Lawsuit Happy Tenants: How to Protect Yourself and Your Investment

Short of a tenant dying due to a property defect, every landlord’s worst nightmare is to be targeted in a nasty lawsuit. But society is becoming increasingly litigious, and landlords – perceived as having deep pockets – are frequently in the crosshairs of plaintiffs looking for a payout. Defense matters: All it takes is one mishap or misunderstanding and the real estate asset you worked so hard to acquire is at risk in a lawsuit. Here are just a few kinds of cases where landlords have been held liable for damages or compelled to settle out of court for significant amounts: A ‘slip & fall’ case on the property or other claim arising from ‘dangerous conditions’ Wrongful eviction Mold-related illness A construction defect Criminal activity of tenants Carbon monoxide poisoning Breach of contract allegations Allegation of sexual harassment of tenants An allegation of handicapped or racial discrimination Claims of injury from excessively hot water in bathtub or shower Damage from burst pipes or other maintenance-related causes Dog bite incidents, where the landlord was found negligent or where the landlord was simply aware that it was a potentially dangerous breed. The list goes on.

Part of a property management firm’s responsibility and part of their value proposition, is to help protect the landlord from many of these claims. Property management firms do so in a variety of ways: Prevention The best defense is to prevent an incident from occurring in the first place. A good property management firm should bring some expertise in home maintenance and repair – as well as a system to keep track of inspections and measures taken to keep the property in good repair. For example, a property manager that schedules and documents an annual inspection of fire alarms may well help shield a landlord from allegations of negligence if there is a problem down the road. The same goes for carbon monoxide alarms and even the scalding incident mentioned above. Most full-time property owners do not have the time to engage personally in the minutia of home maintenance of this type. Your time, after all, has value. But a property manager can take care of these issues. . Expertise Experienced property managers know the federal, state and local housing discrimination laws and ordinances – and can help keep you out of trouble with authorities. This is important because even seemingly innocuous small talk between an inexperienced or unguarded landlord and a potential renter could lead to a later allegation of unlawful discrimination.

For example, if a landlord, wanting to be friendly, asked to see a photograph of the applicant’s children, that applicant could later file a complaint with the U.S. Department of Housing and Urban Development alleging that you engaged in unlawful discrimination on the basis of familial association. An experienced property manager who has executed thousands of leases and interviewed thousands of applicants is less likely to make that mistake. This kind of expertise extends far beyond the initial interview. A landlord acting alone could go years before being able to evict a tenant – an experienced property manager has possibly dealt with an eviction situation before. They will save the property owner a significant amount of time and hassle, and potentially prevent wrongful eviction lawsuits or short-circuit costly delays and defenses to eviction.

Insurance Coverage In the event a tenant does sue you, for whatever reason, your property management company should carry some significant insurance coverage of their own, including an omissions insurance policy and specialized liability coverage for property managers. This is in addition to your own landlords’ insurance and umbrella liability policies. Their coverage may help provide counsel to help you mount a defense. This works for you as long as you and the property manager are sitting on the same side of the courtroom as co-defendants. If a court judgment holds both you and the property management firm jointly liable for any claims against you, you will be grateful for the additional insurance and protection resources the property management firm brings to the table.