December 18, 2020
Property managers must maintain engagement with rental property owners, vendors, and renters themselves. As you work with all of these parties, you will expose your property management operation to various risks. In fact, the risks that come with being a property manager tend to grow and change as your operations expand.
Risk leads to financial loss, so understanding the importance of Property Risk Management is key to mitigating exposures. This makes risk management one of the top priorities of property managers everywhere.
There are specific high-risk that property managers must be aware of to protect themselves and their business. Property managers need to identify where potential exposures lie and make the right moves to manage them, limiting their impact.
As a property manager, it’s normal to work with a lot of data and handle ample contracts, rent rolls, tenant lists, and maintenance tasks. Without the right administrative system, it would be challenging to manage all this data and keep important files organized. You may lose documents, miss deadlines, or overlook contract clauses.
Some of these problems can cost a significant amount of money and lead to legal issues. To reduce administrative risks, a property manager should use an efficient system that stores, organizes, and analyzes information. It should be easy to access and encourage collaboration across the company while also providing reminders and notifications to renters.
Property damage is always a potential risk point for property managers, regardless of how many properties and tenants they are overseeing. Property managers have plenty of physical property to maintain, from furniture breaking to exteriors wearing down to paint chipping.
Property managers can reduce the risk of damage by conducting regular inspections to identify physical damages before they become larger issues. Ensure that all repairs and maintenance are done by professionals who are licensed and experienced. The best solution would be to find appropriate insurance coverage, such as general liability coverage, to protect your property management company against damage.
Property management companies are responsible for the safety of the tenants in their properties. A tenant who becomes injured on the property you are managing may claim negligence and seek legal prosecution. As a property management company, you will be liable for accidents that take place on the properties you manage if it is proven that you were negligent and responsible.
Apart from having the right level of insurance coverage in place, you can limit such incidents through regular property inspections and upkeep. To avoid charges related to negligence, you should take reasonable steps to provide a risk-free property. Ensure you hire qualified contractors and keep records as proof that you took the right course of action to ensure everyone’s safety.
Risk of Rising Vacancy
Being a property manager also means being able to find tenants for your clients. It is up to you to keep your rental properties’ occupancy rate high. However, with the spread of COVID-19 and many workers now spending their time working indoors or losing their jobs altogether, vacancy rates are rising throughout the U.S.’s top metro areas.
For example, vacancy rates in the Bay Area are at their highest levels in years due to COVID-19, hovering around 10 percent, but expected to climb because more tech workers in the city are opting to move back home or to cheaper areas. But even without COVID-19, there is always a risk of running a high vacancy rate. The obstacle comes when you are competing with other properties over a limited potential tenant selection.
Being a property management company comes with some level of risk, like any business. There will be potential legal risks every day of the week, but you have an obligation to protect yourself and the owners by taking proactive steps to mitigate exposures. Speak with your trusted insurance agent to ensure comprehensive coverage and limit your liabilities.
About Associations Liability Insurance Agency (ALIA)
The ALIA Team (part of the Riverton Insurance Agency Corporation), specializes in helping real estate professionals find the affordable and comprehensive liability insurance they need, without the hassle. ALIA dates its roots to 1991 with the founding of FREA, Foundation of Real Estate Associates. In 2013, ALIA was created to work with multiple insurance companies thereby broadening the portfolio of products to customers. For more information about our products and services, contact us today at (800) 882-4410.