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Licensing of owners and managers?

Bills to require the licensing of most owners and managers of residential property have been introduced in the New York State legislature.

While one bill was introduced by Senator Donald - M. Halperin of Brooklyn at the urging of the New York Association of Real Estate Managers, another bill, sponsored by Assemblyman Ivan C. Lafayette of Jackson Heights, was motivated by the theft of money from a Queens co-op several years ago. Other residential real estate groups, however, are unhappy with the measures for a variety of reasons.

Licenses Owners

The Halperin measure, S3982 has as its Assembly sponsor, Assemblyman Daniel L. Feldman of Brooklyn. It exempts only tenant associations, owners of owner-occupied dwellings or an owner of a building containing six units or less that the owner self-manages. Additionally, it exempts regularly salaried officers or employees of managers who do not perform management services or whose compensation is not keyed upon the performance of management services. It also grandfathers those with proof of two years experience.

This bill is geared towards the education and competency of property managers and directs the Secretary of State to approve institutions to give courses that would include studies in operations, maintenance, security, energy conservation and basic legal principles of contracts, tenant and labor relations and agency.

There would be an application fee of $50 as well as an examination fee. The license fee would be $150 subject to a 10 percent increase every two years but there would also be a $150 annual registration fee.

Penalties range from $500 to $2,500 for issues involving licensing requirements while the attorney general is empowered to pursue criminal penalties. The offender can also be liable to the aggrieved party for a penalty of up to three times the money received as compensation or profit.

Aimed at Co-ops

Lafayette's bill is geared only toward cooperative and condominium management and those who collect and disburse money on behalf of such entities. It calls for a $400 application fee and $250 two-year renewal fee but there is no educational requirement.

The manager would have to identify the buildings managed within 10 days, report a change in financial circumstances" within five days as well as make an annual expense report filing.

Under the license, a manager is required to show evidence of financial security in the form of a bond or guarantee from a financial institution.

Real estate and security brokers, as well as licensed bankers and attorneys would be exempt from the licensing requirement but would still have to register buildings and prove financial security.

Fines would range up to $5,000 for not following licensing requirements to the pursuit of criminal actions by the attorney general and payments after suit to aggrieved parties of up to four times the sum of compensation or profit.

Thomas Raffaele, counsel to Lafayette, said they recently met with the Real Estate Board of New York, which has made some suggestions with regard to both the approach of the bill and its details that they would be exploring this week. Complaints included its preoccupation with the financial stability of managers as well as its lack of competency requirements. That bill, A6739 has no Senate sponsor.

The Apartment Owners Association, Inc. (AOA) President Irwin Gumley, who is also president of Gumley-Haft Inc. said he participated in the REBNY meeting and was most disturbed by the bonding requirements, which he deemed "outrageously high."

Gumley thinks all real estate managers should be at least licensed real estate salespersons and brokers and if anything, he noted, those requirements should be "tightened up."

Richard Stone, a property manager and president of the New York Association of Realty Managers (NYARM), which has its own certification program, believes the Halperin bill is the best of the two. "Our whole thrust is to do something beneficial for the industry," he explained. I'm hoping that some of the groups with clearly identified, respected program will be able to provide the basic educational requirements."

Stone felt the two years was aimed at gathering more support and thought 10 years of experience would be a better indication of competency.

In a recent newsletter to NYARM members, Stone wrote the "new respect will translate into even better compensation for property managers. After all," he continued, "a better managed property will run far more economically, more than justifying and certainly offsetting increased manager fees and salaries."

That concept has Federation of New York Cooperatives President Charles Rappaport hopping mad. "What a bunch of malarkey!," he said. "The fact that the person is licensed in and of itself does not guarantee competency," he noted, pointing to attorneys, accountants and even automobile drivers. "Licensing isn't going to make good managing agents."

Rappaport believes the vast majority of managers are doing a competent job now and if they aren't, the building will switch because there is enough competition to ensure that happens. He noted the boards already have a pool of people to chose from with professional certification from organizations like NYARM and the Institute of Real Estate Management (IREM).

Stone agrees with Rappaport that a manager shouldn't expect that holding a license entitles them to more money but he believes further education of some managers will increase their competency and could result in savings to some buildings.

Hilary H. Becker, CPM, president of Becker Real Estate Services, Inc. and the Greater New York Chapter of IREM, which has an accreditation program resulting in the trademarked "Certified Property Manager" designation, said the IREM national organization is opposed to such licensing. "We have an extensive educational and experience process and we have a whole list of ethical standards and people take them seriously," he explained.

Becker noted there is already a license requirement for those who work in real estate, pointing to the brokers and salespersons course. You could hold more management courses for brokers and salespersons," he suggested. "To create a whole new bureaucracy doesn't make any sense. The last thing we need is more government regulation - more fees, more courses - businesses are already strapped."

Becker said he would rather have people attending round-table luncheons and improving the industry than filling out forms and writing a check.

Halperin's spokesperson, Joseph G. Montalto, said the bill, would help to "weed out the bad from the good" and make sure the services are properly maintained.

Stone has also questioned the advisability of accepting a Department of Housing and Urban Development designation as some have suggested because HUD approval does not automatically qualify the person to manage other types of housing. At a recent NYARM luncheon, Halperin responded that a compromise that would not undermine the main thrust of the bill, but gather support, could be warranted. He noted that while the Secretary of State could recognize existing entities it might not require a separate training program.

For a few hundred dollars and a course, Montalto said, the requirements of the Senator's bill are not so overly expensive that people would feel they have to increase their fees. "I don't know how you can make a leap to |it will increase the cost of operating the building,'" he added.

Dan Margulies, executive director of the Community Housing Improvement Program (CHIP), which represents owners and operators of multiple dwellings, said that while the CHIP board has not taken an official position, his instinct is to oppose licensing. "I'm torn by a recognition for a need for professional management and a concern that licensing is a placebo," he said.

The typical CHIP member owns his property and manages it himself. "No one knows better what his bottom line is or pays attention more to controlling costs," Margulies noted. "I don't think an owner needs to go to school to figure that out."

When they are hiring a manger, he said, it is always important to check references and examine accreditation by professional associations but licensing tends to become a crutch." Being professional makes sense, licensing does not."

Margulies also pointed to the unusual circumstances of the City of New York's rental regulations. "I cannot conceive of a program other than, working in a real estate office that could possibly cover the peculiarities of our laws" he said. "It's an ongoing process."

Someone with experience in doing MBR might never obtain a license but be invaluable for doing MBR, he added.

Michael J. Wolfe of Midboro Management thinks licensing is a great idea. "People should have basic knowledge," he said, "at least for the owners of the corporations." If you started to test every managing agent, he added, they would not be able to pass. Wolfe said he carries a fidelity bond and only signs checks himself.
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Title Annotation:bills introduced by New York State legislature concerning residential property
Author:Weiss, Lois
Publication:Real Estate Weekly
Date:May 26, 1993
Words:1442
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