After a period of time, the building begins to show wear. The process is much slower in the buildings immediately adjacent to the on-site employee’s unit. The reason for this is simple. These areas and the various building components are in daily view of the manager and the necessary corrections are ordered. Many owners or supervisors who visit the property look only at the buildings surrounding the clubhouse and rental center. Owners authorize repairs or replacements in these areas to avoid losing prospects as a result of a bad first impression of the complex.

Another sure indicator of trouble occurs when the staff members choose to live in the very best units. To understand this, assume that a complex has fifty one-bedroom and forty two-bedroom apartments plus ten townhouses. The townhouses are in the least supply and probably in the greatest demand, plus they rent at top dollar. These units should be reserved for the tenants and not for the staff. The staff units should be the most difficult to lease rather than the exceptional apartments.

Socializing with Residents. All employees should be discouraged from socializing with residents. This policy is particularly hard on employees who live on the site, but it’s necessary. Socializing with residents, becoming personally involved with residents, or having an occasional drink are all seemingly innocent practices bound to affect an employees’ judgment.

Posting Notices, Keeping Records

At this juncture, it is important to take note of the existence of some employee-related legal requirements. Managers must be aware of local, state, and federal regulations regarding the posting of certain notices and licenses. Here are some examples of commonly required postings.

1. Local business license

2. Real estate salesperson and broker’s license

3. Unemployment insurance notice

4. Worker’s compensation notice

5. Occupational Safety and Health Act notice (OSHA)

6. Equal Employment Opportunity (EEO) notice

7. Fair Housing notice

8. Employee Polygraph Protection Act poster

9. Fair Labor Standards Act (FLSA) poster

10. Age Discrimination in Employment Act (ADEA) poster

These notices primarily address issues concerning prospective employees and existing employees. Such posters must he placed in an area accessible to your staff. Those notices that pertain to residents and prospects must be similarly accessible to the “audience.” Stay current: Laws change and there may be state regulations to keep in mind (e.g., your state Department of Labor probably has information-posting requirements).

There are also numerous laws that prescribe requirements regarding employee records, and these laws frequently change and expand. Some of these requirements are an outgrowth of The Occupational Safety and Health Act (OSHA) of 1970. OSHA includes definite record-keeping requirements for employers—including managing agents—and fines are imposed for violations. Since laws are changing constantly, the local U.S. Department of Labor office should be contacted for details. It is sound business practice to always maintain adequate employee records. Here are examples of items that should appear in the file of every employee, including part-time workers.

1. Employee application form

2. Job description

3. Current W-4 form for withholding tax

4. Benefit application

5. Time records

6. Pay records, including regular pay, overtime, bonuses, commissions, and raises

7. Vacation and sick-day records

8. Social security payments

9. Union benefits

10. Accident reports

11. Review and evaluation reports

12. Promotions, transfers, layoffs, and discharges

13. Commendations and complaints

14. Records of disciplinary action

15. INS Form 1-9 (proof of citizenship)

Employment records should be maintained for at least five years after the employee leaves. Many management firms keep employee records in definitely. In situations where the people working at a complex under your management are technically the employees of the property and not of your company, prepare a duplicate set of records for your own files. By doing this, your files will be complete if you should lose the management account and be required to turn over the original employment records.

Licensing

Many states have real estate license law provisions that say, in effect, that persons who “lease or offer to lease” real estate must be licensed. In most states, this requirement does not extend to direct employees of the property owner, but it almost always includes employees of a managing agent. In the future, licensing requirements definitely will become increasingly stringent. Currently, there is a movement under way to require the licensing of property managers. Licensing requirements vary from state to state, and it is important to know whether the licensing specifications in your state include continuing education requirements. Be aware of the laws in your area and be alert for upcoming changes in those laws.

Compensation

It is not unusual for property management employees to receive several forms of compensation, including salary or wages, free rent, free utilities, and other non-cash items. Some owners hold the opinion that salary or wages can be lower if other non-cash benefits are offered. Thus, as some owners put it, you can hire a site manager for $1200 a month, provide a $500 per month apartment, toss in $80 worth of free telephone service and utilities a month, and claim to be paying the employee $1,800 a month. Let’s see if this is true.

Free rent. The idea of giving an apartment rent-free to an employee came about in the days when empty apartments were more plentiful than money. When the practice started, it was common for employees not to report the value of their apartments as income. But laws have changed. The IRS now includes an apartment’s value as taxable income, unless the employee is required by the owner to live on the site. If the apartment is provided for the owner’s convenience, it cannot be counted as part or full compensation for services rendered.

