De Facto Property Management Creates Agent Risks

May 17, 2012

When clients must move before their house is sold and they ask you to take care of their property in their absence, it's tempting to say yes. After all, you want to remain on good terms with them and get the future sale. But saying yes to such a request comes with a slew of pitfalls that attorneys Glen Kimball and Thomas Gregory of the Philadelphia law firm O'Connor and Kimball discussed at Wednesday's Risk Management and License Law Forum at NAR's Midyear Legislative Meetings and Trade Expo.

The three broad categories of risk to agents include:

 • potential property damage claims by the seller
• potential personal injury claims by buyers and other agents
• potential disclosure-related claims

Before you say yes to becoming a de facto property manager, "be sure you know what your personal limits are and how much responsibility you can take on," Kimball said.

Additionally, keep clear records on the condition of the property. "To protect yourself, it's important to take pictures at the time you take a property over, particularly pictures of things that are already broken at the start," Kimball said.

Other factors to consider upon agreeing to maintain a vacant property for a seller involve making a written agreement about the scope of your representation. "Are you responsible for leases, procuring a tenant, bill paying, maintenance? If extensive maintenance is needed, a full property management contract may be warranted," Gregory said. The agreement should also specify how much spending authority an agent has to contract for needed repairs without getting written consent from the client.

"The duration of this undertaking must be spelled out as well as the right to terminate your involvement," said Kimball.
Gregory warned that existing home owner's insurance policies may not include real estate agents as insured parties if a property is vacant. "You have to think about how to keep yourself blameless for things that aren't your fault," he said.
Clarity in written communication is critical. "Don't write that you will come over every week to check on a property. You should specify you will come once every four days or once a week. Otherwise, you could be held responsible for damage that occurs as a result of it being vacant," Kimball added.

—Wendy Cole, REALTOR® Magazine