Low risk? No way!

Think property management is a low risk service? Think your insurance premiums should be lower? Thing again. Property management claims are on the rise, which is a growing concern for the real estate industry and insurers alike.

Jenna Sammut is an Account Executive at Jardine Lloyd Thompson Pty Limited (JLT)

Why are the number of property management claiming continue to rise? Is it human error? Are tenants and landlords becoming more precious? Or is it simply because property managers are the easiest target to blame?

There are lots of incidents that can occur when it comes to property management.

Claims by tenants

Tenants may look to a property manager for compensation in all manner of circumstances. Here’s a few examples:

Slip and fall incidents: Unsteady steps, slippery ground, carpet that’s lifting, holes in the backyard and more. The list of things that can trip up a tenant is endless. The cost of defending a claim for bodily injury and paying compensation can run to hundreds of thousands of dollars.
Balcony accidents: Balcony collapses resulting in serious injury or death are not uncommon. These incidents can be ‘worst case’ scenarios, leading to lengthy and extremely costly claims and legal proceedings. Compensation can potentially be in the millions.
Broken tiles: Shower tiles, as well as ceramic soap holders, can easily wear over time. Sharp edges can cause cuts and bruises, and an injured tenant may blame the agent for not keeping the property safe.

Claims by landlords

But it’s not only tenants who are making claims against property managers. Claims by landlords are also on the rise. Some common claims include:

Unwanted pets: Sometimes tenants will have a pet, despite the landlord having a ‘no pets’ policy. In such cases, the landlord may claim against the property manager for damage and wear caused to the property by the pet.
Failing to notify landlords: Sometimes landlords take responsibility for liabilities that arise, but if the property manager doesn’t notify the landlord of certain issues with the property, the claim may fall back on them.
Poor tenant screening and lack of routine inspections: Failing to conduct thorough tenant screening and inspections can result in the possible loss of rent for a landlord, as well as ongoing damage to the property should it not be suitably maintained.

Minimising risk

With so much potential for claims, it’s no wonder that insurers struggle to provide less expensive premiums. But there are a range of things you can do to minimise the risk of being faced with a property management claim:

1. Ensure regular and thorough inspections are made. Document all findings.
2. Pass your inspections and recommendations onto the landlord. Recommend the use of experts for inspections of structural areas. Follow up on all maintenance required.
3. Place liability back onto owners when they refuse to invest in repairs and/or maintenance by recording your recommendations in writing.
4. Complete paperwork and documentation may be the key to the successful defence in court proceedings. Ensure detailed file notes are kept. Don’t rely on giving verbal advice or instructions.
5. Ensure owners, contractors and handymen all have their own public liability or landlords’ insurance to reduce the possibility of a claim falling back on your professional indemnity insurance. Keep records of their certificates of insurance.
6. Don’t cross out the indemnity clause in your management agreements. It can assist in defending against a claim.
7. Make use of technology, such REI Forms Live, that can enhance time efficiencies and reduce risks in your business.
8. Recommend your landlords to have their own landlords’ insurance. Landlords insurance can cover loss of rent as well as damage to the property.

To discuss your professional indemnity insurance needs, please contact Realcover and speak with a JLT representative on 1800 990 312 or email realcover@jlta.com.auRealcover is underwritten by QBE Insurance (Australia) Ltd and managed by JLT.

The information contained in this article, which is current as at the date of publication, provides only a general overview of subjects covered. It is not intended to be taken as legal advice or advice regarding any individual situation and should not be relied upon as such. Insureds should consult their insurance and legal advisors regarding specific coverage issues. All insurance coverage is subject to the terms, conditions, and exclusions of the applicable individual policies.