In most cases, providing a free apartment is simply a matter of giving the employee something extra to make up for an otherwise low salary or wage. Under those circumstances, the employee will have to pay taxes on the value of the apartment. So “free” rent is not exactly free.

Now let’s examine it from the employee’s standpoint. An employee earning $1200 a month normally would spend no more than $360 a month for an apartment (using the rule of thumb of paying 30 percent of gross income for housing). So, if you provide a $500 per month unit, the employee can only credit you with the $360 he or she would normally spend on rent; the other $140 of value is nice, but the employee probably would prefer cash to pay other normal living expenses. The disadvantage to giving an employee a free apartment is that the value may not be appreciated.

Employee Discounts. One way to avoid the problems created by offering free rent is to rent the apartment to the employee at its regular value less an employee discount. This is a method used by retailers for their employees, and it results in making the employee aware of value. Also, in most cases, a modest employee discount is not taxable compensation.

The IRS allows some flexibility when it comes to taxing the benefits of an employee discount. Clear this with a tax law authority before establishing your policy regarding such discounts. The general rule followed in the apartment industry is that an acceptable discount amount would be roughly equal to the money spent on a per unit basis for promotion plus an allowance for profit. For example, an apartment that leases to the general public for $600 per month might be discounted by $40 to $50 when rented to an employee without incurring income tax liability on the benefit.

In all events, discounts should be offered to all employees equally. Discounts can not be used as a method of rewarding one set of employees and not others.

Free utilities. Free utilities are offered to employees in cases where they are not normally included in the apartment rent. In my experience, employees who receive this benefit seldom appreciate it as part of their income. Ask them what they earn and they’ll quote their salaries or wages, not what the free utilities (and free apartment) are worth. Because they may not be aware of the value and don’t appreciate it, employees may not see the benefit.

Other Non-cash Benefits. The same holds true of other non-cash benefits such as free gasoline for employee cars. It will not be appreciated and is apt to be wasted. Use a mileage allowance instead.

Salary. A manager is better off paying an employee a straight salary or wage and forgetting about free apartments and free utilities. As for the amount of the salary or wage, set it at a level that will attract the people you want. This level will vary from one area to another. When property management businesses underpay employees, they pay for it dearly in inefficient operations. An informed owner wants a manager who is competent and businesslike. There are no bargains in low wages.

Salary or Commission? This question will come up when setting out to hire a leasing agent. My advice is simple: Choose salary.

Commission would appear to have much in its favor. The complex only pays for results, and commission jobs have a way of weeding out those with little confidence. A person who works hard will rent more units and make more money. So where is the problem? There are several. First of all, very good real estate sales people are selling houses, rather than renting apartments, because the financial rewards are significantly greater. There are certainly some exceptions; there are situations in which a person with some of the inborn skills decides to try renting apartments. Getting started in apartment rentals takes a lot less time than it does to begin as a home seller. Unfortunately, most people who apply for a commission- only leasing agent position see it as something to fall back on, an interesting sideline. To attract a top-quality rental agent, the commission per lease must be respectable; this way, any kind of success will cover the startup period and the inevitable slow weeks. If the agent does obtain lots of rentals—either because of superior ability, market trends, or both, the in come achieved frequently exceeds the manager’s. Obviously, this is the beginning of another problem.

Commission-only leasing agents get paid exclusively for prospects who become residents. It doesn’t take long to learn which prospects the manager will accept on the basis of income and past history. As a result, agents may steer application answers to fit the manager’s expectations. Also, a commission-only rental agent may refuse to handle resident calls, act as a receptionist, or even take a rent check from an existing resident during busy times in the office. Offering fixed salaries to your leasing agents not only provides employment security to the agents, but also allows you the freedom to assign additional duties.

When rentals are plentiful, there’s no problem; but if prospect traffic falls off, agents may search for greener pastures. When times are tough and you need the most help, the commissioned agent’s pay will be at its lowest; and you will probably be searching for someone new. There are many individuals who will develop into top rental agents who need and want employment security and a regular salary. You can sweeten an agent’s paycheck with a small bonus after an exceptional week, but let the fixed salary represent most of the compensation package.

Wage and Hour Law

It is absolutely essential to be familiar with the Fair Labor Standards Act. This is frequently referred to as the Federal Wage and Hour Law. The requirements of this law are significant. Likewise, the penalties for failure to comply are severe. Contact the Wage and Hour Division of the Employment Standards Administration of the U.S. Department of Labor to secure information on the law and its requirements.

