This article discusses the hiring of a resident manager, the pay and reporting regulations and the termination of the resident manager’s employment and occupancy.

Employees: not independent contractors, not tenants

A broker, retained as a property manager, hires an individual as an on-site resident manager to handle the daily operations of an apartment building comprising 16 or more residential units. The resident manager enters into an employment contract with the property manager. [See Form 591, accompanying this chapter]


A resident manager’s right to occupy a unit ends upon termination of his employment.

Under the employment contract, the resident manager:

  • acknowledges he is an employee of the property manager; and
  • agrees to vacate the property on termination of employment.

The resident manager’s job is to show vacant units, run credit checks, negotiate and sign leases, collect rents, supervise repairs and maintenance, serve three-day and 30/60-day notices, etc.

In exchange for his services, the resident manager receives the use of an apartment rent-free.

Later, the property manager terminates the resident manager’s employment.

The landlord demands the resident manager immediately vacate the premises and relinquish possession of the unit to the property manager.

However, the resident manager claims he is a tenant and does not need to vacate until he is served a notice to vacate.

Is a resident manager who holds the right to occupy and use a residential unit as compensation for managing an apartment complex entitled to a notice to vacate?

No! A resident manager who occupies a unit after termination of employment is a tenant-at-sufferance – a holdover tenant who does not have a right to a notice to vacate since the term of his occupancy was fixed in the resident manager agreement until the date of termination of employment. [Roberts v. Casey (1939) 36 CA2d Supp. 767]

On termination of employment, a resident manager is not entitled to retain possession of the unit since the term of occupancy expires on termination of his employment. Possession of the unit is part of his compensation and the compensation ends, as agreed, with the employment.

Also, the resident manager who is being evicted by an unlawful detainer (UD) action cannot defend his possession by asserting a good cause must exist for terminating his employment or by relying on local rent control ordinances. [Tappe v. Lieberman (1983) 145 CA3d Supp. 19]

Unless the resident manager employment agreement provides for the creation of a tenancy following the termination of employment, such as a monthly rent payment after termination, the property manager may begin eviction proceedings against the resident manager on termination of the employment without serving any notices, other than the notice terminating the employment and the occupancy as agreed in the resident manager employment agreement. [Calif. Code of Civil Procedure §1161(1)]

Resident manager activities

A resident manager is a person who lives in a residential unit, on either residential rental property or nonresidential property, as an employee managing the daily operations of the property, including:

  • screening tenants and negotiating leases;
  • cleaning vacated units;
  • supervising landscaping, maintenance and repairs;
  • serving notices; or
  • attending to tenant inquiries.

Apartment buildings with 16 or more units must have an owner, resident manager or responsible caretaker living on the premises to manage the property. [25 Calif. Code of Regulations §42]

Resident managers do not need to be licensed to negotiate leases or collect rents. However, the nonresident property manager, other than the landlord himself, must be a licensed real estate broker. [Calif. Business and Professions Code §10131.01]

Hiring a resident manager

Brokerage activities of concern to a property manager when employing an on-site resident manager include:

  • selecting and hiring the resident manager;
  • overseeing the resident manager; and
  • terminating the resident manager’s employment.

The resident manager’s status as an employee is established in the employment agreement.

Any family members of the resident manager should be listed in the employment agreement as living with the resident manager, noting they are not tenants. They are employees required to reside in a unit on site.

References to the parties in the employment agreement identify the property manager/landlord as “employer” and the resident manager as “employee.” [See Form 591 §4.9]

Payment for services

Depending on the size of the complex, the resident manager may receive occupancy of a unit in the complex as compensation for his services based on:

  • a reduced rent in exchange for the value of the resident manager’s services;
  • free rent for services; or
  • free rent plus a monthly salary.

As a result of the degree of control the property manager retains, a resident manager does not qualify as an independent contractor.

 On the resident manager employment agreement, the salary paid to the resident manager is stated as a monthly amount. The fair rental value of the resident manager’s unit is deducted from his salary. After the rent deduction, the resident manager is paid the balance of his salary. Utilities may also be included as part payment for the resident manager’s services and as a deduction from the agreed-to salary. [See Form 591 §4]

As an employer, the property manager/landlord has the responsibility to withhold all proper federal and state income taxes, as well as to make required payments for social security, unemployment insurance and disability insurance. [Calif. Unemployment Insurance Code §13020]

The property manager or landlord must carry workers’ compensation insurance to cover resident manager injuries on the job.

As a result of the degree of control the property manager retains over a resident manager, a resident manager does not qualify as an independent contractor to avoid tax withholding, employer contributions and workers’ compensation premiums.

Rental value is not income

Consider the property manager who hires a resident manager to run a large apartment complex. As part of his salary, the resident manager receives a unit rent-free plus a fixed monthly salary.

Is the value of the unit occupied by the resident manager in exchange for services considered income which the resident manager must declare for state or federal tax reporting?

