Unlicensed to Lease

Overview

Most large property management companies (“PMCs”) employ unlicensed individuals as “leasing specialists” who are responsible for the day-to-day leasing activities at a community. Spend a few minutes browsing job listings for these positions on LinkedIn or Indeed, and you’ll very quickly notice that a real estate license is almost never required. Typically, successful applicants for this role come from entry-level jobs in the retail and hospitality sectors. But what enables the unlicensed staffing model and what are its effects on consumers?

It’s a Gray Area

While there are certain variations in state-by-state guidelines, the general consensus among regulators is that non-licensed individuals who are employees of a duly licensed property management company are permitted to provide a limited set of services on behalf of their employer. For example, In Section 10131.01 of the California Business and Professions Code (B & P), the state puts forth clear permissive provisions regarding the activities of non-licensed individuals.

1. Showing rental units and common areas to prospective tenants.

2. Providing or accepting preprinted rental applications, or responding to inquiries from a prospective tenant concerning the completion of the application.

3. Accepting deposits or fees for credit checks or administrative costs and accepting security deposits and rents.

4. Providing information about rental rates and other terms and provisions of a lease or rental agreement, as set out in a schedule provided by an employer.

5. Accepting signed leases and rental agreements from prospective tenants.

Notably missing is the ability to negotiate leases, which remains strictly the purview of licensed individuals in essentially every jurisdiction.

Current job listings for this position require that applicants should be “tenacious and skilled at overcoming objections” and “[execute] sales closing techniques successfully” (taken from job descriptions for leasing specialist roles at two NMHC 100 PMCs). It stands to reason that many common sales tactics would pass regulatory scrutiny: creating urgency, emphasizing benefits, painting a picture of the prospect living in the unit - all strategies that do not entail any sort of negotiation.

But what happens when the prospect asks for the look and lease special a week after touring because the unit is still available? Peeling back the onion is likely to expose potential ambiguities. Nevertheless, the industry has generally taken a unified stance on this risk.

So how is it that a PMC’s core sales motion relies on individuals who cannot negotiate the terms of the thing that they are selling?

Going Down the Rabbit Hole: The Role of Matrix Pricing

Leasing specialists at large properties typically quote rental rates generated through revenue management software: a sophisticated automated pricing system that sets rental rates based on a bevy of factors. The algorithm generates a pricing matrix for each available unit, reflecting different prices for each possible lease start date and term. And similarly to hotel rooms or airline flights, prices can fluctuate frequently throughout the day or week. Of course, the Department of Justice recently announced a lawsuit against RealPage for its alleged antitrust violation with regard to these pricing algorithms.

Now, to the leasing specialist, the rent matrix serves as the aforementioned “schedule provided by an employer” from which they can quote rates to potential applicants. Just name your move-in date and lease term and let the matrix spit out your price - no negotiation required. According to the DOJ’s complaint against RealPage filed as of August 23rd, landlords using revenue management are “less likely to negotiate on price…[and] any potential negotiation instead turns on lease term and move-in date, which AIRM and YieldStar adjust the pricing for to avoid overexposure for the landlord in the future.”

This approach extends beyond base rent. Ancillary charges—such as pet fees, storage costs, parking fees, and utility expenses—are typically priced separately and systematically. This further standardization minimizes the leasing specialist's discretion in pricing decisions, cementing their role as a mere facilitator.

Computer generated quoting also serves as a safeguard against fair housing violations by ensuring consistent pricing across all tenant demographics. According to RealPage, their revenue management software helps management companies stay compliant with fair housing laws by “increasing pricing transparency and giving all potential renters equal access to that matrix of rent options, including the lowest available rent.” Moreover, matrix pricing helps to “eliminate inconsistent rent negotiations and bidding wars that can occur in manual pricing, thus reducing the possibility of discriminatory pricing in violation of fair housing rules.” And to that end, revenue management software certainly seems like a strong risk mitigation strategy for large operators.

So…Can You Waive the Pet Fee?

While some consumers might expect certain fees to be waived or concessions to be given as part of a negotiation process, it is generally accepted that corporate real estate owners do not negotiate apartment leases. Commentators frequently make the analogy between matrix pricing and the way that hotels and flights are priced; however, the buying process for the two products could not be more dissimilar. A standard apartment lease is a high touch, offline-to-online transaction in which:

1. the buyer has an in-person meeting with a individual acting as an intermediary representing the product;

2. the buyer reviews and signs an extensive legal contract; and

3. the buyer is contractually committed to the product for at least one year.

All in all, quite a bit different than booking a hotel room for the weekend on Expedia. Apartment leasing also differs starkly with most other real estate transactions where negotiation is not only allowed but expected. In fact, it’s difficult to find any analogous buying process where negotiation is completely off the table. The insurance industry, where rates are set in conjunction with state regulators, is likely the most relevant comparison.

In her prepared remarks regarding the DOJ lawsuit, Lisa Monaco, the Deputy Attorney General, appealed that “renters must be able to negotiate prices with landlords” to ensure healthy competition for rental housing. And while it’s uncertain whether the future of leasing will more closely resemble buying a Tesla off the website or a used car off the dealer, it is certainly worthy to closely monitor how the regulatory environment affects the future of lease staffing, negotiation, and fair housing laws.