The comments in this section amount to a broad interpretation of the Wage and Hour provisions. Specific wage and salary amounts have been avoided, as they are subject to change. Interpretation of specific situations by regional Wage and Hour offices will differ, making a complete discussion of the subject even more difficult.

The Federal Wage and Hour Law generally prevents paying a property management employee a fixed salary so that the employee can work unlimited amounts without additional compensation. Almost all apartment buildings are covered by this law, which states that employees must be paid the minimum hourly wage and that you must compensate employees at the rate of time-and-a-half for all hours in excess of forty worked each week (with certain exceptions). Even if you pay employees monthly, the federal agency simply will take the monthly salary, multiply it by twelve months and then divide by 2,080 hours (forty hours a week multiplied by fifty-two weeks a year) to arrive at an hourly rate.

Consider some implications of the Wage and Hour Law. Your objective is to avoid paying for overtime, if possible. You can do this by giving compensating time off within the workweek. This means that an employee who reaches forty hours before the end of the week can be given time off for the rest of the week. You can’t give compensating time off during the following week; the law says each week must stand on its own.

In most industries, the workweek begins on Monday and ends on Sunday. If you follow this system and you need employees to work on weekends—the time when most emergencies occur—you’ll probably wind up paying overtime. You are better advised to declare your work week to begin on Friday and end on Thursday. This means if employees must work on the weekend, you have the less-hectic remainder of the week to grant time off for compensation. Such a policy can save you many overtime hours. If you do this, it is more efficient to pay employees weekly or every two weeks, because then your records will conform more easily to a workweek.

Take the time to study how the government calculates minimum wages and overtime. The Wage and Hour people may consider both the salary and the value of an apartment when calculating the hourly rate and testing for the minimum wage. The apartment value only counts if the apartment is provided for the employee’s—not the employer’s— convenience. If this is the case, then the IRS will expect taxes withheld on its value. You can’t have it both ways.

Test to see that you are meeting the minimum wage requirement. Assume you provide an apartment for an employee and that this apartment normally rents for $600 per month. Assume further that a reasonable profit and promotion allocation attributable to the unit is $50 per month. You then subtract this amount from the monthly rent ($600 - $50 = $550) to arrive at the apartment’s value, which is added to the monthly wage for the purpose of satisfying minimum wage requirements. Continuing the example, a person receiving a monthly salary of $450 and an apartment with an adjusted value of $550 is effectively being compensated $1000 per month or $12,000 per year. By dividing $12,000 per year by 2,080 hours, you arrive at an hourly rate of $5.77. If this is less than the current federal minimum wage, you must increase this person’s wage at least enough to equal the minimum wage. If your property is in a state that has a different minimum wage than the federal rate, the higher of the two rates prevails. It should be noted that the employee will be required to pay income tax on the $550 per month apartment value.

Using the same example, but assuming the apartment is provided for the owner’s convenience, only the $450 monthly salary may be considered as the employee’s compensation. This amounts to $5,400 a year and, when divided by 2,080 hours, produces an hourly rate of just $2.60, which is considerably less than the current minimum wage and violates the law. The salary must be adjusted upwards to comply with the law. Federal taxes on the apartment value need not be withheld in this situation as it is furnished for the owner’s convenience.

When computing overtime compensation, the government requires you to use the total hourly rate that includes the adjusted apartment value. This figure will be multiplied by 1.5 to arrive at the hourly wage to be paid for all hours worked in excess of forty during one workweek. (The pre ceding example is an extremely simplified examination of one particular situation; it is imperative that you seek legal advice to learn how the law applies to your unique circumstances.)

You must be very careful in keeping track of both wage levels and hours worked. If the government suspects you are violating the law, it will study all of your employees’ pay records for the past two years (in some cases, for the past three years) and hold you liable for any underpayment of the minimum wage plus any premium or overtime pay that was not paid during those years. If it can be proved that you acted willfully in under- paying your employees, the government can go back three years and force you to pay double the wages due.

The best practice is to have each employee fill out a weekly timecard detailing the hours worked each day. Employees should sign their cards at week’s end. Retain these cards as a permanent record, and pay overtime when necessary.

The Wage and Hour Law does provide that certain employees meeting specific criteria can be exempt from the overtime provision. In property management, these exemptions come under one of two classifications executive or administrative. The government has published a special booklet dealing with these exemptions (Regulations, Part 541). Copies are available from the Wage and Hour Division of the U.S. Department of Labor.

In a very broad interpretation of exemption requirements, a person must at least meet the following tests to qualify for exemption from the overtime provision.

