Without a doubt one of the most confusing aspects of residential management is what the requirements are for an on site or resident manager. In California, if there are 16 units or more a designated ‘responsible person’ is required to live on site. As the number of units increase so does the staffing requirements. The compensation for this position is governed by State and Federal rules and regulations. First of all, the resident manager is an employee and generally cannot be an independent contractor. They are therefore entitled to the minimum wage of $8.00 per hour, with some municipalities having an even higher minimum. If an owner wishes to trade off an apartment value, the minimum wage value cannot exceed $451.89 or approximately 13 hours per week. Two managers living in the same unit cannot exceed $668.46. In any case the credit amount may not exceed two thirds of the market value. Therefore, if a unit is valued at $1,000 per month the owner can only charge a resident manager two thirds of that or $666.66. The owner may also only credit for a single manager $451.89 towards minimum wage leaving the manager to pay $214.77 and working 13 hours per week. Any additional hours must be paid as a normal payroll would be. The offset to rents can only be done by a written contract. The hours and restriction to hours is critical to this agreement and many owners have lost wage claim lawsuits brought by resident managers. Therefore it is critical to have a written agreement, not to exceed the two thirds rule and comply with the minimum wage requirement to protect and properly manage the relationship with the resident manager. The following are options for compensating a resident manager.
Full apartment concession; the manager does not pay rent or exchange hours for rent
Manager is paid at least minimum wage for every hour worked
Example: Manager receives a 1 bedroom apartment free of charge and works 40 hours per week at a rate of $9.00 per hour
Maximum lodging allowance by law of $451.89 for one person & $668.46 for two people
The number of hours a manager’s works is calculated based on the lodging allowance (451.89) divided by minimum wage ($8.00).
If the manager works more than the number of hours calculated using the formula above, each additional hour must be paid at prevailing minimum wage.
Example: Manager (one person) receives a 3 bedroom apartment. The maximum lodging allowance is $451.89/$8.00 = 56.48 hours per month
The manager is only allowed to work 56.48 hours per month in exchange for the apartment. If the manager works more than 56.48 hours per month they must be compensated for those hours at minimum wage.
The unit size of the manager’s apartment does not affect the number of hours the manager is allowed to exchange.
The Check Exchange
A manager may be charged up to 2/3rds the market rent. The manager pays their rent and receives payment for each hour they work.
Check exchange literally translates to the manager gives the property a check for rent and receives a check for their hours worked.
Example: Manager receives a 2 bedroom apartment with a market rent of $1500 per month; 2/3rds of the market rent is 999.00, which is the Manager’s monthly rental payment.
The manager works 30 hours per week and is paid at least minimum wage for each hour they work, which they receive from the owner each pay period