Real Estate Broker Faces $1.5M Suit Over Property Management

Long & Foster, a real estate broker with 11,500 agents across 7 mid-atlantic states, is facing a $1.5M discrimination claim from the tenant of a managed property. Anthony Tucker, who is African American, filed a claim in the City of Richmond Circuit Court that is likely to be both costly and time consuming to defend. In addition, the brokerage could be subject to fines and suspension of licenses.

Tucker claims a pattern of systematic discrimination from the property manager after they took charge of the development in early 2014. It is alleged the property manager , Virginia Payne, began monitoring the plaintiff and stopping by for unannounced and unwarranted inspections of the premises. It is further alleged that maintenance complaints were ignored and routine expenses were charged back to the tenant.

From the complaint it appears that the property manager could have been acting under pressure from other unit owners who did not want an African American family living nearby. Although it is legal for common citizens to be prejudiced or racist within the confines of the law – licensed real estate brokers, property managers and unlicensed landlords are subject to fair housing laws. The legal expenses on alleged routinely reach six figures, with complicated cases incurring half a million dollars in legal bills before a settlement is made or verdict is reached. With huge fines and the potential to lose one’s livelihood if a case goes south, investing in the best defense possible is advised.

Sound risk management, which is key to preventing claims, should be implemented at brokerages and property managers of all sizes. In person continuing education, documented procedures and early intervention in complaints are all recommended. However, not matter how careful an operation is there is always the room for bad apples. Not all property managers follow the rules and not all tenants make truthful allegations.

Ensuring that your organization is properly insured is the cheapest and easiest way to sleep well at night. Many standard errors and omissions insurance policies exclude coverage for allegations of discrimination or violations of Fair Housing Laws. Those that do provide coverage often “sub-limit” it – a million dollar limit policy might only offer $25k-100k in coverage for defense costs. Contact an expert property manager insurance broker and discuss better protecting your company and your livelihood.

Property Manager Liable for Murder at Apartment Complex

David Nelson, a 31 year old former marine, was tragically shot and killed at a South Florida apartment building where he resided.  The killer – Jaime Vogel (who later committed suicide in jail awaiting trial) – was another apartment resident who had moved there a couple years earlier.

The apartment was managed by Greystar – a sizable property management company who oversaw many additional properties.  They were managing this particular apartment building at the time Vogel was looking to move in.  The lawsuit against Greystar alleged that the management firm negligently failed to properly assure that the tenants at the building were going to be safe and that they failed to perform an adequate and proper background check.  As the facts of the matter were discovered, Greystar decided to settle for $1.5M.

Details came to light in the depositions and investigations that Greystar did not properly perform a background check on Vogel.  Specifically, it was found that Vogel had previously been kicked out of another Greystar-managed property for disturbing the peace and making death threats against other residents.  The plaintiffs said this failure led to Vogel acting out on his violence on David Nelson and Greystar agreed to settle the matter.

Property managers being held liable for the death of residents is extremely rare and since this matter was settled, no case law was established.  However, this sad situation brings to light the importance of property managers acting with care as they search for tenants.

Management firms have a fiduciary obligation to their clients to act with care – care to find tenants that will respect the property and other tenants.  It is important for managers to perform each of their duties and due diligence well.  Failing to do so can not only lead to lawsuits against the firm that can impact the future of the firm, but loss of life or even the murder of another tenant.

Contact us to discuss additional ways to protect your property management firm from liability.

5 Items Every Building manager must do before Winter

The ability to predict and know the weather is big business for many companies.  Despite the particularly harsh winter Illinois experienced last year, sources vary on their prediction for the 2014-2015 winter.  Regardless of an organization being able to forecast January temperatures within 5 degrees of actual – there is one thing we can be certain of.  Chicagoland will have snow, freezing temperatures and a wind chill.

Extremes in temperature have always wreaked havoc on buildings.  For property managers, October is a good month to prepare for the cold and snow of winter.  There are a number of items a property manager should be on the lookout for as the weather starts to drop.  Here are 5 items to check and add to your risk management list:

  1. Roof Inspection – The wet, heavy snow of the Midwest can often accumulate and place undue weight on trusses and beams of a roof.  Roofs that have not been inspected or have weak joists could cave in with the additional pressure.  It may be necessary to remove snow accumulation, as well.
  2. Protect Sprinklers – A frozen sprinkler isn’t so bad – it is the thaw that ruins things.  To help prevent freezing and thawing of sprinkler pipes, it is important to have adequate insulation around the pipes and to keep attics and basements at least 40 degrees.
  3. Temperatures Regulation – Freezing temperatures can damage more than just sprinkler pipes.  Equipment such as boilers, air conditioner, compressors and blowers can be impacted by low temps.  Other water pipes in the building may also burst.  It is recommended that all areas of a building is kept to a temperature of at least 40 degrees to prevent freezing.
  4. Heating System Maintenance – Annual inspection on heating equipment can prevent a mid-winter breakdown that causes temperatures to plummet within the building
  5. Ice Accumulation Plan– Falling ice can damage vehicles and injure people.  Icy sidewalks can cause many winter injuries.  It is important to prevent ice accumulation on all portions on, in and around a building.  Having a plan in place and a snow removal contractor secured is a vital step.