1. The primary duties of the employee must be management-related.

2. The employee must supervise two or more employees.

3. The employee must not spend more than 20 percent of the work week performing manual or non-management-related activities.

4. The employee must receive a guaranteed weekly wage of at least a specified amount. This figure has two levels and is subject to change. The wage must be guaranteed at this level and must not be subject to deductions for sick pay or short hours. The test of this wage level may not include any apartment value.

A thorough reading of the government’s pamphlet on this subject is recommended before determining which, if any, of your employees can be classified as exempt.

Don’t take the Wage and Hour Law lightly. The law is written to protect the employee, whose word often will be upheld against the employer’s. Be sure you know and understand the law thoroughly and be careful to document your actions.

Salary and Wage Adjustments

Ideally, you will make it a policy to review salaries and wages for each employee at least once a year. At that time, you can determine whether art employee should get a merit or cost-of-living increase. Job performance and local job market conditions will help you decide the amount.

In keeping with what was said earlier about paying a competitive wage or salary, your policy should he to reward good performance and to pay your people well and in accordance with their responsibilities.

Incentives and Bonuses

Regular incentives and bonuses are self-defeating. Employees learn to count on them and expect them. They become regarded as part of employees’ regular income and lose all value as incentives for extra effort. For this reason, any kind of regular bonus, including a Christmas bonus, is discouraged.

Instead, consider random bonuses geared to short-range goals, such as leasing a certain number of apartments, obtaining renewals, or collecting rent in a short, specific period. Such incentives build excitement and vary the pace of activities. Employees usually will welcome the challenge and respond with extra performance. Bonuses needn’t be paid in dollars; they can be just as effective in the form of merchandise, commendations, or travel.

Gifts, Kickbacks, and Commissions

You need an absolute policy for gifts, commissions, and kickbacks in order to head off trouble and ensure that whatever you purchase from vendors is based on price and quality, not favoritism.

Vendors historically have offered management employees bonuses for orders, knowing that the employees’ traditionally low pay scale may tempt them to accept. Many companies that sell cleaning supplies and chemicals, for example, continue to follow such practices. Some furniture leasing companies pay a bonus to the manager or rental agent for every resident who rents furniture; the companies then may pressure the manager to let the furniture remain after a resident moves, hoping that the apartment will be re-leased and the company’s furnishings with it. This practice saves the furniture company money because they don’t have to pick up the furniture. Nevertheless, waiting for someone who will accept the furnishings may cost the property owner money in lost rent. And you must consider the fact that residents who have their own furnishings are often more stable than those who do not.

Commissions, gifts, and bonuses—indeed, any form of kickback from vendors—are unacceptable for several reasons. First, they may encourage employees to order more than is needed in order to qualify for a gift. Second, employees may disregard quality, costing the property more money in the long run. Third, if there are any reductions in price, these rightfully should be credited to the building account in the form of a discount rather than going into employees’ pockets.

To make sure that all relations with vendors are on a strictly businesslike basis, employees should he forbidden to accept any kind of money payments from them. They should also be instructed to refuse any free tickets to entertainment or sporting events and to turn down any free dinners or other invitations to socialize. You may wish to permit the acceptance of “token” gifts at Christmas time.

Gifts or tips from residents should be refused; they could lead to special treatment and unequal service, a source of many resident complaints. If holiday tipping and gift-giving to employees is already practiced, establish a kitty so that all employees benefit and individual residents are not identified.

Holidays

Let your rental employees know right away that they will be expected to work Sundays and on summer holidays. Thanksgiving, Christmas, and New Year’s Day generally are poor rental days, when you might just as well remain closed.

The maintenance staff usually can be minimal on all holidays.

Vacations

It’s a good idea to establish a vacation year in which any earned vacation time must be taken. An employee usually earns one day of vacation for each full month of employment, up to a total of ten days (employees with greater tenure should be allowed to accumulate some additional vacation time). Employees should be required to take these vacation days within a certain period. For example, many management companies allow vacation time to be accumulated through April 30; employees then have to take their vacations before March 31 of the following year. This policy prevents employees from combining two weeks of vacation at the end of one year with two weeks at the beginning of the next to make a four-week vacation.

Here are some other vacation policies to consider:

• Employees must schedule their vacations around those of other employees, so that you are not left shorthanded at any time. If a conflict develops, seniority rules.

• Any vacation time not taken is lost forever. It is not carried over into the next year or compensated by money.

• If an employee resigns without sufficient notice or after less than one year of employment, all accrued vacation time is lost.

