Rules for Caretakers - Interview with Scott Ulrich
I stopped for a chat with Scott Ullrich last week. Scott is the president of Gateway Property Management, the largest property management company in BC, and second in all of Canada. We were talking about live-in managers, or caretakers, and some of the rules and regulations.
Bill Goold: Scott, I’ve had several owners email me with questions about caretakers. The first question is always about pay.
Scott Ullrich: Funny how that always comes up. In BC there is a government ordained formula for calculating the minimum wage payable for a resident caretaker. And I stress that word minimum, and we’ll get back to that later. In BC, a resident caretaker in a building with 60 or less suites is due $19.25/suite per month, plus a base of $480. In buildings with 61 or more suites, the base jumps to $1635 per month, plus the per suite pay.
BG: One of the areas that owners get confused about is whether a resident manager pays rent.
SU: You’re right, I get asked that all the time as well. The caretaker pay does not include the rent on the suite. They need to pay rent. Often times, though, an owner will rent the caretaker a suite at 10% lower than current market, as a minor perk.
BG: Some of the building owners I’ve talked to have worked out a deal where the caretaker lives for free.
SU: That’s probably pretty common, but it really opens the owner and the caretaker up for some serious problems with the government in the form of past tax payments, tax penalties, CPP, etc. In the old days that was probably legal, but not anymore.
Also, any free rent is deemed a taxable benefit, and will be treated as such come tax time.
Add on top of that the liability exposure through Worksafe BC, and the possibility that a disgruntled caretaker can go to the labour board and ask for his back wages to be paid as well, and it quickly becomes obvious that you need to fly above board on employment matters when dealing with a resident manager.
BG: What about offsite caretakers.
SU: That is another option, but it still counts as a job, with minimum wages, and overtime and on-call premiums
BG: I’ve heard that some owners get around that by hiring people as independent contractors. Does that work out in favor of the owner?
SU: The government has really cracked down on the “independent” contractor classification and they have several parameters that a person must meet to be deemed independent. They must have more than one source of revenue, so if they are just working for one owner, then the government will deem them to be an employee and make all the necessary back charges. There are other rules as well, things like how they present themselves to the world; do they have a yellow page ad, do they have a web page describing their other services, do they make money from other employers. To be completely legit, they need a Worksafe number as well, a municipal business license, etc.
BG: Can an independent contractor live in the building?
SU: Sure, it just can’t be a requirement. It’s a bit tricky, but say you hire a person as an independent contractor to look after your building, and that person lives in the building. Then you discover that you have made a bad hiring choice, and you end his employment. You can’t evict him; he has a legal right to live in your building.
BG: You talk about hiring choices. I’ve heard it’s hard to find a good building caretaker.
SU: It’s really all about supply and demand, and paying people appropriately. If you own a building with 30 or more units, you can expect to pay 30% more than the minimum wage for a good caretaker. As you get into bigger buildings, ones with more than 100 suites, you’re looking at people that have chosen building management as a career, and they expect other perks like medical, dental and pensions.
BG: In your opinion, what is the perfect scenario for a resident caretaker?
SU: Well in the good old days it would be a husband and wife team. The wife would do the books and deal with the tenants, and the husband would do the maintenance and landscaping. With the legislation as it stands today, you’re better off with one full time caretaker, and a part-time person to cover them for sick days, weekends and holidays.
BG: What are the normal duties for a caretaker?
SU: Cleaning the common areas, handling all the paperwork involved with renting the suites, collecting the rent, and some, what we call, first echelon maintenance - general handyman stuff. When you hire a caretaker it’s really important that you have all the duties clearly delineated, with a schedule of recurring maintenance items.
BG: That’s good advice. What about landscaping?
SU: Sometimes it makes sense to have the caretaker do the landscaping, but often, especially if there is a lot of it, it’s better to have a landscape company do it. Remember that the landscaping is very important for the curb appeal of the building.
BG: What about extras for the caretaker? Is there ever a situation where caretakers get paid extra?
SU: Sure, all the time. When a job comes up and the owner and caretaker agree that it would be okay for the caretaker to take on the task, they can come to an agreement for extra pay for the extra work. One common situation is when a tenant moves out and the suite needs some painting, cleaning, or minor repair work. It’s pretty common for a caretaker to do that work. The great thing is that it doesn’t often cost the owner anything, as those costs are collected and paid out of the damage deposit.
It’s pretty typical for a caretaker to receive an extra $200 to $250 for painting a suite, and $10 to $15/hour for cleaning a suite.
BG: What about holidays? How does that work?
SU: Under the current legislation, a person is entitled to 32 uninterrupted hours off per week, plus a minimum of two weeks paid vacation per year. The number of weeks of vacation goes up as the person works more years. For both days off and holidays, you need to arrange coverage.
BG: We’ve talked about hiring someone, and paying someone, but sometimes you’ve got to fire someone. Talk to me about that.
SU: There are a couple of ways to fire someone; the first is with cause, the second is without cause. Trying to fire someone with cause is very difficult, because you need to document the problem, and that’s always subject to interpretation, and trying to prove cause in court is very difficult. It is, however, perfectly legitimate to let someone go without cause as long as you satisfy the labour board guidelines for termination.
If the person has been working for an owner for less than six months, there is no termination period. That means you can politely let a person know that they are no longer required and show them the door. After six months, the notice, or pay in lieu of notice is one week. After that it goes to about one week per year of service.
BG: That sounds expensive, but I guess it’s less expensive than having an employee that is reducing the value of your business.
SU: That’s a good point Bill. The real complications begin when you have a resident caretaker. Remember earlier we were discussing the different ramifications of having a contract caretaker living in your building? If you sever the business relationship, that person has a legitimate right to stay paying rent and living in your building. And if you’ve given them discounted rent they get to keep that lower rate! If however, you have a resident caretaker, who is living in a suite that has been designated as the caretakers suite, and you fire that person, they have 30 days from the beginning of the next month in which to move out.
BG: Now let’s say that the owner decides to sell the building, and there is resident caretaker in place. What the issues there?
SU: It’s really a perspective issue. If I’m buying a building, I’d rather it come with no accumulated liabilities. If you have a caretaker that has been working there for 15 years, and you purchase the building and find that you can’t work with that person, then you are responsible for their entire severance. It can really add up. And if there was any “irregular” arrangements made with the previous owner, you could be in for nasty surprises. From the buyers perspective, it’s best to have the seller terminate the caretaker, pay him out his severance, and make a clean break. If you decide to re-hire them, that’s up to you, and it gives you a chance to get all the appropriate employment documentation in place so that everything is clear and above board.
BG: I guess that’s the key here, isn’t it. It’s best to get everything done legally at the beginning of any contract, employment or otherwise.
SU: And before you actually hire someone. You can’t hire someone with one understanding, and then change the rules, or add duties, or change pay scales and have it legally binding.
BG: Thanks again, Scott. I know that this will help a lot of owners out there in their understanding of the ins and outs of hiring a caretaker.