REPRINTED FROM ORLANDO REGIONAL REALTOR MAGAZINE MAY/JUNE ISSUE 2010
Property managers can unnecessarily expose themselves to liability if they do not properly manage risks. By developing a risk management strategy, you can not only protect yourself but also your Landlords, Tenants and Properties.
There is a straightforward process for developing your risk management strategy: 1. Identify risks, 2. Avoid risks, and 3. Control risks.
Firstly, jot down a list of all the different type of risks that are associated with your properties. For example, risks can range from the obvious to the obscure: slip-and-fall accidents, animal attacks, fire, hurricanes, damage caused by tenants, non-payment of rent, fair housing violations, escrow account procedures, tax liabilities, etc, .
Now you have identified risks associated with the properties you manage you can avoid and control them.
Avoiding risks can consist of addressing poor maintenance and building or electrical code violations. Do not take on a property which is poorly maintained and the Landlord refuses to make repairs! When maintenance is requested, address issues immediately and make prompt repairs.
Approve only good Tenants. Do you approve applicants based only on what car they drive, what they are dressed like, and how much cash they can put down? No! You need a thorough process which investigates each adult’s credit, eviction, criminal, income, employment and rental history. This way you attract less of those “professional tenants” that holdover, decline to pay after a couple of months and exit with damages.
Not all risks can be eliminated but you can control them, and there are many ways to do this.
You don’t want to be exposed to the risk of injury to anyone on properties you manage such as tenants, their guests, contractors or your employees. All your landlords should have liability insurance covering such occurrences. Urge the Tenants to purchase renters insurance to cover their personal belongings (which may also include some liability insurance and/or pet insurance). Purchase e & o insurance for your management business.
Inform all your Landlords and Tenants of the importance of regular maintenance and use licensed and insured contractors. Also recommend putting better locks on doors to deter break-ins; installing high-quality smoke alarms and carbon monoxide detectors; and possibly fencing around properties so that people are less likely to pass through and slip & fall.
Use a comprehensive lease with plenty of clauses that protect your interests, plus disclosures about repairs, insurance, damages, liability, etc. Perhaps have an attorney draw up a thorough lease specific to your needs.
Use an accounting software that allows you to reconcile and keep track of your escrow accounts(s). Ask a qualified accountant for advice on tax regulations, for example, withholding for foreign nationals so you don’t get in trouble with the IRS.
In some cases, no matter how many precautions you take, something will go wrong and you may be held legally responsible. So conduct yourself professionally and ethically, and put a risk management strategy in place; this will greatly reduce the chances of this ever happening to you!
Oliver Overton-Morgan, Broker GRI
Absolut Realty Inc
www.absolutrealty4u.com