The Ins and Outs of Regulating an Industry Manager Licensing in New Jersey

In Florida and the District of Columbia, among other states, property managers are required to be licensed in order to do business. As of now, managers in New Jersey have no such requirement; however, the topic does generate great debate.

Some property management professionals and organizations feel the system works fine as it is and that licensing property managers would make for more red tape and generally be more work than it's worth. Others feel that management professionals should be licensed or credentialed, since this is the only way to ensure ethics and standards in the industry.

Florida Leads the Way

In 1987, Florida became the first state to pass legislation that required property managers to be licensed. Florida lawmakers adopted legislation during the 1987 session requiring all those providing community association management services to be licensed as of October 1, 1986.

Those who already provided these services as of this date were given a grace period or 'grandfathered' period of another year before they had to comply with the pre-licensure requirements and pass the exam.

"The licensed community association managers [in Florida] support licensing for the most part," says Lisa Magill, Esq., a shareholder at the Fort Lauderdale-based law firm of Becker & Poliakoff, an attorney who practices exclusively in the field of community association law. "The vast majority of attorneys practicing in this area of law are likewise in support of the regulations, including the background investigation and continuing education requirements."

Magill points out that there have been several attempts in Florida to deregulate the industry since this legislation passed but the public outcry was so strong that the practice of licensing managers has remained.

"Community association managers often have access to and control over hundreds of thousands of dollars belonging to the communities they manage," she explains. "They are in a position of trust, especially with respect to older residents. Moreover, in some communities managers have access to the units and all the personal property therein."

She maintains that licensing is a way to protect the homeowner from the abuses of an unethical or incompetent property manager.

For the most part, Magill says that industry group opposition to licensing managers is not an issue in Florida. In fact, some even feel that managers are not regulated enough.

"There is a desire among many Floridians to increase disciplinary efforts and create more remedies against managers that violate the standards of conduct," she says.

Who Supports Licensing?

In addition to local support in various states, the Community Associations Institute (CAI) and the National Board of Certification for Community Association Managers (NBC/CAM) have long supported manager licensing.

According to Chuck Achilles, vice president of legislation and research for the Institute of Real Estate Management (IREM), these organizations have been instrumental in efforts to advance state mandated community association manager licensing.

IREM agrees. Since managing condos, co-ops and homeowners associations requires a manager to get involved in real estate activities, IREM asserts that managers should be required to hold a license under existing state license laws.

The best way is for all forms of real estate management to be under the jurisdiction of existing state real estate broker and agent license laws, according to their position statement.

Achilles says IREM supports placing the ongoing regulation and management of the licensing process under the jurisdiction of the state real estate commission. They believe that "the state real estate commissions provide the most appropriate means to regulate and monitor the real estate industry and protect the consumer."

Licensing Benefits

Most people see management as a serious business. As Magill pointed out, managers of community associations often have access to large amounts of cash belonging to homeowners, who trust that their managers will put their best interests first.

In Florida, licensing is a way to regulate how capable—and principled—property managers are.

"Licensure ensures that managers have at least minimum skills," says Magill, whose firm represents over 4,000 associations in Florida, including condos, co-ops and homeowners associations. "All candidates are required to disclose whether they have a criminal history and a background check is performed by the Florida Department of Law Enforcement. The candidate's history is evaluated and inquiries are made to determine whether the candidate has good moral character."

Although licensing has not come to New Jersey yet, some are buzzing about what it could mean for the property management industry.

According to Curt Macysyn, executive vice president of the New Jersey chapter of the Community Associations Institute, no one particular incident spurred action.

"The impetus is to 'professionalize' the industry," he says. "At this point, the debate has centered on manager certification, not licensing. The debate has not advanced enough to have folks line up on either side."

Macysyn says that certification would have lighter standards but would still allow the state to track managers in the industry.

Professionalizing the industry would not only require licensing but would also offer a set of standards to which all property managers should adhere. Some see this as a drawback to an already unpopular industry, where new entrants are not often seen.

Others think that licensing would be beneficial in providing guidelines where there currently are none.

"There are no guidelines. Anyone can open a property management company," explains Joseph Balzamo, Jr., owner of Alliance Property Management in Morristown. "They don't necessarily have the qualifications. In my opinion, people should know what they're doing before they say they're going to be in a management position. That doesn't necessarily always seem to be the case."

In Florida, property managers are required to complete 18 hours of classroom instruction before being permitted to take the licensing exam. The coursework reviews state and federal laws relating to the operation of community associations. It also teaches property managers about issues relating to nonprofits, proper budgeting for associations and financial practices, the procedures for noticing and conducting meetings, insurance issues and other management skills, says Magill.

"To retain a license, managers must adhere to standards of professional conduct," Magill explains. "They may be disciplined or risk losing their license for violations of those standards and the laws."

"You should have a certain degree of competency in anything you do before you say that you can do it," adds Balzamo, whose management company primarily manages condos. "I wouldn't hire a plumber if I didn't think they could do plumbing. Their license tells me they are competent to do plumbing. As far as property management goes, there's no standard [in New Jersey] that shows whether you are competent."

"Consumers would know that if [their property manager] didn't perform, they risk their license," he adds. "I think it's fair to say that consumers should be provided with a certain degree of decorum and that managers should be willing to work with a certain degree of quality."

Grandfathered In

One worry that Balzamo and others have is that current property managers who have long been in business will somehow be negatively affected by licensing laws.

In Florida, managers were grandfathered in for one year. This "grandfathering" provision allowed current managers time to complete the coursework, have the background check performed and pass the exam, according to Magill.

"While I'm not against licensing, I wouldn't want to be put out of business due to criteria that are unattainable," argues Balzamo. "I've been in business for awhile and made a number of inroads. I wouldn't want to be denied an ability to perform. But for new entrants into the market, I would like to see some established form of criteria," he says. "You don't want everybody in this business, especially if they don't know what they're doing."

Macysyn agrees that any licensing proposal in New Jersey would need to include a grandfathering clause, so that managers currently in the field have time to complete the requirements.

"The only drawback I see [to licensing] is that there is a lack of managers in the industry," Macysyn states. "Then again, formalizing a structure may make community management a career path."

Higher Education

If legislation is passed in New Jersey as it was in Florida and other states, it's likely continuing educational opportunities will be offered by organizations like IREM or CAI.

"Many different types of entities may qualify as providers of continuing education," says Magill, who serves as president of the Southeast Florida chapter of the Community Associations Institute (CAI) and has conducted numerous presentations regarding community association governance and laws for managers, attorneys, board members and others.

In Florida, the state statute passed in 1987 created the Regulatory Council of Community Association Managers within the Department of Business and Professional Regulation. This seven-member council, appointed by the governor and confirmed by the Senate, approves continuing education courses and providers.

In fact, IREM encourages state legislators now and in the future to consider the educational courses and designations awarded by IREM as valid criteria for standards for potential licensing. Courses would provide education on all aspects of real estate management.

Domini Hedderman is a freelance writer and an aspiring novelist living in Erie, Pennsylvania.

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