Does Your Firm Manage Properties?

It is two in the morning and the phone is ringing. The tenant has a gushing toilet. RING- The tenant has a leaking roof. RING- The tenant is mad that the next door neighbor has a stereo that he loves to play at ear-splitting volumes. Sound familiar?

As a part of their everyday activities many real estate offices will handle property management. Sometimes they will handle large apartment or condo complexes, and sometimes just a house or two for an out of town client. In any event, you face many of the same exposures.

For those who do property management, the best place to start tuning up E&O exposure is to begin with the Property Management Agreement. Think about your own: what have you agreed to do for the property owner (and sometimes more importantly) what have they agreed to do for you?

Oftentimes when faced with a Property Management claim we look to the PMA for reference to insurance or indemnity agreements between the broker and the property owner. It is imperative that you check to ensure that the property is both insured and also that the policy has appropriate coverage levels. The broker should also make every attempt to be named on the homeowners policy as an Additional Insured. This will assist you in making a defense claim to the homeowner's insurance should you ever be sued in relation to the management of property. Note that Homeowner's policies most often have bodily injury coverage (and E&O policies usually do not). You want every bit of protection you can find.

Another common allegation against managers is that they do not keep close enough tabs on the tenants, and thus the property owner tries to get paid back for damage that the tenant does. A regular drive-by (or annual inspection of the premises, if allowed by the management agreement) is a good idea. Show the owner that you are looking out for them; It goes a long way in keeping good relations with the owner.