Property Management Compliance: How Top Property Managers Avoid Costly Mistakes

For property managers, compliance isn’t just about checking boxes. It’s about protecting your business from risks that can spiral into lawsuits, fines, suspended licenses, or lasting damage to your reputation. The reality is that even one overlooked regulation or poorly documented process can cost far more than the time and effort it takes to stay compliant in the first place.

The best property managers know this, which is why they treat compliance as part of their risk management strategy. They rely on clear policies, ongoing training, regular audits, and smart technology to keep everything running smoothly and defensibly. Below, we’ll look at how top managers build these systems and avoid the costly mistakes that trip others up.

‍

The Core Compliance Framework (What Every PM Must Track)

Every property manager needs a strong compliance framework to keep operations running safely and legally. At the federal level, there are a few big ones you simply cannot ignore:

• Fair Housing Act (FHA): Sets the rules for marketing and screening applicants to ensure fair treatment.
• Fair Credit Reporting Act (FCRA): Governs background checks and requires written notices when denying or conditioning applications.
• EPA’s Renovation, Repair and Painting Rule (RRP): Applies to pre-1978 housing and mandates lead-safe work practices.
• Servicemembers Civil Relief Act (SCRA): Provides protections for active-duty tenants in areas like evictions and lease terms.
• Enforcement and guidance: Agencies such as the Department of Justice, Housing Equality Center, and Federal Trade Commission oversee and enforce these laws.

On the state and local side, things vary more widely. Landlord-tenant statutes cover areas like security deposit limits, required notices, and how quickly deposits must be returned. Cities and states also set their own habitability and life-safety standards, along with licensing rules for managers. Because these requirements differ so much, top property managers keep a quick-reference map of state and local rules to avoid surprises.

1. Compliant Marketing and Tenant Screening

Marketing and screening are where many compliance problems begin. A single ad with the wrong phrasing or an inconsistent decision during showings can open the door to fair housing complaints. The key is to keep your language neutral, apply the same criteria to every applicant, and document denials in writing. 

HUD’s 2024 guidance reminds property managers to avoid blanket policies, especially around criminal history, since those can create unintended discrimination risks. The Housing Equality Center and similar organizations publish examples of fair marketing practices that are worth reviewing regularly.

Screening also brings in another layer of compliance: the Fair Credit Reporting Act. You need written permission before you pull a credit or background report, and if you deny or condition an application you must send an adverse-action notice. The Federal Trade Commission recommends issuing these notices in writing and keeping records on file.

Finally, top property managers take the guesswork out of approvals by creating standardized matrices that cover income, credit, and rental history. Using these consistently not only keeps you compliant but also makes your decision-making faster and more defensible.

‍

2. Leasing Documents & Disclosures

Leases are more than a place to list rent and rules. They are legal documents that carry specific disclosure requirements. At the federal level, one of the most common is the lead-based paint disclosure for any property built before 1978, which is required by the EPA. HUD also requires disclosures in certain assisted housing, including rules around carbon monoxide detectors where applicable. On top of that, many states and cities have their own smoke and carbon monoxide detector laws, so managers need to double check local codes before finalizing a lease.

State addenda are just as important. Items like late fee policies, notice periods for entry, procedures for rent increases, and termination rules often vary depending on where the property is located. The safest approach is to create a standard lease template and then cross-check every local ordinance to make sure nothing is overlooked.

‍

3. Trust Accounting & Handling Other People’s Money

When you manage rental income and security deposits, you are holding money that does not belong to you. That is why most states, including California, require strict trust accounting rules. The California Department of Real Estate, for example, makes it clear that rents and deposits must be kept in separate trust accounts and never mixed with operating funds. Managers are also expected to complete regular three-way reconciliations to confirm that ledgers, bank balances, and client records all match up.

Beyond legal compliance, top managers put systems in place to stay organized and transparent. Dual control on accounts helps prevent mistakes or fraud. Monthly owner statements keep clients informed and reduce disputes. Audit trails, whether through software like AppFolio, make it easy to show regulators and owners that every dollar has been tracked. This consistency builds both trust and protection for your business.

‍

4. Security Deposits: The #1 Lawsuit Magnet

If there’s one area that gets landlords and property managers into hot water more than anything else, it’s security deposits. Every state has its own rules on how much you can collect, how you have to itemize deductions, and how quickly deposits must be returned after move-out. Miss a deadline or fail to provide proper documentation and you could be looking at double damages, attorney fees, or a tenant lawsuit.

That’s why top managers set up an internal “deposit clock” that starts ticking the day a tenant moves out. This keeps deadlines front and center so nothing slips through the cracks. Nolo’s and Landlord Studio’s resources make it easy to check the rules where you operate.

A simple move-in/move-out checklist with photos, timestamps, and signed notes can also make or break your case if a tenant disputes deductions later.

‍

5. Habitability, Inspections & Life-Safety

Keeping rental properties safe and livable is one of the biggest responsibilities a property manager carries. Every state has minimum habitability standards that cover essentials like heat, plumbing, and structural safety. On top of that, local ordinances often add specific requirements for things like smoke detectors, carbon monoxide alarms, and fire code compliance. Resources such as iPropertyManagement.com are helpful for staying on top of these rules.

