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When it comes to property manager licensing, Idaho is still the Wild West

Andy Probst Park Place cropped

Andy Propst (right) with Tyler Hildebrand with Anderson Construction and Autumn Boulton with Park Place Property Management at the Cantabria Apartments, a new complex that Park Place manages. Photo by Pete Grady.

Barbers, beauticians, and shorthand reporters all need to obtain a license before they can set up shop in Idaho. But for a would-be real property manager, the process is as easy as signing up a client.

Idaho is one of only five states with no real estate broker or property management licensing requirements for property management companies. It’s the Wild West when it comes to keeping track of rent payments and security deposits, or keeping track of those who collect them, said Andy Propst, the president of the National Association of Residential Property Managers.

“If the property manager wants to take the money and run, there’s nothing (the property owner) can do,” said Propst, who is an Idaho property manager. “It is a civil matter, not a criminal matter.”

Idaho also has no requirements for property managers to secure rents or security deposits in trust or escrow accounts and no regulatory agency audits or monitoring these funds, something that is commonplace in nearly all other states.

Propst  is president of Park Place Property Management in Meridian, the Treasure Valley’s largest property management firm. Park Place manages 2,500 units, including 900 single-family homes and 12 apartment complexes.

Propst is crusading to bring Idaho alongside nearly all other states with property management laws and licensing. But there is no universal endorsement to license property managers, even among other Treasure Valley property managers who have been national presidents of NARPM.

“I’m happy with the status quo,” said Marc Banner, owner of Realty Management Associates in Garden City and the NARPM president in 2005. “Having a license does not solve the problems. Government creates more problems than it solves.”

Square feet in column blurbTony Drost, president of First Rate Property Management in Boise, wrestles with positive aspects of free enterprise that he associates with Idaho’s tradition of relatively minimal regulation. It’s balanced by a lack of accountability regarding what property managers do or don’t do.

“It’s tough,” said Drost, NARPM’s national president in 2011. “I do like that we have small thriving businesses because we don’t have a lot of bureaucracy. (But) I think the barrier of entry has got to be a little harder. There have to be some kind of requirements. The thing that concerns me is where do you stop it (how much regulation).”

Propst, Banner and Drost, despite their varying stances about property manager regulations, are themselves all licensed real estate brokers.

“The local NARPM is all over the board (about licensing),” Propst said.

Their contrasting viewpoints mirror the for-and-against dynamic across the property management and real estate community. The lack of consensus has stifled any action from Idaho Real Estate Commission, said that group’s executive director, Jeanne Jackson-Heim.

jeanne jackson-heim

Jeanne Jackson-Heim

“It’s one of those things some people really want it, some people really don’t want it,” Jackson-Heim said. “I don’t know if in my job it’s my place to have a strong opinion on what should happen.”

Jackson-Heim established a task force three years ago to address the regulation of property management, and invited several in the real estate sector to take part.

“We had maybe four-five show up in the core group,” she said. “They were not all of one mind. We’ve done nothing in the last two years. We were looking at some draft legislation, but never got much farther than that. We need to do something to reconvene that group.”

At one time, earlier in the millennium, Boise had more property management firms than San Antonio, the nation’s seventh largest city, said Drost, whose firm manages just under 1,000 units – smaller apartment complexes and single-family homes.

“If you look at the number of property managers in Boise to other like-size cities, you won’t find as many (in other cities),” Drost said. “That aspect is good. But you can become a property manager and not do a damn thing.”

Propst said 15-20 years ago there were relatively few property managers in the Treasure Valley, but the numbers grew staggeringly in the 2000s as Boise-Meridian-Nampa grew into a single mass. The area’s population has grown 44 percent since 2000. Because there is no oversight, nobody knows how many property management companies there are in the Treasure Valley, said Propst, who estimates there could be more than 300.

The primary issue is that property managers receive rent payments and security deposits on behalf of the property owners. Often, those property owners live in other states. Even if property owners are local residents, there is no formal, state-sanctioned avenue guaranteeing that the renter money gets to the property owners. Ultimately, the property owner is responsible for getting security deposits back to renters.

“There is no regulatory body that audits those,” Propst said. “Some people are co-mingling operating funds with security deposits and rents. You go 50 or 60 miles to the west and do that, and you go to jail.”

Keeping deposits and rents distinct from operating funds prevents property managers from spending money that shouldn’t be spent, Propst said.

Propst believes Idaho should require trust or escrow accounts for rents and security, as many states do. He said they should be audited by a state agency. The other four states with no real estate broker or property management licensing requirements for property management companies are Massachusetts, Vermont, Maryland and Maine.

“I think the Idaho Department of Finance should do it,” Propst said.

The Idaho Department of Finance would support Idaho Real Estate Commission efforts to pursue property management regulations, but Finance Director Gavin Gee does not anticipate overseeing or auditing trust funds.

“Probably the more appropriate place would be the real estate commission,” Gee said. “My experience is to have the licensing agency conduct the audits. It’s awkward (when two agencies do it). It’s easier for the regulated people to know they are dealing with one agency.

“We do see a need for it,” Gee continued. ”Both the experiences in Idaho and other states, there is a need for some type of regulation. You are talking about a lot of money.”

Jackson-Heim has fielded a number of calls that illustrate Propst’s “Wild West” description of property management in Idaho.

“It puts our consumers at risk by not having some sort of oversight,” Jackson-Heim said. ”People run out of their states and come here to open up shop. I had a guy call who just got out of prison for money laundering and having two fake passports. He thought he would come here and set up shop here as (a Realtor). There’s no way for you to know if the person you are dealing with is reputable.”

Numerous property managers have caused problems in the past decade or so. Among them, real estate developer Jerry Gunstream was sentenced to prison on grand theft charges for siphoning some $400,000 in rent money from Holly Plaza in Nampa and Cherry Plaza in Meridian. 4-U Property Management shut down in 2007 with several clients saying the company owed them money.

“It has happened in the past, multiple times,” Propst said.

Jackson-Heim often fields calls from puzzled Idaho property owners, many who live in other states.

“A property owner called me: ‘We have bought a property for investment but the property manager has not sent us a cent,’” Jackson-Heim said.  “Any time you have money passing through it would be nice to have the ability to check on it. I think we have something we have to keep an eye on.”

Banner, who opposes licensing, has worked in property management in Idaho for 36 years. He manages about 250 units, about 70 percent of them single-family residences.

“I had the benefits of building my business without government interfering with me,” Banner said. “I would never do this in Oregon or Washington. They dictate what you can charge. You can’t charge a late fee.”

Banner does acknowledge he sees benefits to both licensing and no licensing.

“I’m not supposed to say this, but licensing would create a barrier to entry (for some new property managers),” Banner said. “Because we have a high level of competition, consumers are benefiting from lower fees.”

Drost similarly weighs the pros and cons of licensing in Idaho. He took part in Jackson-Heim’s task force.

“The committee talked about other states and some laws are good and some are bad,” Drost said. “I don’t know if a real estate license is the way to go. The No. 1 thing is protection of funds, whether a trust fund or just an audit of your accounting.”

Drost wants to keep any state licensing simple.

“Just some basic criteria and some basic laws,” he said. “We don’t want to go crazy. Just some basic principles and guidelines.”

About Teya Vitu

Teya Vitu is an Idaho Business Review reporter, covering commercial real estate, construction, transportation and whatever else may intrigue him in the moment. Join me on Twitter at @IBR_TeyaVitu.