Doing Repairs Yourself? Watch Out!

Many property managers are finding creative ways to differentiate themselves from other firms.  Some simply advertise in new or creative ways.  Others are offering discounted services.  Still others are trying to tout their service model as unique and quick.  However, a business can only spend so much on advertising and cut so much from their fees.  One way some property management firms are trying to bring in additional revenue is through the contracting of repair services.

Firms are beginning to consider bringing in-house some of the services they previously contracted out.  The most common example of this is hiring an employee to perform the repair and “handyman” type work around the property.  This includes toilet replacements, window washing, lawn care, or roof maintenance.  Most property managers are staying away from hiring a full crew in-house as most jobs are too small and infrequent to justify many individuals.  However, charging the landlords or condo boards a maintenance fee could return additional profits and give the property manager direct control over which jobs get done when.  This could reduce wait time between repairs and make the landlord/board very happy.

Bringing repair work in-house is not without risk, however.  We want to highlight three risks that a property management firm should consider when thinking about bringing repair and servicing in-house:

  1. Entry into Private Premises — Many repairs will require the entry private residences within the building or property managed.  This could give rise to theft of occupier’s property – or the allegation of theft.  Insurance can be purchased for this risk and advance permission should be obtained at all times.
  2. Insurance Restrictions — Most insurance policies that a property management firm purchases do NOT cover something called “completed operations.'”  This means that any damage resulting from a completed repair job will not be covered by insurance.  For instance, if the management firm repairs a toilet and fails to properly seal the base, a leak could develop.  That leak may cause damage to the floor joists or mold in the walls.  Any costs to remedy the situation would not be covered by insurance and all the money would have to come out of the firm’s pocket.  However, there are insurance policies that can be purchased to cover completed operations such as repairs.  These are not standard and should be discussed with your insurance broker.
  3. Client Expectations — A property manager is held to the standards of their management agreement.  Assuming additional responsibilities should correspond to an addendum to the management contract.  The contract should outline exactly what services will be performs, at what costs and any avenues for the resolution of overages or the need to contract with third parties.  This will help manage client expectations and prevent lawsuits for breach of contract.

With the proper insurance and risk management practices in place, property managers can thrive in an economic environment.  Contact us to learn more about protecting your property management firm and saving money on your professional and general liability insurance.