• An employee who is terminated receives any accrued vacation pay as severance.

• If an employee dies, the heirs receive any accrued vacation pay.

Death of a Relative

If an employee’s immediate relative dies, consider granting up to three days off with pay. “Immediate relative” includes spouse, mother, father, mother-in-law, father-in-law, son, daughter, sister, or brother. If the employee needs more time, allow an authorized leave of absence. Absence due to the death of any other relative or friend should be without pay.

Sick Days

It is virtually impossible to set a foolproof sick-day policy. Some companies allow employees five sick days during a calendar year. For each day they take, they are paid. For each sick day not taken, they receive one day’s additional vacation, up to five days. Any sick days taken beyond five days are without pay.

Whatever sick-day policy you establish, be sure to record sick days carefully to avoid disputes.

Employee Insurance

Employee insurance, such as a health and hospitalization plan, is rare for many management and maintenance-associated employees because of the typically small size of the work force. Most group plans require ten or more people. This may put you at a hiring disadvantage, since many employees expect this kind of coverage. However, even if you do provide insurance, employees won’t give you full credit for what it costs. Again, they generally think only of their wages or salaries, not the full cost of any benefit you offer.

Some community health groups have been set up to provide medical coverage. If your community has one, it might be a good idea to have your employees enroll on a fifty-fifty basis. That is, you offer to pay 50 percent of the premium while the employee pays the other 50 percent. In this way, the employee gains a better appreciation of the value of the coverage. An employee also should pay any premium for coverage of dependents.

In some cases, employers are obligated to provide a Health Maintenance Organization (HMO) option. This requirement only applies to those employers who already provide health insurance benefits. Under the Health Maintenance Organization Act, an employer may be required to offer an HMO plan if the employees involved exceed a specified number and a written request has been received from a qualified HMO. An employer who fails to comply can be subject to substantial fines. The changing law in this area serves as a reminder that the entire insurance picture is in a state of flux; it’s very important to stay up-to-date and seek professional advice.

Education and Tuition

Employers usually benefit by encouraging their employees to pursue education to improve their on-the-job skills. This education can include for mal day or evening classes, seminars, dinner programs, and short-term training programs. Administrative, rental, and maintenance people should be included in the education policy.

The policy must be thought out carefully and enforced, or you may find yourself paying for education that has no relation to the job. Some owners find this acceptable; they believe that any course an employee takes will pay off in better job performance.

The typical education policy requires an employee to get approval from a supervisor before enrolling in the course. The employee then pays for tuition, books, and other expenses in advance. When the employee presents evidence of having successfully completed the course, the employer calculates the reimbursement due using a predetermined percent age of the tuition cost (e.g., 50 percent). Books and expenses are typically not reimbursed. This policy encourages the employee to make a personal financial commitment, rather than get a free ride at the employer’s expense. It also encourages the employee to take the course more seriously.

Professional Memberships

You may decide to encourage your employees to join a professional association, perhaps one with which you yourself are affiliated. In this case you can establish a policy to pay for part or all of the employees’ membership fees and subsequent dues. Professional organizations provide a forum for exchanging ideas and an opportunity for members of your staff to learn about the industry through the experience of other property managers providing this benefit may be quite costly, but it frequently pays off in the form of a skilled and enthusiastic staff.

Permanent, Part-time, or Seasonal Employees

Unless your operation is very small and is not subject to federal and state Wage and Hour regulations, employees cannot work more than forty hours a week without being paid time-and-a-half for overtime. In many cases, it doesn’t take much overtime to make you realize that you’d be better off with another full-time person.

Overtime in general should be discouraged. If it becomes routine, employees will come to expect overtime pay as part of their regular in come and will be disappointed when they don’t get it. Try to streamline your operation with efficient planning and scheduling so all routine work is performed during the regular workweek. There may be certain periods due to weather, untimely breakdowns, or seasonal traffic when short-term needs justify overtime. If overtime becomes a regular requirement, add another full-time or part-time person to your staff.

Reporting to Work and Breaks

You have a right to expect employees to be at work on time. Your policy should state that if an employee is sick or delayed, the supervisor must be notified no later than thirty minutes after the appointed starting time.

Similarly, if an employee must leave work before the designated break, lunch period, or quitting time, the supervisor must be notified. Your policies should clearly state the number of violations of these rules that is cause for dismissal.

A common response from an employee found not working is “I am on my break.” If you wish to eliminate this excuse, establish uniform time periods in the morning and afternoon for breaks. Typically, these would be from 9:45 to 10:00A.M., and 2:30 to 2:45 P.M. You also may establish a set lunch period. At all other times of the workday, you should expect to find employees working.

