Thanks to our guest blogger, Todd Ortscheid, Chairman, President, CEO & Owner at GTL Real Estate.
Liability concerns are always with us in the property management game. As you probably know, the vast majority of litigation that takes place in the real estate space is related to property management and landlord/tenant issues. Because of this, risk mitigation is a big part of running a property management company (or being a landlord).
When it comes to risk mitigation, the way we handle repairs and maintenance is where our biggest focus should be. Think about all of the various ways that repairs and maintenance can become a liability:
- A tenant withholds rent and disputes an eviction that you filed because they claim that a repair was not done.
- On move-out, a tenant claims that items you are attempting to charge them for were the result of you not addressing service requests that they submitted during their tenancy.
- You assign work to a vendor on a safety-related repair, but it slips through the cracks and never gets done. The tenant is injured as a result.
This list could really go on and on. Get a group of property managers together and start talking about this subject, and you’re likely to get a whole host of stories about lawsuits filed or threatened over issues related to maintenance.
While these sorts of risks can never be completely eliminated, you can certainly take steps to mitigate the risk and put yourself on solid footing to prevent the problems in the first place, and to defend yourself against claims if they are made.
First, make sure that every service request is documented. A software system that allows for online submission of service requests, such as Property Meld, is a great way to handle this. A good practice is to require tenants to submit service requests electronically using this kind of system. If you still want to offer phone submission of service requests, make sure you have a specific phone line that all service requests go to, and be sure to record those calls and have an electronic call log. This all comes in very handy later if there is a dispute. Being able to show a judge a report of all service requests submitted by the tenant and how quickly they were handled can save you in court.
Second, put KPIs (key performance indicators) in place for your maintenance coordinators or property managers related to maintenance and repairs. There should be metrics for how quickly a service request is dispatched, how quickly it is resolved, and the average rating a tenant gives the repair. By putting these KPIs in place and holding your employees to them, you will ensure that things don’t slip through the cracks. Again, good software for tracking these things is a necessity. The best way to avoid litigation is to make sure that the repairs are getting done, and getting done quickly. It’s pretty difficult for a tenant to claim that they didn’t pay the rent because of a repair not being done if you can show that you get all repairs done in less than four days, for example.
Finally, get your vendors to document everything thoroughly. You want before and after photos on every repair, and having software that allows the vendor to upload the photos directly into the work order makes this a piece of cake. You also want detailed descriptions on the invoices. If your vendors are submitting invoices that just say something like “fixed electrical problem,” you need to have a talk with your vendors. “Fixed electrical problem” does not make for very good evidence in a courtroom. “Traced short to faulty electrical outlet, removed old outlet, replaced with new,” tells a judge exactly what was done. And if it is accompanied by photos of the removed outlet and the new one, the judge is really going to love you.
Benjamin Franklin famously once said that “an ounce of prevention is worth a pound of cure.” Nowhere is this more true than in how we handle repairs and maintenance. Do it right on the front end, and you’ll have a lot less to worry about if you end up in a dispute.