Claims are made against all types of licensees, including strata and property managers. This article reviews the types of claims E&O gets against these licensees and, more importantly, looks at how to avoid them.

Claims against strata and property managers

Against strata managers we often get claims:

1. For providing incorrect information such as in Form Bs for storage lockers and parking stalls;
2. For approving unauthorized expenses and improperly supervising contractors; and
3. For making improper or unauthorized payments, including taxes, on behalf of the strata corporation.

Property managers are not immune from feeling the heat and face claims such as:

1. Improper vetting of tenants and tenant placement;
2. Improper supervision of tenants and inspections of the property;
3. Unauthorized repairs and expenses or failure to repair or maintain the property during the tenancy; and
4. Failure to discover tenant misdeeds like grow ops and drug labs.

How to put out the fire and prevent claims

As a strata manager, ensure that you:

1. Have a full and proper management agreement in place at the beginning of the relationship. Note that, unless authorized by the prospective client, written service agreements are required as per the Real Estate Services Rules, s 43 (1). Get your corporate counsel to review your agreement. Consider including clauses in the agreement that limit your liability, provide you with an indemnity, and require your client to add you as an additional insured under their insurance policy.
2. Check, double-check and then regularly audit any information provided by the strata regarding the numeric allocation and designation of the storage lockers or parking stalls. Be sure about the numbers and information and understand the different ways that parking stalls and storage lockers can be allocated to the strata lots. Is it common property, limited common property, a separate strata lot or a lease agreement? Legal Update 2023 has a module on Types of Ownership that covers these different allocation mechanisms well. Know what you’re dealing with when you complete the Form B.
3. Have document retention policies in place and follow them. If your service agreement addresses document production and retention, ensure that you comply. Key communications should always be documented in writing, such as instructions from your client and confirmation of advice you provide to your client. If you do face a claim against you, we have a better chance of successfully defending you if you can back up your testimony with written documentation.

If you’re a property manager, remember to:

1. Ensure that your brokerage has a written property management agreement in place. The same tips set out in #1 above for strata managers apply here. Your agreement should set out the entire scope of the management duties in a clear manner. For example, the agreement should set out frequency of inspections, so there is no doubt.
2. Properly document key communications as set out in #3 above. Be sure to keep a copy of all written recommendations and instructions to and from the owner. Be sure to have a documented inspection report for each time you visit the property (indicating such things as the date, time, address, whether you went inside and/or outside the property, any problems or issues observed, and whether you shared this in writing with the owner and what, if any, recommendations you made). Pictures of the condition of the property before and after a tenancy are also useful.
3. Recognize your role as an agent. When negotiating or arranging contracts on behalf of your client, keep in mind that you should not be exposing yourself to unnecessary legal liability. For example, property management brokerages who enter into leases with the brokerage named as the landlord may be found responsible for breaching the lease, even in circumstances where the property manager and brokerage did nothing wrong. When listed as a lessor, the brokerage is a party to the lease contract and thus the brokerage takes on the rights and obligations in the contract, not the client (the property owner). You have a greater risk of being sued under the Residential Tenancy Act (such claims are not covered under the Indemnity Plan, as per Exclusion 14).

Your risks can be minimized if your client’s contracts (such as leases or service agreements) are in your client’s name (not the name of your brokerage) and authorized, reviewed and signed by the client. If your client is not able to sign themselves, then you could sign on their behalf but only if you have obtained written authorization from the client to do so (ensure you comply with Real Estate Services Rule 45).

Concluding thoughts

Strata and property managers following the above tips are more likely to douse the flames of potential claims.

Additional Risk Report resources for strata and property managers can be found here:

Challenges in defending residential property management claims, by C. Spratt

A reminder to strata and property managers

Don’t get stung by this “B”: Form B and parking/storage allocations for strata managers, by J. Chow

Risk management for strata and property managers, by R. Dix