As a property manager, you are expected to reduce the risk associated with a landlord’s investment. But what about the risks you face? In an industry where legal liability claims are common, it is important property professionals safeguard themselves, writes EBM RentCover’s Sharon Fox-Slater.
One of the main risks agents face is legal liability claims – these arise when someone is harmed or property is damaged as a result of someone’s negligent actions or lack thereof.
One example might be an agent who is made aware of a defect at a property but they do nothing about it and a tenant is injured as a result of the agent’s failure to prevent and mitigate loss.
Property professionals must know their legal obligations and arrange appropriate insurance cover (such as professional indemnity cover) to avoid and/or mitigate the risk of this type of claim being made against them.
Without knowledge or protection, they may be putting themselves, and their business, at risk.
What are some practical ways agents can reduce the risk of being hit with a legal liability claim?
When acting on behalf of a landlord, agents should make sure the property they manage is as safe as possible, regularly maintained and kept in good condition.
They can achieve this by doing such things as ensuring installations, like gas, electricity, and heating are working; ensuring any appliances they provide are installed and maintained safely; and addressing potentially health-threatening issues such as rising damp.
NOTE: Agents are not skilled electricians or plumbers, and some jobs they are unable to act upon – however, they should regularly engage, or recommend the engagement of appropriate professionals to ensure a property is safe and habitable.
In addition, agents can provide a safe and habitable property for tenants, and ultimately reduce or eliminate a potential professional negligence claim, by:
- Inspecting the premises at the commencement of the tenancy or lease renewal to ensure it is in a safe condition.
- Implementing clear processes and procedures to monitor all aspects of property management.
- Arranging for regular inspections to be conducted throughout the tenancy.
- Identifying any repairs or maintenance which are the responsibility of the tenant and requesting the tenant fix these, and conducting a follow-up inspection to confirm they have been fixed.
- Identifying any repairs or maintenance which are the responsibility of the landlord and letting them know as soon as possible. Record all your recommendations in writing and place liability back on the landlord if they refuse to invest in repairs.
- Having urgent/emergency repairs carried out as quickly as possible. If for any reason the repairs cannot be made immediately, take all reasonable precautions to ensure the safety of the tenants until the repairs can be made.
- Considering terminating an agreement with a landlord who continually refuses to undertake necessary repairs.
- Not fixing things yourself or offering unfounded advice – relay facts back to the landlord and let them determine the next steps.
- Ensuring any repairs and maintenance are carried out by appropriately licensed and insured people (e.g. qualified tradies).
Let us dig deeper into responding to repairs and maintenance
At EBM RentCover, we have seen many liability claims against agents arise when they were warned of, but failed to properly rectify a potential hazard within a reasonable time.
If the agent was aware of a hazard and failed to notify the landlord of a potential issue and a claim is made for injury or property damage, then the agent can be held responsible.
A Victorian tenant slipped at night on back stairs that were worn, slippery and unlit, with no handrail.
The judge concluded that it was reasonably foreseeable that someone using the stairs might fall. The landlord was found liable.
The property manager was also found liable to the tenant for failing to carry out an inspection of the premises and identify the obvious defects in the back stairs.
Importantly, it was found that an agent acting reasonably would have detected the obvious defects. The judge determined both landlord (two-thirds) and agent (one-third) were liable.
However, the landlord appealed the decision, claiming that he had completely delegated his duty as owner, regarding inspections and management of the property, to the agent and should be fully indemnified by it.
The appeal judge agreed and held the agent 100 per cent liable for the tenant’s $430,000 in damages on the basis that the landlord had completely delegated his duties to the agent.
The agent was also held liable for the landlord’s legal costs.
In addition, it is important to note that even if an agent properly notifies the landlord and the landlord simply fails to respond, and in that time the tenant suffers an injury, the agent could be held liable.
This is because it may be seen that the agent failed to either authorise urgent repairs, or that the agent failed to indicate to the landlord the request was urgent.
The bottom line is that agents should always notify the landlord of potential hazards, big or small, and ensure the landlord recognises and understands the urgency of the matter.
While agents can take practical steps to mitigate the risk of a claim being made against them, insurance is designed to step in if things go wrong.
So, if agents do everything in their power to prevent a liability claim (such as conducting regular inspections and responding promptly to repairs and maintenance requirements) and they still end up in court, appropriate insurance will help to fund the legal costs, and the payout, associated with the claim.
EBM RentCover is part of the broader EBM Group and can align agents with experienced insurance brokers, so they find the right type and amount of cover. For more information visit rentcover.com.au
- Sharon Fox-Slater is the Managing Director of EBM RentCover.