Address Litigation

Property managers face potential lawsuits on several fronts. Most frequently, they will have do deal with claims for personal injury. A tenant or a visitor experiences a “slip and fall” accident on a driveway, or a pet bites someone.

The other likely litigation is contractual, which can arise from three sources. A tenant may sue; contractors who work on the premises, or service employees may bring claims; or the property owner may go to court, asserting breach of contract. Typical contentions are that the property has been empty and unrented for too long, or that it is not being properly maintained.

If you have the misfortune to get embroiled in a lawsuit, here are key steps to undertake promptly. Equally important, make sure to take all the necessary precautions ahead of time, for protection.

• Insurance is the first line of defense. Take out policies for both general liability and workers’ compensation. You should be included in the owner’s insurance, and try to get added as an additional insured on the policies of your independent contractors, too. “You want as many layers as possible,” explains R. Scott Steinbach, attorney with The Steinbach Law Firm in Dallas. Some complexes even require tenants to maintain liability insurance for negligence. For example, a tenant smokes in bed, and as a result burns down 10 units. You need not require tenants to insure their own contents, only against harm to third parties.
• Get it in writing. Your agreement with the property owner should be in writing, and spell out both parties’ responsibilities clearly. “It should indemnify you from any loss or injury resulting from the property,” Steinbach says. A written contract with service providers for any jobs lasting a day or longer will minimize the likelihood of future disputes. Specify the work, the price, and include an indemnification provision to hold you harmless for damage to third parties.
• Inspect the property regularly. “Walk around and look out for potential hazards,” advises Michael Sandner, a partner at Pickrel Schaeffer & Ebeling in Dayton, Ohio. Do you notice a water leak or a dangerous place for tripping? However busy you are, don’t procrastinate, have it fixed immediately.
• Document everything. Keep logs, records and invoices of all maintenance or independent contractors’ work. If you get sued, they will help your attorneys recreate the context from a past period.
• Communicate openly. Maintain an avenue of communication, whereby tenants may report defects. It might be a comment or issue box, or sending somebody out on the site at certain intervals to collect information. Publicize the system, Sandner says. “Set up protocols for your own responses. It won’t help to have a history of complaints that haven’t been acted upon,” he adds.
• Screen your employees. Maintenance people and security guards will have free access with keys and can harm tenants or their property. “Because you have hired those employees yourself, you can’t palm that off on the owner,” Steinbach adds.
• Incorporate, and avoid holding assets. You will be safer if you operate strictly as a service business, with agreements to service properties. If you should lose a lawsuit, any assets like a building could be taken from you.

Immediately notify your own counsel and your insurance company. By not reporting swiftly, you might lose some evidence. Moreover, if an insurer thinks that a late notification has prejudiced his or her ability to investigate, it may be able to deny you coverage.

You will need to gather facts as soon as you learn of an incident, whether in photos or other documents. “By the time you are in a suit, you will have less chance to do that,” Sandner warns.

Take any necessary corrective actions. You don’t want the problem to be repeated. For instance, if you learn that one of your employees is a rogue, terminate that individual. Steinbach explains that “remedial measures are generally not admissible as evidence of guilt.” (They can be used against you in settlement talks, but not in court itself.)