Failure to properly account for any of the above items could lead to burst pipes, caved roofs or by-passers slipping on ice.  In turn, this could lead to liability being assessed to you as the property manager for failure to provide a safe building for the owners.  It is important to prevent and stave off accidents when possible.  It is also important to carry adequate property manager’s insurance when something does happen.

Contact us to discuss ways to protect your firm from liability through proper insurance and risk management.

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.


Manager’s Liability for Owner’s Debts

This case settled in 2013, but the lessons are worth repeating as the situation is timeless.  Property managers often order work to be done on the buildings they manage.  These work orders are generally routine, and a part of the management agreement.  The work done is financed by the property owner, but the manager is often in charge of writing the check.  However, a situation arose in Georgia where the owner did not pay for the work being done and the manager had no funds in the property’s account to pay.  The property manager was then sued and asked to pay the money due.

The matter arose at an apartment building being managed.  The property manager ordered work to be done on a unit.  The contractor hired completed the work and invoiced as usual.  Shortly after this, the apartment building was foreclosed upon and the bill was left unpaid. The contractor sued the property manager citing that the manger knew the owner lacked the funds to pay.  He went on to further state that the timing of the work and the subsequent bankruptcy indicated that the work was ordered solely to obtain free services.

The matter went to court and the judge found in favor of the property manager.  A court of appeals affirmed this position.  In the court’s brief, they explained that the property manager lacked the intent to defraud in this case.  Because of this, the manager was not found liable.  The court went on to explain that the property owner always paying bills on time previously, and giving no indication of a forthcoming foreclosure on the property.  This gave the manager every right to assume that the contractor’s bill would be paid.

For property managers who often order work to be done, this is a good formula to follow to avoid personal liability for debts. Contact us to discuss other ways to protect your firm.

Discrimination Complaints Lead to Strict Liability

Discrimination Complaints Continue

The US Equal Employment Opportunity Commission (EEOC) has released its 2013 year end statistics on charges filed against companies and individuals.  The EEOC is the governmental department in charge of monitoring and enforcing Federal employment laws – specifically discrimination and harassment.   While the total number of charges have declined slightly from 2012, the figures reveal many areas that property managers should be aware of as they interact with their employees, and as their employees interact with tenants of properties they manage.

In 2013 the EEOC reports that 93,727 charges were filed.  Many of the charges mentioned multiple areas where the individual felt they were being discriminated against.  The largest concentration of complaints arose in a few areas.  Namely: Race, Sex, National Origin, Age and Disability.  Property managers have a unique role that brings them into contact with many different types of people.  This increases the opportunity for a property manager or their employee to offend, discriminate or harass an individual.  It is vital for managers of buildings to realize this risk and mitigate their exposure to it.

When charged with an EEOC violation, the regulatory investigation can be expensive and time consuming.  If found guilty, a company can face compensatory and punitive damages up to $300,000.  For age or sex discrimination, the amount could be higher if liquidated damages are awarded.  There may also be monitoring by a local Fair Housing or governmental agency.

It is also important to note that owners of properties have liability for this as well – even if they hire a property manager to handle the operations of the building.  Federal – and most state – Fair Housing Laws  contain absolute vicarious liability wording.  This means that the owner of a property could be liable even if their manager discriminates against a tenant.

Risk Mitigation

With this risk facing property managers every single day, it is important to be aware of the issues and promote activities that discourage discrimination.  There are a number of ways that building managers can lessen the chance of facing an EEOC investigation and decrease the adverse impact if they do.

1) Training

First, make training a priority within your firm.   Making sure that all employees and building managers are aware of the law is the first step to complying with the law.  Regular announcements and examples can help employees realize how this may impact them specifically. As the law or interpretation of the law changes, inform your employees and staff

Secondly, require each employee to attend a Fair Housing training at least once  a year.  Finding a reputable organization to host classes will not only earn your licensed managers CE, it may also save your firm from a major lawsuit.  The law also changes and obtaining updated information annually is an important aspect to a risk management program.

2) Insurance

Insurance can play a critical role in protecting your firm.   While you cannot insure against a guilty verdict, many policies have coverage for the expenses and defense costs associated with an EEOC violation.  Documentation, time away from the office and legal fees can quickly deplete a firm’s resources.  Having the right insurance in place can protect you.  Since not all insurance policies have this coverage, it is important to engage with a broker who is an expert in this field.

3) Internal Policies and Manuals

Managing a building is a 24/7 job.  There are no days off when a pipe bursts.  However, who handles those emergencies is subject to your discretion.  Be aware of family and religious commitments that may prevent some individuals from working on a particular day.  Forcing them to work or threatening to terminate their job could be conceived as discrimination.

