New Resident Manager Laws in California

To start the new year on the right foot, California apartment owners must be aware of the new resident manager laws that are now active in 2023. With an increase in the minimum wage, stricter contracts, rent credit limits, and more, it is essential for owners to follow the implemented guidelines to ensure they do not incur unnecessary profit losses during the year.

Notable Law Changes and Owner Obligations

• First, apartments with 16 or more units without an on-site owner must have a “manager, janitor, housekeeper, or another responsible person” living on the premises. However, owners should remember that the law does not give any specific guidance regarding the “responsible person’s” work responsibilities or schedule, making this slightly more manageable for off-site owners to navigate.

• Another significant change enacted on January 1, 2023, is the increase of California’s minimum wage to $15.50, which, unlike previous years, is not affected by the number of employees an owner has at the time. It is essential to point out that if an owner fails to comply with the new minimum wage, they will owe the workers double the amount needed to make up for the income lost.

• Owners must pay employees twice per month and have an accurate time sheet for each employee. Employees who work five hours a day or more are owed a 30-minute lunch break, which must be recorded on the time sheet.

• An owner must reimburse the resident manager for cell phone expenses if they use a cell phone for work. This also includes wifi charges that the resident manager needs to use for work.

• Lastly, as of June 2022, if an owner has five or more employees, they must offer a retirement plan to workers.

Rent Credit vs. Check Exchange: Which Is Financially Beneficial for the Owner?

Apartment owners can implement various payment options when paying their resident managers. These options must be in federal compliance with the Industrial Welcome Commission’s Wage Order and the state’s Labor Code. Two popular options include a rent credit and a check exchange. A rent credit entails reducing the manager’s rent and transferring the savings to their compensation — assuming the owner has an adequately constructed written contract that allows them to do so. Without a valid written contract, the law states that the owner still owes the resident manager their unpaid wages and liquated damages of penalties.

As of January 1, 2023, there have been two slight amendments to rent credit limits: first, a rent credit can be no more than two-thirds of the expected rental value of the apartment. Second, if the average rental value of the apartment is $1,800, the maximum rent that may be charged to an individual is $847.12 and $1,253.10 for a couple.

On the other hand, a check exchange allows the owner to pay the resident manager for their work hours and separately charge the manager for the apartment rent. If an owner chooses to employ a check exchange, the wage order’s rent rate restriction no longer applies; instead, the owner can charge up to two-thirds of the apartment’s fair market rental value. Depending on the value of the flat, employing a check exchange instead of a rent credit may be more cost-effective.

Overall, it is advised apartment owners stay in the know on current laws and regulations that are often evolving. Being informed helps avoid employee issues and keeps owners on the same page as the local government.