Landlords may be concerned about the employment status of on-site employees. Learn about worker categorization and the dangers of misclassification.
What you’ll discover:
If I exclusively hire contractors, am I an employer?
Are rental property managers paid?
Are rental property maintenance staff classified as employees?
As a landlord and employer, what tax and liability concerns do I face?
Individuals who manage a single property to large organizations with thousands of units are all examples of landlords. In any case, a landlord is a company owner who is concerned with more than just renting out apartments. One point to consider is when you employ personnel or provide free rent in return for on-site services.
Table of Contents
If I exclusively hire contractors, am I an employer?
It is not always evident whether a worker is an employee or a contractor. You may not want to think that since you solely employ independent contractors, you have nothing to worry about. If such contractors are legally obligated to be regarded and paid as employees, they may face expensive fines and penalties. Hiring independent contractors or service providers for one-time repairs or seasonal maintenance will not usually result in a landlord becoming an employer in the conventional sense.
When you are deemed an employer, you have several legal and practical repercussions. Consider the following:
Federal and state taxes are withheld.
Providing compensation for workers’ compensation and unemployment insurance.
Your obligation to an injured worker.
Your obligation to a renter for a worker’s behavior.
It is your legal responsibility to check an employee’s right to work.
Your whole working connection.
If you decide to use contractors, you should have an Independent Contractor Agreement in place that details the scope of their work and remuneration. If you hire someone to perform continuous services, you should consult with a lawyer to determine whether that person should be classified as an employee or an independent contractor.
Are rental property managers paid?
There are two kinds of rental property managers. One works directly for a landlord as an employee, while the other works for a property management firm hired by a landlord.
Due to real estate license rules, this may be a rather simple difference in many states. Several states require that anybody managing renting and leasing have a real estate license or work for the landlord. The IRS and many states often consider licensed real estate brokers as independent contractors.
Property Managers on the Job
Since the landlord controls their work and hours, a property manager who works for a single landlord is likely to be regarded an employee. Although if the property manager has a lot of freedom, their tasks are quite similar to those of managers in other sorts of firms who are obviously employees. Employee property managers are required by law in several places, including California, for larger multifamily complexes.
In jurisdictions where a property manager is not required by law to be categorized as an employee, a landlord may nonetheless be deemed an employer if they have extensive influence over the property manager’s job.
Another consideration is that offering a rent-free apartment to a renter in return for property management services may be considered remuneration. As a result, the renter may be considered an employee, and the landlord may be required to pay employment taxes and other duties.
Job offer letters, employment contracts, and employment agreement amendments may assist define your expectations of workers and what they should expect from you.
Property Management Firms
Outside vendors, or independent contractors, are often real estate brokers and property management organizations. They often have a large number of customers and are compensated according on the services they deliver. Property management businesses that provide additional regular services, such as rent collection and maintenance, often have control over the services they provide and who they may contract to do the job. Yet, if a property management business violates labor regulations, a landlord may be regarded a joint employer in specific cases.
Consult a lawyer if you are unclear if a worker should be categorised as an employee. These decisions may be difficult to make, and the repercussions of getting it wrong can be expensive.
Are rental property maintenance staff classified as employees?
Employees and independent contractors may both work in the maintenance industry. That depends on what they do and how much authority you have over them.
Your employee might be a full-time or regular part-time person you engage to work on your property. If you contract out certain tasks to established businesses or single owners who perform the same work for others, they are most likely not employees. If you utilize a property management firm, it is probable that they have regular employees who are not your employees.
As a landlord and employer, what tax and liability concerns do I face?
Many companies mistakenly feel that just because it is simpler, they may categorize a person as a contractor. If you engage a worker as a contractor, you may believe you may avoid tax withholdings or additional tax forms. The fact is that whether someone is an employee or a contractor is determined by their actions and the amount of control you have over them.
Several rules may be used by the IRS, state taxation authorities, the U.S. Department of Labor, state labor departments, and other government entities to decide whether someone is an employee. If you are unclear if your employee is an employee, you should consult with a lawyer.
If you mistakenly categorize an employee as a contractor, you should be aware of two things:
To begin, a misclassified worker normally possesses all of the legal rights that an employee does.
Second, you may be fined or required to pay more taxes if you misclassify someone as a contractor.
If a misclassified employee complains or sues you, they may be entitled to back pay, unpaid overtime, breaks, vacation money, and other benefits.
Lastly, you may still be held accountable to or for a properly classified contractor. For example, they may not be eligible for workers’ compensation, but if they are hurt while working for you, they may be entitled to pursue a personal injury claim against you. If a contractor injures your tenant, steals from him, or causes him other injury, the renter may be entitled to sue you since you hired the contractor.
