Lawsuits are unfortunately a part of life, and they can happen at any time – especially when we least expect it. So how can you minimise the chance of it happening to you?
Blogger: Sam Saggers, CEO, Positive Real Estate
As property investors, we’re arguably more exposed to the possibility of litigation than the population at large simply because we provide a service to the public.
You might remember about five years ago, a case presented to the District Court of New South Wales that resulted in a huge judgment. The plaintiff in the case was a tenant who had been injured when his hand broke through the glass on a door at the property he was renting. Ultimately, the court awarded the tenant more than $840,000 in damages.
Fair or not, this is what happened – and both the property owner and the property manager were held responsible to pay the claim.
Granted, things sometimes happen, but there are things we can do to lessen the chance of a tenant opting to sue us.
Good communication is an important part of a tenant/landlord/property manager relationship. Misunderstandings can easily balloon into tribunal hearings and court cases.
Avoid this by promptly responding to tenant concerns and spelling out what each party is expected to do, and follow up to ensure that all expectations have been satisfactorily met.
2. Document everything
Every communication, whether it be written or verbal, needs to be accurately documented. Facts that need to be documented include:
● Topic (e.g. repairs, lease renewal)
● Parties involved (e.g. tenant and property manager’s assistant.)
● Solution and date accomplished
● Follow-up date and task (if necessary)
3. Give notices
Provide your tenant with all required notices, such as fire safety, carbon monoxide information, etc, obtaining a signature that the information was received.
4. Provide a safe property
Ensure your tenants’ safety by keeping the property in top shape.
A good rule of thumb: if you would do something to your own residence, such as exterior flood lamps or well-manicured shrubs, then do it for your rentals.
5. Follow-up on repairs
When a tenant calls about a problem that needs repairing, set up a time that’s good for them for you to inspect the damage. Once you’ve determined what needs to be done, contact a licensed professional to attend to it, ensuring that it’s done as quickly as possible.
After the repairs have been done review them to make sure they’re done correctly and to your (and your tenants’) satisfaction.
6. Be available
Make sure your tenant has your contact information, and respond quickly to their enquiries.
If you plan to go away, let them know well in advance that you’ll be unavailable. However, have an emergency contact person they can reach if necessary.
7. Never violate your tenant’s privacy
Always give a 24-hour notice of your intent to visit the property.
8. Reward great tenants
Have tenants who always pay on time – or even a bit early?
Who take great care of your property and have neighbours who love them?
Make sure you let them know how much you appreciate them by giving small tokens of your appreciation, such as a nice bottle of wine at Christmas or even movie/theatre tickets.
Even if you’ve done everything you possibly can to ensure your tenants’ safety and to manage your property as efficiently as possible, things happen and sometimes people feel the need to involve the courts in their disputes.
To protect yourself and your investment make sure your insurance is enough and that it will cover litigation costs should you be sued.
It’s also advisable to speak with a financial planner to determine what structures you need to put in place to protect your personal assets or limit your personal liability.