By Robert Meisner

By giving property managers the power to oversee a community, they become potentially liable to persons who may be injured, or for property that may be damaged. Consequently, property managers are often named as defendants in premises liability and other lawsuits. Therefore, it is imperative that property managers understand their potential for liability exposure and how to protect themselves accordingly.

The most common lawsuit against property managers are “premises liability” cases which involve actions brought to recover damages for personal injuries sustained while on the condominium’s common elements including the manager’s failure to properly maintain the common areas. Property managers have also been sued for knowingly permitting covenants, conditions and restrictions to be breached.

Property managers can be sued under the Federal Fair Housing Act pertaining to allegations that their actions and/or policies constituted discrimination and/or they allowed a neighbor to create a racially hostile environment which was tolerated and ratified. For gender or racially motivated acts, a property manager may also be sued under the Civil Rights Act. Failure to accommodate a disability could be deemed a violation of the Federal Fair Housing Act.

Additionally, the Fair Debt Collection Practices Act should be practiced by a property manager who may be deemed a “debt collector” under the Act. Property managers have also faced potential liability arising out of bankruptcy proceedings. For instance, if the property manager ignores the automatic stay and continues to pursue the co-owner for the debt, the property manager could face liability. In addition, property managers could be subject to scrutiny under the Patriot Act.

Legal obligations to provide security in the community is also a growing concern. The number of lawsuits against associations, management companies and individual directors claiming inadequate security has dramatically increased as the numbers of crimes committed in community associations has risen.

Managing agents which are in control of the premises are under the same duty as the association to keep the premises in a safe condition. A primary consideration in determining the extent of liability is the efforts made to prevent foreseeable criminal acts on the premises. Victims have sued under the “premises liability” doctrine, claiming there was a duty to make the common areas safe.

In addition to educating yourself and seeking good legal advice, the best time to take steps to minimize potential exposure to liability is during the time the management contract is being negotiated between the parties. The extent of the property manager’s potential liability is largely contingent upon the duties that the property manager has contracted to perform or otherwise assume.

Contracts should specify the manager’s authority with regard to hiring, supervising and discharging association employees and other contractors. Managing agents should require the filing of liens, which is a legal service to be performed by an attorney because mistakes could result in slander of title or other claims. The management contract should specifically limit the manager’s potential liability for performing those duties assigned to it by the association. The property manager can also limit its liability by assuming responsibility for injury or loss caused by the manager’s gross negligence, instead of ordinary negligence. There should be cross indemnification provisions between both the association and the property manager to limit their liability to each other.

The agent should provide a bond in a sufficient amount with a bonding or surety company covering all employees of the agent who handle or are responsible for handling the association’s funds and records. Good insurance coverage is the best protection from financial exposure to potential lawsuits for both the association and property manager, and the manager should ask for insurance protection from the association.

In conclusion, if someone is injured at a community association project, chances are high that both the property manager and the association will be sued as co-defendants. Be sure to educate yourself as to the potential areas of liability, seek legal advice and, remember, the best time to take steps to minimize potential exposure is during that period when the management contract is being negotiated.