Earlier this year, the CBC reported about the dire situation facing strata corporations in BC — too many strata corporations, too few strata property managers:

The Real Estate Council of B.C., which licenses strata managers, said there were 1,322 licensed strata managers in the province as of June 30, 2017.

According to the Land Title and Survey Authority, there are 31,100 strata buildings in B.C. with 637,205 units between them. That works out to an average of 23 buildings per manager. ^[1]

Anecdotal reports and experience tell us that strata and property managers work long hours and have plenty of responsibilities. We know that when people are overworked, mistakes can happen. Important deadlines can be missed, key points are not documented, notes are lost. 

This article will give a brief overview of some of the types of claims that are reported to E&O, and discuss some of the risk management strategies, or preventative measures, that you can take to minimize the potential risks discussed below. 

Property and strata managers face a large variety of tasks. These include negotiating and arranging contracts between contractors and clients, collecting rent, reporting and managing claims relating to property damage, identifying and arranging tenants, recording lists of tenants or residents, and managing assignment of parking stalls and storage lockers.

Given the variety of tasks for which strata and property managers are responsible, it’s no surprise that the types of claims we see at E&O are just as varied. Some examples include:

Strata managers

1. A claim for negligence in overseeing a leaky condo repair project, where the licensee faced risk for failing to put forward different contract options to the client, failing to record the decision-making process, and failing to have the client sign major contracts;
2. A claim for representing to a buyer of a unit that past leakage issues in the building did not involve the building envelope – in other words, a risk that the strata manager was providing advice outside the scope for which they were qualified;
3. A claim for missing the deadline for applying for a rebate by relying on third-party information, instead of confirming directly with the relevant government office;
4. A claim for providing inaccurate information on a Form B;

Property managers

5. A claim for failing to take any steps to inspect a property while it was vacant;
6. A claim against a commercial property manager for leasing to a new tenant whose business breached an existing tenant’s exclusivity clause;
7. A claim for failing to properly vet a tenant and conduct inspections during the tenancy.

In terms of risk management, what is clear from the claims E&O has received is the importance of documentation from the beginning of your retainer as a manager throughout the management process. 

Commencement of the retainer

At the beginning of the retainer, it’s important to document the agreement with the client. You should ensure that the terms of the management agreement are completely documented and that expectations are clearly described. For example, for property managers, what authority do you have to make repairs without authorization from the owner? How often are you expected to conduct inspections?

For strata managers, document the terms on which you can enter contracts on behalf of the client or approve lists of approved contractors. 

It’s also important to document the legal liabilities that may be imposed or negated through the terms of management agreements. You may want to consider including clauses in your contracts that limit your liability, provide you with indemnity or require the client to add you as an insured under their insurance policy.

This is good risk management, because not all claims against managers are covered under E&O’s Indemnity Plan. For example, the Indemnity Plan doesn’t include coverage for claims for bodily injury (Exclusion 4), but if you have an indemnity agreement from your client or coverage under your client’s insurance, you’ll still have some form of protection. 

Course of the retainer

During the course of the retainer, the importance of documentation remains paramount for both strata and property managers, as there may be several licensees or a series of licensees managing the property or strata complex. Communication between licensees is crucial, and proper documentation can be the key to avoiding claims or at least successfully defending them.

Courts may disregard a property manager’s testimony that regular inspections were done, if there is no documentation of such inspections taking place. Similarly, courts may disregard the testimony of a strata manager who did not record key communications or agreements in writing. From a practical perspective, documentation is also key in terms of assisting memory – the likelihood is slim that you’ll recall specifics of a conversation or meeting several years after an event (when a lawsuit may arise). Reliance on documentation, therefore, is vital. 

It will come as no surprise to those who act as strata managers, particularly for large strata corporations, that the assignment of parking and storage lockers can be an unending source of grief. Both anecdotally and from the claims we see, we know that documentation of stall/locker assignments can often be found wanting. 

This frustration for managers is, of course, compounded when it’s time to prepare the Form B upon the sale of a strata unit. Documentation available to you may be out of date; the seller (or previous owners) may have long since assigned out use of the parking stall or storage locker. Inevitably, when problems arise after the transaction completes, the parties will be looking to the manager who completed the Form B for satisfaction. 

In terms of risk management, consider recommending regular audits of stall and locker assignments. As part of the audit process, you may request confirmation of all assignment agreements. 

Contracting on behalf of a client

It’s also an important aspect of risk management for both strata and property managers to recognize their role as agents.

When negotiating or arranging contracts on behalf of your client, you must keep in mind that you should not be exposing yourself to legal liability for that contract. In other words, your client’s contracts (such as leases or service agreements) should be in your client’s name (not in the name of your brokerage) and authorized, reviewed and signed by the client.

Licensees who make themselves parties to a contract (for example, naming the brokerage as the landlord) should be aware that they may not have insurance coverage should claims be filed against them for breach of that contract. 

Conclusion

Ultimately, you must use common sense in relation to risk management as a strata or property manager.

It’s key to develop standard practices so that mistakes are limited. Detailed note-taking, proper agreements, and ensuring open and comprehensive communication between managers and clients will go far in minimizing the risks associated with strata and property management. 

 

[1] A building problem: B.C. has too many stratas, not enough managers; Liam Britten · CBC News · Posted: Feb 12, 2018 8:00 AM PT; http://www.cbc.ca/news/canada/british-columbia/b-c-strata-manager-condo-townhouse-1.4529740