Finally, engage with a employment lawyer to make sure your employee handbook and policies manual are up to date with required wording.


For further discussion on ways to protect your firm, contact a licensed broker today.

Liability for a Fire Falls on Property Manager

A recent fire ravaged an apartment building, causing millions of dollars worth of damage.  During the investigation it was determined that this fire was preventable and the building owner and the property manager were liable for the losses due to their lack of care in correcting the issues that led to the fire.

Three insurance policies were available to cover the two entities.  One insurance policy covered both the owner and the property manager for $1M.  There was an umbrella policy for $9M that covered both the property manager and the owner.  Finally, the property manager had policy for $5M that covered his actions.  Disputes arose as to which policy should respond since not all three policies covered both entities and the courts did not explicitly break out how much each party had in liability.

There are three lessons a property manager should take from this scenario:

The property manager was held liable.

While the details of the fire are not known, the court found that the property manager was responsible.  The manager had a duty to maintain a safe building. This duty could not be transferred to the owner or to the tenants.  Many property managers think that their liability is limited to direct actions while managing a building.  This is not the case, as this instance points to.

Millions in insurance coverage might be neccesary.

An apartment building, condo building or mixed use development of any size is worth millions.  Many property managers do not consider the fact that their liability may include the entire value of the building they manager.  A building manager should consider an umbrella policy to protect against these catastrophic losses that may occur.  Umbrella policies are relatively inexpensive, but can save a business from bankruptcy and protect the personal assets of the manager responsible for that building.

Multiple policies may respond.

This case highlights the need for each party of a building management contract to be covered and to understand where their coverage comes from.  It is important to have an expert review of the policies and policy wording that covers a particular building.  Condo association policies can be worded to protect the manager.  Owner’s policies occasionally have clauses to cover the manager – or a joint policy may be purchased.

Contact a broker at today in order to discuss the implications of inadequate risk transfer and to learn how to better protect your firm.



San Francisco Landlord Sued Over Rats

San Francisco resident Deborah Silverman found herself fighting off rats from the unit below after ten years in her apartment. After feeling her complaints had fallen on deaf ears she moved… and sued for $125,000.

The landlord, Bart Murphy, manages 500 buildings and acts as a Rent Board Commissioner. Among the allegations is that his company did not fix the problem in order to drive the long time tenant out so they could raise rents. The apartment Silverman lived in was rent controlled and the rents were raised after she left.

Making the case stronger against the building manager, the city of San Francisco had ordered pest control visits twice that were never completed.

Property managers are encouraged to create systems and checks to ensure complaints are investigated, substantiated and fixed in a timely manner. Without documentation it is very difficult to defend allegations of a lack of action. Government regulation is increasing and anyone working with rent controlled, subsidized or pubic housing should be extra careful of increased enforcement. Putting proper risk management in place up front can save headaches down the road.

Contact today to discuss ways you can increase controls to lower your risk and insurance cost. They are the experts in helping building managers who have had legal problems secure competitively priced insurance and also are able to help well run organizations highlight their improved risk for underwriters.

Landlord Sued Over House Fire

The family of Nancy Worrell, the woman who was killed with her four grandchildren in a Baltimore house fire in 2012, have sued her landlord. The Baltimore Housing Authority, which manages the Section 8 program the family was in, was also named in the lawsuit.

Building manager Paul Stanto is accused of not repairing a faulty furnace that lead to the fire. It is also alleged he did not provide working smoke detectors that could have saved the family.  Providing smoke detectors is mandated by many State’s building codes.

Several family members were able to escape from the fast spreading two alarm fire. Wilson Worrell, the husband of decased Nancy Worrell, was forced to jump from a second floor window, suffering a broken back and burns. A four month old was also throw from the second story to a relative below.

Fires and other accidents happen.  Running a sound maintenance and inspection program is the first line of defense to prevent disaster.  Ensuring your insurance coverage is adequate in the event that injuries and property damage do occur is the second priority. Working with ensures you have the most comprehensive coverage at the lowest possible price.  Contact us to discuss ways to improve your insurance program.

Bedbug Lawsuit Verdict

A 69 year old Annapolis Maryland resident, Faika Shaaban, has been awarded $800,000 in a lawsuit over bedbugs. The award from a Anne Arundel County jury included $650,000 in punitive damages to send a message to the landlord.

Shaaban moved into a building owned and managed by Cornelius J. Barrett and West Street Partnership, shortly afterward she was covered in “scabs and lesions from head to toe” from a bedbug infestation in her unit. It was alleged that Barrett knew of the problem and had been previously ordered to exterminate the insects.

After Shaaban began to make formal complaints about the problem she was evicted, further giving fuel to her lawsuit.

Property managers are reminded to document all complaints and the timeline of any remedies. Also, lawyers should be involved in any evictions or regulatory investigations. Contact to discuss better protecting your operation and strategies to lower insurance costs.