Top managers don’t wait for complaints to surface. They schedule preventive inspections at regular intervals, making sure every visit is carefully documented with photos, timestamps, and detailed work orders. This not only creates a clear record if disputes arise, but it also helps catch small issues before they become major problems. 

Consistency in inspections and documentation is what separates reactive managers from those who build long-term trust with tenants and owners.

‍

6. Maintenance and Renovations in Pre-1978 Housing (Lead Rules)

If you manage or renovate properties built before 1978, you’re working under the EPA’s Renovation, Repair, and Painting (RRP) Rule. This regulation kicks in any time work could disturb painted surfaces, since those surfaces may contain lead. To stay compliant, property managers and contractors must be properly certified, use lead-safe work practices, and provide the required lead hazard information to residents before the project begins.

Even if you hire outside vendors, you’re still responsible for oversight. That means checking that every contractor has an active license, proof of insurance, and current RRP certification. Keeping a qualification file with these documents helps you stay organized and protects you if questions ever come up. Think of it as building a paper trail that proves you did your due diligence.

‍

7. Collections, Evictions & Protected Classes

Handling collections and evictions is one of the riskiest parts of property management, especially when it comes to protected classes. The Servicemembers Civil Relief Act (SCRA) gives active-duty military tenants important safeguards, including the right to request a stay in court proceedings and in some cases the ability to terminate a lease without penalty. Before you move forward with any filing, it is smart to have a clear SCRA check protocol in place so nothing slips through the cracks.

The Department of Justice actively enforces these protections, so ignoring them can quickly escalate into serious legal trouble. Beyond SCRA, the safest approach is to apply consistent notice timelines, keep detailed documentation, and ensure every step aligns with local laws. By doing this, you protect both your tenants and your business from wrongful-eviction claims that could have been avoided.

‍

8. Data Privacy & Communications

Property managers handle a lot of sensitive information, especially when it comes to tenant screenings. Personal data like Social Security numbers, credit reports, and rental histories must be stored securely, with access limited to only those who truly need it. It is also important to follow retention schedules that line up with Fair Credit Reporting Act requirements. Keeping clear written templates for adverse-action notices and logging when they are sent can help show compliance if questions ever arise.

The Federal Trade Commission stresses that these notices should be both clear and documented. On the communication side, many managers rely on text and email, but that convenience should never override consent or compliance. Tenants should opt in before receiving messages, and records of those communications should be kept. Because rules can vary by state, it is smart to review practices with internal counsel to make sure everything stays above board.

‍

8. Ethics, Training & Culture

Strong property management isn’t just about following the law, it’s also about setting a standard for how your team operates day to day. Many top firms adopt a formal code of ethics, such as the one from the National Association of Residential Property Managers (NARPM.org), to guide decisions and keep accountability front and center.

Regular training is another cornerstone. A yearly refresher on fair housing rules and FCRA requirements helps staff stay sharp and avoid slip-ups that could lead to serious consequences.

Finally, culture is reinforced through structure. A compliance calendar that tracks deadlines for license renewals, property inspections, and trust account reconciliations keeps everyone on track and reduces the chance of missed obligations. When compliance is woven into the culture, it becomes second nature rather than a last-minute scramble.

‍

9. Technology & Internal Controls That Top PMs Use

Great property managers know that strong systems make compliance much easier to maintain. Technology isn’t just about convenience, it is the backbone of good internal controls. For tenant screening, they use platforms that create clear audit trails so every decision is documented and defensible. When it comes to leases, e-signature tools with clause versioning help ensure tenants are always signing the most up-to-date documents.

On the financial side, top managers stick to trust accounting software that supports three-way reconciliations, keeping owner funds secure and transparent. Maintenance requests are handled through ticketing systems that timestamp each step, from the initial report to the final completion. To round it out, many teams maintain a vendor compliance tracker so they always know which contractors are licensed, insured, and properly certified. Together, these tools keep operations smooth and reduce the risk of costly compliance gaps.

Recommended Software Categories for Compliance

• Tenant Screening with Audit Trails: RentPrep, TransUnion SmartMove, Buildium
• E-Signature with Clause Versioning: DocuSign, Adobe Sign, HelloSign
• Trust Accounting with Three-Way Reconciliation: AppFolio, Propertyware, Yardi Breeze
• Maintenance Ticketing Systems: Buildium, Property Meld, AppFolio
• Vendor Compliance Tracking: VendorCafe, Compliance Depot, custom trackers in property management platforms

‍

Conclusion & Next Steps

Compliance isn’t something you check off once and forget. It’s the operating system that keeps your property management business running without expensive surprises. By treating compliance as an ongoing process, you protect yourself, your clients, and your tenants from the risks that come with cutting corners.

Take a moment to download the checklists we’ve provided and use them to audit your current processes. Even a quick review can reveal gaps worth fixing before they turn into real problems.

If you’d rather have a partner who already has these systems in place, consider working with Awning’s property management team. We combine expert compliance practices with day-to-day management so you can focus on growing your portfolio with confidence.