Compliance in property management is serious business. With ever-changing laws and regulations, how does the modern landlord keep up? They embrace the technologies to simplify property management compliance.
Importance of Compliance
Industry accountability and standards are the backbone of building trust with your tenants and owners. Accountability levels the playing field and ensures landlords are properly caring for the needs of their rentals and tenants in a responsible manner.
Regulatory boards and governmental agencies put regulations in place for protections against fraud, discrimination, the rights of the renter, and the list goes on. Compliance usually falls under one of three categories:
- Financials Compliance
- Physical Property Standards and Maintenance
- Tenant Relations
But there are barriers and pain points of staying in compliance; mainly it’s difficult to stay up-to-date with so many regulatory boards and agencies and the many compliance changes. Fortunately, there are technologies to simplify property management compliance that can make following those regulations easier.
Financial Compliance
Accounting
Accurate financial accounting is essential to grow and maintain your rental business as well as keep you in compliance with many regulatory agencies.
Regulatory Oversight
- State Real Estate Board
- State Tax Board
- Internal Revenue Service (IRS)
Solutions
Software for accurate accounting such as Quickbooks, Xero, and Sage are excellent examples of software systems designed strictly for aiding in accounting tasks. In addition to bookkeeping software, property management software combines bookkeeping and reports with a robust system for other rental management tasks.
Learn more about Rental Property Management Trust Accounting
Learn more about Quickbooks VS. Property Management Software for Rental Accounting
Payment Processing
Going beyond the simple convenience of automation, collecting rent online by eCheck/ACH, credit cards, debit cards, or electronic cash alternatives is a necessity in this day and age. During the pandemic, online rent payment options dramatically increased the likelihood of tenants paying rent on time according to the Rentec Direct Rental Trends Report. It also cuts down on data entry, check processing, trips to the bank, and data entry errors. Not-to-mention property management companies can pay owners quickly and conveniently.
But payment processing is a highly regulated industry and for good reason. Those regulations are in place to avoid issues with fraud, banking, and data-entry errors.
Regulatory Oversight
National Automated Clearing House (NACHA) develops rules and standards and oversees the development and governance for the electronic movement of money and data in the US.
Payment Card Industry (PCI) Security Standards Council Compliance provides consistency and safety in credit card processing and requires payment processors and merchants to establish and maintain PCI compliance in regards to credit card processing regulations.
Solutions
Merchant processors use technology to transfer funds between financial institutions through the lifecycle of an ACH, credit, or debit card transaction. The technologies they utilize process payments between parties, such as a rent payment or an owner distribution (owner disbursement).
Additionally, some merchant processors are designated preferred NACHA partners which allow new account information to be validated to protect you and the ACH network from fraudulent and mistaken activity.
PCI compliance protects against credit card processing issues and is governed by the PCI Security Standards Council. Both PCI and NACHA have strict and complex compliance requirements and are difficult to maintain without the proper merchant processor who will continue to implement technological advances to stay current with any regulatory changes.
It’s important to choose a merchant processor that has up-to-date technology in place that integrates with your chosen accounting or property management software. With that technology, tenants can take ownership of making secure rent payments through their tenant portal, bookkeeping for payment processing transactions are automated, and opportunities for in-house and payment fraud is reduced.
Some landlords have been receiving funds from services like Venmo, Paypal, Cozy, Google pay, etc. Be sure to check that those services are indeed PCI and NACHA compliant and the compliance extends to protect you, the landlord. Check your state and local agencies to confirm those are an acceptable alternative to a merchant service provider.
Understand that those payment services rarely integrate with landlord software. The best accounting and property management software will already have a preferred merchant service provider available with built-in compliance technology.
Learn more about Important NACHA Verification Changes for ACH Payments
Learn more about PCI Compliance (PCI DSS)
Learn more about NACHA’s Supplementing Fraud Detection Standards
Learn more about Rental Real Estate Terms to Know | Payment Processing
Physical Property Standards and Maintenance
Bookkeeping tasks aside, managing the physical aspects of your property portfolio isn’t immune from compliance concerns. Be sure to stay current with regulatory requirements from regulatory boards and agencies such as:
- State Real Estate Board
- Local city, county, and state ordinances
- Americans with Disability Act (ADA)
- Local Fire Department
- OSHA
Solutions
Landlords are required to ensure the Implied Warranty of Habitability of the rental property. This may include who is responsible for removing snow, HVAC maintenance, ADA requirements, etc. The first step is to stay informed on landlord responsibilities is to check with the departments and agencies like the ones above. From there, it’s all about using technology to schedule inspections and maintain those building standards.
Some maintenance software programs or modules of your property management software allow you to keep notes and set reminders for routine maintenance tasks as well as record and maintain maintenance, tools, and appliance records and data.
Inspection software provides more than simple checklists. These days, the technology built into inspection software allows you to record a video walkthrough, take pictures, create workorders, and more. Many landlord software programs integrate well with inspection software such as zInspector. Inspection software technology not only helps keep all your inspections, maintenance, and repairs organized but also allows for social distancing with virtual inspection options.
Learn more about how Virtual Inspections Keep Renters Safe and Promote Social Distancing in Rental Properties
Tenant Relations
From tenant screening to lease signing, the lifecycle of a tenancy is improved using modern technology. Some areas of compliance regarding tenant relations are the Fair Housing Act, credit reporting storage and permissions, and eSignatures
Solutions
Online tenant screening companies with their proprietary software can provide a level of compliance for access to reports. Additionally, there are providers dedicated to help tenants access that information in a self-serve manner and securely email the reports to the landlord such as Apply Connect.
Again, many landlord software programs will have built-in compliant technology that allows them to access and store credit and background check reports within the program. The software should auto-purge out-of-date credit and background tenant screening reports in compliance with standard practices.
Using proprietary software, landlords today are able to stay compliant with the Fair Housing Act as well as State regulations regarding the questions they can ask in their rental application by allowing for application customization.
Electronic signatures have been approved for some time now to sign a legally binding document. That technology is a huge benefit to landlords as they no longer need to have in-person lease signing sessions and can store those documents securely within a property management system. eSignature software such as HelloSign is often another component of a good landlord software suite.
Learn more about Updated State Anti-Discrimination and Federal Fair Housing Laws
Learn more about HelloSign for Success with Electronic Signatures for Your Rentals
To stay ahead of the curve and on the right side of federal, state, and local regulations many landlords turn to a robust property management software suite. In addition to the above, landlord software often has other built-in technologies that help a property manager stay compliant. For example, it may have a robust file library that makes sharing a required disclosure directly to an online tenant portal easy.
From being prepared for a real estate board or tax audit to avoiding fines and penalties for non-compliance, technology is available today that is easy to learn and easy to use to simplify property management compliance requirements.