Uniforms

Policies on uniforms vary widely. Some firms require rental personnel to be dressed in blazers. Whether you make this your standard or not, you should require a professional appearance in dress and grooming and spell this out in as much detail as necessary.

It’s generally a good idea to require maintenance and service people to wear uniforms while on duty, because that makes them easy to identify and also contributes to the well-managed appearance of the property. It also saves on wear and tear of their own clothing.

If you decide on uniforms, select a readily available style and color and provide each employee with two or three sets. Employees should be responsible for washing and cleaning; you should be responsible for re placing worn out uniforms. Giving the employee a standard name badge is also a good idea.

You must provide appropriate safety equipment (shoes, goggles, helmets, etc.) if the nature of an employee’s work requires such items. Here again, you must be aware of the Occupational Safety and Health Act of 1970.

Radios

One of the quickest ways to spot an unprofessional work environment is by the playing of radios. Workers will often bring radios and play their favorite music while they work. Whatever rules you establish regarding radios should apply to both employees and vendors. These people are being paid to work, not to entertain themselves. The sound of a radio is often loud and annoying to residents and visitors. You won’t see employees or other outside workers in top hotels playing radios or even wearing earphones, so why should you allow it?

Tools

Maintenance personnel should be required to provide their own tools. If they are first-rate workers, they will have their own hand tools and take care of them. Ask to see the tools before you hire the person. If the tools are in good condition, you can feel reasonably confident that the person is competent. If you must provide tools, don’t expect workers to care for them as they would their own. The exceptions are specialized or ex pensive heavy-duty tools that should be provided as equipment of the property.

Guns

It is recommended that you prohibit employees from carrying guns or having them anywhere on the premises at any time (i.e., an employee can’t store a gun in his or her desk or locker during the day). The sight of an employee toting a gun creates the wrong image for your property: Would you rent an apartment if you saw the manager wearing a gun? Guns can be misused, leading to tragedy and possibly a lawsuit against you and the property. It is even questionable whether bona fide security employees should be allowed to carry guns.

Controlling Employee Purchases

Property managers often establish accounts with local vendors such as hardware, electrical, and plumbing supply stores. This can create problems since employees may take advantage of these accounts to buy items for themselves. Some property managers attempt to deal with this situation by setting a dollar limit on each order, but it’s a simple matter for an employee to get around such a restriction by coming in at different times with smaller orders.

The recommended way to control purchases is to require vendors to refuse any orders that are not itemized and signed by the manager. This makes it difficult for any unauthorized person to buy something for personal use. The same rule applies to purchases of capital equipment.

Pilfering and Petty Theft

Because of the supplies, equipment, petty cash, and coin meter collections kept on the premises, a property management business is vulnerable to pilfering and petty theft. Employees should know that you realize this temptation exists and that you will use every means available to reduce losses. Furthermore, let them know that if they are caught pilfering, you will terminate them. If the theft involves a substantial amount, you should prosecute.

These are some steps you can take to reduce the possibilities of petty theft:

• Keep supplies to a minimum. Don’t order a gross of brooms and expect them to remain; order one or two at a time, as they are needed. You can give your vendor a blanket purchase order to arrange drop shipments of small quantities.

• Keep supplies locked in cabinets. Give the keys to only one or two people.

• Buy bulk quantities. It’s easy to steal a gallon of paint or a quart of household cleaner. But if you buy in larger containers, such as thirty-gallon drums, theft becomes more difficult. It’s often cheaper to buy in large quantities anyway.

• Bank money daily. Don’t hold checks, or cash, other than petty cash, for more than eight hours. Keep petty cash in a locked desk.

• Log coin collections. Normally, there is little variation in monthly collections from year to year. If there is a sharp drop in this income, you can suspect theft.

• Never authorize site personnel to sign checks. They should only make deposits. Any exception to this recommendation virtually guarantees accounting problems and money irregularities.

MANAGING YOUR STAFF

The subject of staff management is an expansive one. Your level of management ability will depend on your aptitude in a wide variety of skills. For starters, a manager must be able to organize, communicate, solve problems, and relate to others. There is a proliferation of courses and books addressing this topic—many of them can be helpful. For that reason, I will explore a few management issues without devoting much time to management techniques.

Labor Unions

In certain areas, particularly in major cities, labor unions have made and are continuing to make efforts to organize apartment property personnel, especially maintenance workers. Unions seek out the larger complexes because the numbers of employees make it worth the effort.

