Hiring a manager can free landlords from many time-consuming tasks, such as handling repairs, collecting rent, and showing vacant units. But it can also cause some worries of its own, such as meeting all the IRS tax rules and other legal obligations. Landlords also need to be concerned about properly training and supervising their managers.
Potential Legal Problems Caused by Managers
Depending on the circumstances, you may be sued (by a prospective or current tenant) and found liable for acts of your manager, such as:
- violating antidiscrimination laws by refusing to rent to a qualified tenant who is a member of a minority group
- sexually harassing a tenant
- failing to return a departing tenant’s deposit within the time limit set by your state law
- failing to repair a dangerous condition, such as substandard wiring that results in an electrical fire, causing injury or damage to the tenant
- committing a crime such as assaulting a tenant, or
- invading a tenant’s privacy by flagrant and damaging gossip or trespass.
How to Protect Tenants and Yourself from a Bad Manager
Here are five key ways to limit legal problems with your manager.
- Choose your manager carefully. If a tenant gets hurt or has property stolen or damaged by a manager whose background you didn’t check carefully, you could be sued.
- Make sure your manager is familiar with the basics of landlord-tenant law, especially if your manager will be selecting tenants or serving eviction notices. Provide detailed instructions to managers that cover likely trouble areas, such as the legal rules prohibiting discrimination in tenant selection
- Supervise your manager, and encourage your tenants to report problems to you. If a tenant complains about poor maintenance of the building or another problem, do your own investigating and try to resolve the issue.
- Get rid of a bad manager before problems accelerate. Doing so may help avoid an expensive tenants’ lawsuit.
- Purchase a good landlord’s insurance policy that covers illegal acts of your employees. No matter how thorough your precautions, you may still be liable for your manager’s illegal acts—even if such acts directly violate your instructions. A good insurance policy is a must for all landlords.
More Information on Managing Managers
For additional details on hiring, training, and supervising property managers, see Every Landlord’s Legal Guide, or, (if your rental property is in California), The California Landlord’s Law Book: Rights & Responsibilities. For a wide variety of useful articles on legal obligations of employers, see Nolo’s Employment Law Center.