The Debate on Licensing Property Managers License to Manage

In a number of states throughout the U.S., including Florida, Nevada and the District of Columbia, property managers are required by law to be licensed. This is not the case in New York, although a debate over the necessity of licensing has boiled quietly—and sometimes not so quietly—under the surface for decades. As can be imagined in a city of eight million property-obsessed people, there are myriad voices and opinions on the subject.

The topic first came to the forefront of conversation in the late 1980s. "In the 1980s, there was real scandal in the industry," says Marolyn Davenport of the Real Estate Board of New York (REBNY). The subject, she says, has died down "as people have realized the importance of professionalizing the industry, of training and hiring the top people."

Where it All Began

Today, the only licensing that exists for New York property managers falls under the aegis of the state real estate broker's license. The vast majority of managers in the New York City area hold those brokers' licenses, which includes a component on real estate management within the curriculum required to earn the designation.

If licenses were mandated in New York, the requirements would likely follow those already established in other states. According to background material offered by the Institute of Real Estate Management (IREM), "Although specific regulations can vary from state to state, generally the certification or licensing requires an exam, fingerprint test, certification or licensing fee, renewal fee and some form of continuing educational requirements."

In addition to the broker's license, a substantial number of today's property managers also hold certifications and have taken part in extensive continuing education programs—not to fulfill any state mandate, but simply to get ahead in the game.

In This Corner…

The lines between pro and con on this issue are firmly drawn after more than two decades of quiet and not-so-quiet debate. Many argue that a separate license beyond the broker's license should be required for property managers. While the law covering brokers worked well for the time in which it was conceived—the early 1920s in an era before residential buildings became the serious business they are today—they are no longer adequate. Margie Russell of the New York Association of Realty Managers (NYARM) says that, "in the 1920s, the law was about protecting the money," meaning the rent that brokers were responsible for collecting for property owners. "Today, if even one mistake is made (by a manager) it's very serious business. It's about protecting people in and around these buildings. So NYARM has long felt that there needs to be a separate license for managers."

The preference is for the property management license to be separate from the broker's license. "If you just want to sell apartments, you shouldn't have to learn about management," Russell says, "so we wouldn't want to add this to the broker's requirements."

The Institute of Real Estate Management (IREM) also supports a form of licensing, although they would prefer it to be under the umbrella of existing laws. According to the organization's prepared statement, "IREM believes that the management of residential apartments, condominiums, cooperatives and homeowner's associations involves real estate activities and should require a license under existing state license laws. IREM National supports professional community association management, but is opposed to a separate state mandated license or certification for community association management and urges all forms of real estate management to be under the jurisdiction of existing state real estate broker and agent licensing laws."

The framework for the additional requirements that would be necessary to enact licensing requirements—whether under the banner of existing laws or under new legislation—is already in place, thanks to the many professional organizations that currently provide continuing education opportunities for its members. IREM provides courses that lead to specific designations awarded to real estate managers including the Certified Property Manager (CPM) designation and the Accredited Residential Manager (ARM) designation. NYARM provides training for a New York Accredited Realty Manager designation. "We have been among the loudest and most consistent voices on certification, which is baby steps toward licensing," Russell says.

The extra coursework required to achieve a license would eliminate the problem that exists currently with managers simply having broker's licenses: the vast majority of coursework done to become a broker revolves around topics that are strictly applicable to sales. When these requirements were first established in the 1920s, "these were all new buildings, safe and solid as a rock. The heating was simple, the elevator was simple," Russell says. There was little if any need to understand how to deal with building staff, how to hire contractors, how to deal with budgets or how to decipher a building's infrastructure and maintenance needs.

Organizations such as NYARM understand that there might be hesitation on the part of today's property managers who already have been in the business for a number of years. "I can understand people who feel nervous about taking a test, or who are worried about losing their livelihoods or are worried about taking time away from running their businesses to do this," Russell says. The thought is that new licensing requirements would take significant account of real world experience. "There might be an application process where people would have to document their experience and it would be looked at," Russell says. "Great value would be given to the experiences of those in the industry and that would be appropriate."

In the end, licensing might ultimately protect owners, boards and residents from people who are not possessed of the experience necessary to run what can be a multi-million dollar operation. Managers are entrusted not only with the financial but also the physical well-being of the people living and working in the buildings that so many New Yorkers call home.

On the Other Hand…

Others in this debate would argue that if it isn't broken, don't fix it. Even though the broker's license may not require extensive management coursework, it still provides a means for the state government to control the men and women who call themselves managers. "How much (oversight) does one need?" asks Davenport. "We already have numerous property management certifications. CPMs, RAMs, NYARMs—it's amazing all the different certifications out there."

She believes that instead of state licensing, the boards should be making sure that the individuals and firms they hire meet their own exacting standards. "Boards should be asking if their managers are certified and what kind of training they have," she says. "The industry has become increasingly professionalized." Many firms, Davenport points out, already do a lot of training in-house in addition to the other continuing education available at local universities, colleges and professional organizations.

The basic argument is that because the market requires a certain level of expertise and experience, managers are already forced by the market, rather than the government, to achieve significant standards. "REBNY's members are also subject to the Real Estate Board of New York's Code of Ethics and Professional Practices," Davenport says. This code covers standards of conduct and offers guidelines on such topics as compensation from suppliers, advertising, client referrals, agency considerations and more.

Mona Shyman of the Federation of New York Housing Cooperatives & Condominiums (FNYHC), herself a management consultant, agrees with the upside of licensing. "People shouldn't be able to walk in off the street and say they can manage a building," she says. Licensing "would prevent that from happening." On the other hand, she also believes that "people can go to school and take tests and still be missing something. They need knowledge other than what they find in books." Each building a manager works with is so different, she says, people need to learn on the job under the guidance of their companies and people who have been in the business for years—mentors, of sorts.

She agrees, too, that most managers already go to great lengths to stay ahead of the game in terms of continuing education. "People already do all sorts of things to be certified," she says. "There are so many different courses and workshops and certifications."

If licensing does come to pass, Shyman would like to see managers with a certain number of years' experience "be grandfathered in," thereby allowing them to not have to take time away from their business to attend classes or additional training.

What Happens Now?

The debate over licensing is likely to linger for several more years before any sort of consensus is achieved. In the meantime, certification continues to be a viable option for achieving exceptional professional standards as set by building owners and boards. "Real estate management certification is not required by any governing body," Russell says. "The requirement to be certified comes from owners. An owner might say, 'I want you to be certified,' because they recognize the importance of education. There are government agencies, too, that own properties and many of them want certification."

For now, the best option for boards, owners and residents is to ask questions and get to know prospective property managers. Do they have a broker's license? A handful of certifications? A well-served apprenticeship with a reputable firm? Continuing education credits? The experience to do the job? If it's all there, that's a good sign indeed.

Liz Lent is a teacher and freelance writer living in Bloomfield Hills, Michigan.

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3 Comments

  • I live in NJ can anyone tell me ... do property managers need a license in NJ?
  • Everyone needs oversight, not licensing property managers gives them a free ticket to engage in unethical practices, that's what licensing and oversight is about. It creates a set of standards and go to when unethical practices are alleged. Property management companies must be licensed~ They are handling peoples personal affairs, lives, etc., so are social workers and the like and they must be licensed. License them in New York Now~
  • Licensing is essential with no grandfather clauses. Cooperative buildings in New York City are rift with corrupt managers who use their powers abusively and are self-serving.