5.2 Property Management & Landlord-Tenant

Managing real property for an owner in exchange for compensation is a licensed activity in Tennessee. A property manager who collects rent and deposits is handling trust money.

Property Management Requires a License

Exam point: Rent and security deposits collected for owners are trust funds. They flow through the principal broker's escrow account and may not be commingled with the manager's or firm's funds - the same escrow rules from Chapter 4 apply.

URLTA: The Uniform Residential Landlord and Tenant Act

Tennessee adopted the Uniform Residential Landlord and Tenant Act (URLTA), but it does not apply statewide. URLTA governs residential rentals only in counties with a population above roughly 75,000; smaller counties follow general Tennessee landlord-tenant common law and other statutes.

Exam trap: A common state-exam question is whether URLTA applies. The answer depends on county population, not on the type of property.

Security Deposits (URLTA)

URLTA also sets rules for entry notice, repairs/habitability, and the consequences of nonpayment, including notice before termination.

Fair Housing Applies to Rentals

Everything in the Fair Housing section applies to leasing. A property manager:

• May not steer applicants or set different terms based on a protected class
• Must allow reasonable accommodations and reasonable modifications for persons with disabilities
• Must treat an assistance animal as not a pet (no pet deposit), while the tenant remains liable for actual damage
• Must keep advertising about the unit, not the ideal tenant

Exam point: 'No children' or 'adults only' rental ads violate familial status protections unless the property qualifies as lawful housing for older persons (55+).

Duties to the Owner

Under a written management agreement the manager acts as the owner's agent and owes the owner:

Key point: A manager who pockets or 'borrows' owner funds commits conversion - the same serious violation discussed under escrow, exposing the manager to revocation, civil liability, and a Recovery Account claim.

Trust Accounting for Managers

Property management multiplies the escrow obligations because money moves continuously: rent comes in, owner disbursements and vendor payments go out, and security deposits sit untouched until move-out. Each owner's funds must be traceable, and security deposits in URLTA counties must be held in a separate account disclosed to the tenant. A manager who mixes one owner's money with another's, or with the firm's operating funds, has commingled; one who spends owner money on unauthorized expenses has converted.

The same three-way reconciliation discipline from the escrow chapter applies, which is why management questions so often circle back to trust accounting.

The management agreement defines the manager's authority - what they may spend without owner approval, how they are compensated, and how often they account to the owner. Because the manager acts as the owner's agent, the manager owes the full agency duties (loyalty, disclosure, accounting, obedience to lawful instructions, reasonable care). A manager who takes an undisclosed kickback from a repair vendor breaches the duty of loyalty and the accounting duty at once.

URLTA Mechanics and Fair-Housing Overlap in Rentals

Where URLTA applies, it sets the operational rules tested on the exam: a landlord must generally give notice before entering except in emergencies, must maintain the premises in a habitable condition, and must follow specific notice periods before terminating for nonpayment or other breach. On move-out, the landlord must follow the deposit itemization procedure before withholding, and the tenant often has the right to be present at the inspection. In non-URLTA counties, general landlord-tenant law fills the gap, so the first question is always whether the county crosses the population threshold.

Fair housing rides along with every leasing decision. Tenant screening must apply consistent, nondiscriminatory criteria - income, credit, and rental history standards applied equally to all applicants. A manager may not impose stricter terms, steer applicants to certain units, or refuse a reasonable accommodation such as an assistance animal because of a no-pets policy. Combining URLTA mechanics with fair-housing limits is the realistic context the exam uses to test whether a manager understands both bodies of law at once.

For exam purposes, anchor property-management answers on three pillars at once: a license is required to manage for others for a fee, all rents and deposits are trust funds subject to the escrow rules, and fair housing plus URLTA (where the county qualifies) govern how tenants are screened, charged, and served.