The best approach is to avoid union organizing in the first place. One way to do this is through fair and reasonable personnel policies uniformly applied, regular salary and wage reviews, good supervision, and communication with your employees. Give them more advantages than they would have as members of a union, and you’ll eliminate any need for them to organize.

If a union does approach you with notice of its intention to organize, contact a labor attorney immediately before you do anything else. This is not the time to get tough or make threats. The federal government has strict rules governing union organizing, and these are best interpreted by a labor attorney. You should contact a labor attorney immediately before you take any action, including discussing the situation in any manner with personnel.

Employee Termination

Most of us are employees ourselves and we understand the family crisis that can result from losing a job. We also know that our complaints about the people we supervise rarely express the total picture. In other words, most people do some things better than others. Perhaps an individual possesses a high level of skill working with customers and is hopelessly inaccurate when dealing with money or arithmetic. You may want to restrict that employee’s activity to the areas of strength, or you may provide additional training and supervision. However, in a small operation you may not have the time to provide the necessary extra attention.

Sometimes an employee claims to be indispensable. Perhaps this individual knows something about your building equipment that no other staff person appears to understand. However, there are few things in an apartment building that cannot be quickly figured out by professionals. Certainly, nothing is so mysterious that you should put up with a difficult employee. In fact, terminating the so-called “indispensable” person al most always results in the discovery of a grand omission on the part of the departing employee. Correcting these problems obviously benefits the property.

Countless situations exist in which a valuable employee threatens to quit. A good many of these threats are ongoing and often said in a joking fashion. Nevertheless, the message is clear. When this happens, the time has come to Stop the comments or terminate the employee. You absolutely do not need an employee who walks around telling others it’s time to quit if changes aren’t made. Allowing this to continue means you will lose control and respect. We have all witnessed children who do this to their parents and we may wish we could influence those parents with our advice. When it comes to an employee threatening to quit, our advice would be to grant one written warning (and no more than one) before termination. Remember to check all your termination policies with a lawyer.

Before you terminate an employee, it is crucial to document the incidents that led to the discharge—that way you’ll have the proper records should a disgruntled former employee accuse you of discrimination. When you must terminate someone, handle the situation with dispatch. If circumstances dictate severance pay, then issue a check and dismiss the employee. The final check should not be turned over, however, until the employee gives back all keys, vehicles, tools, and any property of the complex. If you’re providing the employee with living quarters, naturally you must take possession of the space before handing over the final check.

Know your state laws because there may be notice requirements when living quarters are involved. In general, don’t give a two-week notice. If a person is being terminated, your best, safest, and most humane course of action is to make the termination effective immediately. The terminated employee will only do harm to your relationship with other employees, vendors, or residents during those two weeks. Also, it’s absolutely foolish to have a person who is leaving involuntarily train a replacement.

As a final note, you do not need to crush a person’s self-esteem with a recitation of every weakness and fault, nor do you need to quantify the damages that have been caused to the property. It is sufficient to say that things haven’t worked out. This person now has the problem of having no job and an interrupted income; don’t inflict more pain or embarrassment with a sermon.

Employee Turnover

Turnover is an expensive affair. With each change, the training process starts over again, and usually a little something is lost with each new training session.

Your residents notice such turnover. Finding a new set of players with each trip to the office can be frustrating. Residents are forced to bring the new staff up to date regarding the chronology of their occupancy and to adjust to the personality and temperament of the new workers.

The advice for achieving greater longevity is the same advice we’ll offer for selecting new residents: Slow down. Don’t jump at the first hiring opportunity. Complete thorough background and reference checks. If a person has held a number of positions in the past year or so, you should be alert. Hiring and working with people involves personal chemistry. So, while it is possible that you will succeed where others have failed, the odds aren’t good. You will solve an immediate problem if you can quickly replace someone who leaves your operation. Nevertheless, it’s crucial to be aware that you waste time and money when you train someone who ultimately won’t stay.

Assure yourself through investigation that the individual is capable of doing the job. Start out with a trial period during which both parties know that they must prove themselves. A large company can offer advancement and a multifaceted benefit package. A single apartment complex cannot compete with those terms, hut it can certainly respond with a good compensation program, greater individual recognition, and freedom from the politics of working for a large organization.

Turnover is often driven by a need for a particular strength. The four basic disciplines in the management of investment residential real estate are marketing, staffing, organization, and renovation. Each of these areas demands unique strengths. Therefore, as the need for help within a given discipline changes, so does the need for a person with different skills and interests. Finding someone with a flair for all or most of the four disciplines usually doesn’t work because such individuals typically have their own operations.