No! Taxwise, the value of the apartment is not income to the resident manager and is not declared as income when the unit occupied by the resident manager is:

  • located on the premises managed;
  • for the property manager’s or landlord’s convenience; and
  • occupied by the resident manager as a condition of his employment. [Revenue Regulations §1.119-1(b)]

Minimum wage requirements

A resident manager’s employment is subject to minimum wage laws even though the portion of the wages paid by a reduction in rent or free rent is not taxable as income. [Calif. Labor Code §1182.8]

Strict minimum wage requirements apply to resident managers since they carry out the instructions of the property manager or landlord rather than having the authority to make their own independent decisions about management policies. [8 CCR §11050(1)(B)(1)]

A rent credit may be used as all or part of the wages received per hour of work performed by a resident manager to establish the amount earned per hour for minimum pay requirements. However, a cap exists limiting the rent credit toward hourly wages at two thirds of the fair rental value of the unit, not to exceed $381.20 per month. Should a couple be employed as resident managers, the rent credited toward hourly pay cannot exceed $563.90 per month. [8 CCR §11050(10)(C)]

Thus, the property manager should require the resident manager to prepare time cards, limit the number of hours per week the resident manager may work so wages per hour do not drop below the minimum, and make provisions for the payment of any overtime permitted. Weekly work reports by the resident manager and a review of the reports by the property manager or landlord are to confirm the total compensation exceeds the minimum wages for time spent on the job. These reports will help avoid any resident manager’s claim he worked excessive hours in relation to his salary and maximum rent credit. [See Form 591 §4]

Thus, all work requiring additional hours, except emergency work, must be approved by the property manager prior to being performed by the resident manager.

For example, a resident manager who is provided with a base salary, plus a unit, is required to remain on the premises at all times, but only performs five hours of daily work as limited by the resident manager employment agreement.

The resident manager claims he is entitled to overtime pay for the hours he is required to be on the premises.

However, the resident manager is only entitled to receive compensation for the time he actually performed work agreed to in the resident manager employment agreement, not for the time he was required to remain on the premises doing no work at all. [Brewer v. Patel (1993) 20 CA4th 1017]

Mismanaged managers

A resident manager is an employee of the property manager or the landlord who hires him.

As an employer, it is the landlord or property manager who is liable to others who are injured due to the improper conduct (negligence) of the resident manager in the course and scope of the resident manager’s employment. [Calif. Civil Code §2338]

To avoid liability for negligent violations of law or personal injuries to others, the conduct of resident managers must be closely supervised by the property manager or landlord.


A resident manager employment agreement creates an agency with the property manager or landlord which is an at-will relationship. Thus, the employment of the resident manager may be terminated at any time and without prior notice.

While a landlord or property manager does not need to have a good reason to terminate a resident manager, they cannot have an improper reason.

For instance, a resident manager has managed a large complex for many years as an agent for the property manager. The resident manager is over 62 years of age.


A landlord cannot have an improper reason for terminating the employment of a resident manager.

The property manager hires a new, younger resident manager and relegates the old resident manager to a lesser position.

The property manager constantly suggests to the older manager that he should retire and demotes him to even lesser positions while dramatically reducing his compensation.

Has the property manager discriminated against the older resident manager?

Yes! The property manager’s basis for demoting the older resident manager was not substandard performance, but age.

As a result, the property manager is responsible for money damages for emotional distress and attorney fees. A property manager or landlord cannot terminate the resident manager or otherwise harass him because of race, creed, color, gender or age. [Stephens v. Coldwell Banker Commercial Group, Inc. (1988) 199 CA3d 1394]

Terminating the occupancy

Consider a resident manager employment agreement that provides for a property manager to receive immediate possession of the unit occupied by the resident manager on termination of the resident manager’s employment.

The resident manager employment agreement should avoid creating any landlord/tenant relationship in the resident manager’s occupancy of a unit, or requiring that prior notice be given to the resident manager before his occupancy can be terminated.

For example, the owner of an apartment complex hires a resident manager to run the complex. In exchange for his services, the resident manager receives an apartment rent-free and a monthly salary.

Under the resident manager’s employment agreement, he agrees to vacate the apartment unit on termination of his employment. Thus, the right to possession is extinguished on being terminated.

The owner terminates the resident manager’s employment. The owner then serves the resident manager with notice to immediately vacate and relinquish possession of the unit, or stay and pay monthly rent.

The resident manager remains in possession of the apartment, but fails to pay the monthly rent called for in the notice to vacate. Without further notice, the owner begins UD proceedings to regain possession of the apartment from the terminated resident manager.

The resident manager claims he is now a tenant and the owner must serve him with a notice to vacate to establish his unlawful detainer of the unit.

The landlord claims the resident manager is a holdover tenant who has been unlawfully detaining the premises since the termination of his employment.

Is the resident manager entitled to a notice to vacate?

Yes! The resident manager’s occupancy was converted to a month-to-month tenancy when the owner served the resident manager with a notice to vacate that included an offer to remain in possession, which the former resident manager did.

Here, the resident manager’s continued occupancy of the apartment constituted acceptance of the new tenancy offered by the owner. Thus, the failure to pay rent is a breach of the new tenancy agreement noted in the notice to stay and pay. The owner’s UD action cannot be filed until a three-day notice to vacate is given to terminate the resident manager’s new tenancy for failure to pay rent. [Karz v. Mecham (1981) 120 CA3d Supp. 1; CC §1946]

On termination of his employment, the resident manager should not have been served any notice to pay or vacate. If the terminated resident manager remains in possession, he is unlawfully detaining the property and can be evicted.

Neither the landlord nor the property manager should at any time enter into a separate lease/rental agreement with a resident manager.

Rather, the occupancy arrangement should be written as part of the resident manager employment agreement, even if the management services do not equal the unit’s rental value and the resident manager pays the difference as a reduced monthly rent charged for the unit. [Form 591 §4]

To avoid creating a tenancy which continues on termination of the resident manager’s employment, the resident manager employment agreement must state:

  • possession is incidental to his employment;
  • possession automatically ends concurrent with termination of his employment; and
  • failure to perform managerial duties constitutes a breach of the employment agreement and grounds for immediate termination and eviction.