What liabilities does a landlord have and how can the landlord protect themself?

By
Services for Real Estate Pros with HomePointe Property Management, CRMC

As the owner of a rental property you could be held liable for known and unknown conditions at the property. In most cases your fire/liability insurance policy will cover you adequately. You should discuss with your insurance company the amount of recommended limits for your situation. 

                             

If you use a professional property manager,most have an indemnity clause in their management agreement that places basic liability for all acts on the owner. Insurance companies know this and most will willingly name the property manager as either additional insured or name the manager as an interested party to the policy at no extra cost. This is important to do as you want the insurance company to protect both the owner and the property manager in the unlikely event of a lawsuit.  Some insurance companies refuse to name or cover the property manager.  This is unfortunate.  The property owner can obtain insurance for the liabilities at the property, but a property manager may not be able to obtain insurance on a property they do not own.  Even if they could, most property managers base their management rates on fact that the owner provides the insurance. 

It makes sense for the owner to provide insurance, after all, the owner owns the property and has to have the coverage whether they have a professional property manager or not.  Having a property manager actually reduces the owners risk, so insurance companies are being short sighted by not covering the property manager.  Again, most do provide this coverage.

In most cases, just acting with common sense and acting quickly will lessen the likelihood of a lawsuit.

 

Posted by

Robert A. Machado, CPM, MPM

HomePointe Property Management

Sacramento, Yolo, El Dorado, and Placer Counties

We manage residential and commercial property.

916-429-1205 x 105

rmachado@HomePointe.com

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Rainmaker
1,089,501
Wallace S. Gibson, CPM
Gibson Management Group, Ltd. - Charlottesville, VA
LandlordWhisperer

When I am asked at a property presentations why I don't have insurance, I advise would-be clients that I do not have an insurable interest in their property.  They need to advise their insurance agent to place landlord liability coverage on their property AND name Gibson Management Group, Ltd. as an additional insured...many insurance companies are good about this, some are not.

Property managers need to have knowledge of this issue and it is a VERY GOOD topic for local landlord or property management association meetings and insurance agents are glad to provide their knowledge on the subject. 

 

May 04, 2008 11:22 AM #1
Rainmaker
251,847
Robert Machado
HomePointe Property Management, CRMC - Sacramento, CA
CPM MPM - Property Manager and Property Management - Sacramento Area
Wallace:  Since some insurance companies will not name a property management company, the owner needs to get a committment from their insurance company to cover their property manager.  In the event of a lawsuit, a good indemnity clause forces the owner to defend and cover the liabilities of the property manager.  The property manager is only there to benefit the owner so it is logical and reasonable for the owner to provide this coverage.  It keeps management fees low.
May 04, 2008 12:45 PM #2
Rainmaker
1,089,501
Wallace S. Gibson, CPM
Gibson Management Group, Ltd. - Charlottesville, VA
LandlordWhisperer

I liken it to us both being on the same side of the courtroom.  Their insurance covers me or my attorney may make a different deal. 

I have only been sued a couple of times and in all but one instance, the insurance paid my attorney to defend us both. 

Virginia is a caveat emptor state * I love it!!

May 04, 2008 01:47 PM #3
Rainmaker
271,628
Chuck Willman
BuyLowAZ - Mesa, AZ
Realtor - Arizona - 480.292.0600
If people only knew how many things they need to do to be their own property manager they'd come to realize that having a good manager is money very well spent.
May 04, 2008 06:26 PM #4
Rainmaker
251,847
Robert Machado
HomePointe Property Management, CRMC - Sacramento, CA
CPM MPM - Property Manager and Property Management - Sacramento Area
Chuck,  professional property management is very inexpensive when all costs and time saved is considered. 
May 04, 2008 07:20 PM #5
Rainer
64,561
David W. Bolick
Network Real Estate, Inc. - Little Rock, AR
My management contracts alway had an indemnity / hold harmless clause, so either my owner/investor or their insurance one was going to be liable.  The key is to "keep from being sued"...the attornies Always win.
May 04, 2008 07:45 PM #6
Rainmaker
67,820
Denise Allen
Resh Realty Group - Chesapeake, VA
Realtor@ Chesapeake, Hampton Roads
I agree with David.  Keep the landlord from getting sued.  He needs to make sure he goes by the book.
May 04, 2008 07:56 PM #7
Rainmaker
251,847
Robert Machado
HomePointe Property Management, CRMC - Sacramento, CA
CPM MPM - Property Manager and Property Management - Sacramento Area

David,  The Indemnity Clause is the key to preserving a property management business.  Keeping from being sued is out of anyone's control, that is the key to the legal profession.

Dennis, Even those that perform by the book get sued, there are lots of people trying to hit lottery on the backs of property managers.

May 05, 2008 12:09 AM #8
Rainer
64,561
David W. Bolick
Network Real Estate, Inc. - Little Rock, AR
Robert, it's an "art" not being sued. I've been a Broker for 34 years and was a CPM for 20+ years and managed some 7,000 units of multifamily in about 5 states for those 20 years and never once had a lawsuit.  Came close...had only 1 discrimination complaint that was dropped and had one attempt at a suit that was never brought.  "Negotiating" at the source level of the problem and coming to an understanding and heading off trouble saves a lot of money in the longrun. I learned early on "Discretion is the better part of Valor".
May 05, 2008 05:16 AM #9
Rainmaker
251,847
Robert Machado
HomePointe Property Management, CRMC - Sacramento, CA
CPM MPM - Property Manager and Property Management - Sacramento Area

David,  I have been in the business over 25 years and have had a handful of lawsuits.  I don't know how lawsuits  can be avoided with all the attorneys around chasing mold claims, trip and fall injuries, asbestos, fires, etc. 

We do  our best, but "It" happens.

May 07, 2008 01:17 AM #10
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Rainmaker
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Robert Machado

CPM MPM - Property Manager and Property Management - Sacramento Area
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