The need for a particular skill often comes and goes in a period of about eighteen months. For example, consider an apartment complex that has been allowed to deteriorate. First, there is a need for a manager who possesses considerable experience in identifying the work to be done and the skill to direct people to accomplish established goals. Such an individual would be ideal initially, but as the work is completed, the personnel needs change. Next, the complex could benefit from a person with care fully honed marketing skills. As occupancy levels climb, the challenge to your marketing specialist wanes. You might switch to building a staff capable of providing top service to the customer, or you might need to develop an organization to correct deficiencies in bookkeeping, scheduling, or record keeping. If you pause to reflect upon your own experiences, you will probably recall individuals who exhibited competence in one of the four skill areas while demonstrating weaknesses in aspects of the other three.

Shifts occur as the need for different skills arises. Of course, large companies have the advantage in this area because they can rotate their employees according to specialization and need. In general, however, some turnover at the managerial level is inevitable in the business of apartment management.

The Importance of Building Morale

Morale is a hidden force that can push your efforts forward or stop any chance of success. Instilling positive morale requires the kind of leader ship and motivational skills that are the envy of managers in all aspects of the business community. It’s also the subject of countless training courses and books. We need to address the damaging effects of low morale and the ways the motivation level of your staff can he eroded. In a service-driven business, low morale is surely the beginning of the end.

Nonpayment or slow payment of bills does more damage to the staff’s morale than anything else. When a maintenance person is turned away at the hardware store because previous bills remain unpaid, the psychological damage is substantial. People need to feel good about their jobs and they need to feel secure. If a small hardware bill isn’t paid, the newspaper has refused any more insertions, or units have been left unpainted be cause of a lack of money, there’s no way the staff can feel secure or enthusiastic. Sometimes the owner of a group of properties will put on sales training or motivational sessions in an expensive hotel in an effort to brighten the spirits of the staff. People may want to go, but they can’t side step the fact that it would be more helpful to use the money to pay bills rather than funding the sales training. If there are problems with money, they must be dealt with at the highest level. Once financial problems become known to the staff, any positive spirit in the office is lost.

Morale is also damaged by hiring or promoting staff members who are unqualified for their positions. Relatives are sometimes given jobs ahead of staff members with much more experience. Nepotism is a dangerous practice. You should also discourage the possibility of staff members having intimate relationships; office romances often cause break downs in morale and operations.

Displaying a lack of sensitivity is another way to harm employees’ spirit. Firms that have policies that cheat residents of their security deposits are in fact hurting their staff as well as their residents. People do not like unfair policies or methods. Employees may appear to support unfair Policies (because they want to keep their jobs), when in fact they may disagree vehemently. This sets up a lack of respect that will weave its Way through virtually every employee action.

Employee Burnout

Managers and maintenance people are often subject to employee burnout. Ours is a business of basics that must be repeated every day. We clean up the mess of residents who have moved so that we can quickly attract new ones. The more the property is used, the greater the need for cleaning. Good residents seem to leave and difficult residents seem to stay. Properties continually decay, and a property’s ability to attract maximum rents drops just when the operational costs begin to increase. Deteriorating conditions bring less responsible residents, who often cause more damage and are more mobile. Thus the cycle continues at an extremely rapid pace.

When this pattern sets itself in the minds of the employees, the burn Out syndrome has begun. At that point, employees (owners are certainly not immune) no longer put a lot of thought behind their actions. Suddenly, the excitement of maintaining and improving the property is gone. The challenge of learning what prospects want in their housing has been lost. The rewards of resident comments and praise stop. The winning attitude has vanished.

The way to defeat burnout is to constantly experiment with new improvements. When a vacancy occurs, don’t paint the unit white, try some thing special. You might change the carpet, or add some new woodwork or built-ins. If you always plant geraniums in the front yard, try creating new flower beds with a totally different arrangement. Redecorate the rental center or recreational facility, or start over completely and create the most provocative models you and your staff can.

You can learn from the continual progression of department store displays. Even better, watch the most popular fast food restaurants and note the constant evolution of the hamburger, a much more mundane product. Making changes in your product or your marketing approach adds the needed spark to prevent burnout.

The job of initiating change falls to those in supervisory positions, but don’t get caught waiting for someone else. Share your ideas for innovation; create an opportunity to heighten your own sense of job satisfaction as well as that of others. Soon we’ll discuss the value of making changes in the context of retaining residents. Obviously, making progressive changes in your complex will pay dividends beyond the prevention of employee burnout.

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