We would eventually realize that all of the above are correct, depending upon the landlord and property manager relationship as defined in the management agreement itself.
Some property managers structure the management agreement to give the property manager maximum authority to act on the property owner’s behalf, in fact, becoming, for all intents and purposes, the landlord. While this permits the property managers to maximize their skills and operate at the peak of efficiency, perhaps saving the owners lots of money, it comes with a potentially heavy price for the property management company. When the property managers, look like, smell like and taste like the property owner, courts of law may deem them to be so, holding them accountable for management indiscretions, even when those indiscretions were at the direction of the owner.
Property managers that practice this way are doing so because they have confidence in their ability to do a good job and avoid litigation. The best way to avoid litigation is to not make people angry. Angry people make lawsuits. Happy people do not. So, while it is actually easier said than done, such property managers do their best to keep property owners and tenants happy. It can be done.
Also, many of these property managers adopt this relationship because they truly believe that they can best protect the property owner. That should be seen and appreciated as a noble effort, considering the risks.
The other type of property manager is one that executes the directions of the property owners, occasionally advising them on technical matters, but for the most part managing resources more so than relationships. For these types, the leases usually name the property owner as landlord and identify the property manager as simply an agent of the property owner with no greater authority than that defined in the lease. A good comparison would be the relationship between a home seller and their listing agent. The listing agent has no decision making authority. The seller makes all the decisions.
This style of property manager is risk averse. When a lawsuit is served, they want to be able to say: I’m sorry you’re suing the wrong party. Please redirect this action to the property owner.
In reality though, at least in my limited experience, courts and juries will nail the party that did something that harmed another party. In other words, it doesn’t matter who signed the lease. It also doesn’t matter what indemnifications are found in the lease. Those things might dissuade a party from seeking a lawyer to protect them, believing that such provisions would make it a meaningless pursuit. That could work, and maybe that’s the justification. But if someone is really angry, they will not be deterred from seeking legal counsel. You can bank on that lawyer finding a way to get this case into the courtroom. That’s how they get paid! And it does not matter if you win or lose; you still have to defend yourself and cover legal costs, and spend a lot of stressful moments getting through it.
For me, the bottom line here is that if I were a property owner I would want the former rather than the latter type of property manager working for me. That being said, there are those types of property owners that are unwilling to give up so much control and would be more comfortable with the latter relationship. It’s a beautiful world!
If anyone is interested, we are a property management firm that offers property management services in Metro Atlanta. We are based in Roswell, Georgia but we serve most of the metro counties.
Daniel R. Wilhelm
3 Options Realty, LLC., CRMC®, The Green Broker
dan @ 3OptionsRealty.com
The author of this Blog is neither an attorney nor an accountant. Nothing written should be construed as legal advice. Conclusions conveyed are outcomes based upon practical experience and should not be depended upon to be a common outcome of other similar circumstances. Consult with a professional before making tax or legal decisions.
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