Here are some hard-won lessons learned in dealing with a common feature of Foreign Service life: property managers.
BY AARON P. KARNELL
Two words from a Virginia judge, and it was over: “Motion granted.”
Someone else might have turned to his lawyer at that point and asked, “What does this mean?” But I was acting as my own lawyer. I already knew what the verdict meant: after an eight-month legal battle with my property manager, I’d lost my case. As I left the courtroom, my opponent was grinning.
Sometime in 2014, while I was in Mexico, three people moved into my Alexandria condo without my permission. My Virginia-based property management company didn’t vet them or run a credit check on them, but the company did cash rent checks from the three, none of whom had ever applied to live in the property. Evidently, they had swapped places with the original tenants. The property manager later claimed not to know they were there.
The three paid rent to the property manager for awhile, then decided paying real money for housing was passé, and stopped. I had to request the property manager to threaten them with eviction. They finally left the condo, and during the resulting turnover period, I lost two months’ rent. (The month they didn’t pay before leaving was covered by the security deposit, which the property manager did not return to me until after I had filed the lawsuit!)
I wrote a demand letter to the property manager clearly stating my claim. Don’t I pay your management fee, I asked, for you to know what is going on with my property, including who actually lives there? No response.
I am a lawyer by training, and the lawsuit started to form in my head. I checked off the elements of negligence. Was there personal injury or property loss caused by the defendant’s breach of a legal duty? Check. What about the duty of an agent, such as a property manager, to the owner, to look after his affairs as if they were his own, and to act in his best interest? He definitely didn’t do that. Check.
Then I looked at the contract I had signed with the property manager. Hmm. There wasn’t much in there about his duties, but there was an awful lot about mine.
Still, I was confident in victory. I was going to be the consumer who fought back. I may be an inexperienced lawyer, but I had two grand legal pillars holding up my case: the law of agency and the law of negligence.
According to the law of agency, the fiduciary duty of an agent to his principal is one of the highest duties one person can owe another. It means that the agent—in this case, the property manager—must act in the best interest of the principal—me. The property manager-owner relationship is a textbook agency relationship, and everyone who has been to law school knows this.
But that’s the difference between law school and the real world. Practicing lawyers know that common law principles are sometimes scrapped altogether by business-friendly state legislatures. As it turns out, the Virginia Code rewrites the property manager-owner relationship to exclude any duty of the property manager to act in the owner’s best interest.
Okay, that hurts. But I still had the law of negligence, right?
Enter the economic loss doctrine, a business-friendly legal principle that says, in essence, that if you have a contract with a service provider such as a property manager, and he doesn’t do his job properly, but you don’t suffer any personal injury or physical loss due to his poor performance, you cannot sue for negligence.
All I was left with, at that point, was what was in the contract. What were his promises in that document? To collect rent. To find tenants. And that was about it.
Aside from revealing my naïveté as a lawyer, there is a point to sharing this story. My hope is that others in the Foreign Service, whether they are lawyers or not, can learn a few lessons from my loss.
First, as a property owner, don’t go around thinking “the law” protects you from your property manager’s incompetence if your losses are purely economic and not very shocking. Legal doctrines and pieces of legislation designed to protect businesses have a way of cropping up.
Second, and more importantly, take an active role in the negotiation of your property management contract. When I signed my contract, I assumed, like many, that I had little power to negotiate. Increasingly, the contracts in our daily lives are “take it or leave it” agreements—“Click here to agree to all of this gobbledygook.” But sometimes there is room for negotiation, especially with more personal business relationships.
In fact, on looking at my contract again, I discovered that it had a few blank lines I could have used to enter my own terms. If I had used those lines to write, “property manager owes owner a duty of due care in the management of owner’s property,” I might have seen a different outcome. At the start of your relationship with a property manager, or when the contract is up for renewal, check that the agreement requires the property manager to act with due care. If that language isn’t in there, ask for it. It’s not an especially onerous request, and if the property manager wants your business, they will probably accept it.
Finally, don’t have illusions about what a property manager can do for you. Relying on that same principle of the property manager acting in the owner’s place, I once asked a property manager to attend an important condominium association meeting for me where a critical topic—condominium redevelopment—was to be discussed. When I lived in the States, I didn’t go to condo association meetings very often; maybe once a year, if that. But this is one I certainly would have attended if I were in town. The manager said simply, “Sorry, we don’t do that.”
I should have figured out then what I finally know now, several years and one lawsuit later: Property managers are there to collect rent, help you find a tenant (sometimes) and make basic repairs. They are not you. They don’t act in your best interest, but rather, in their best interest—which, if you are smart about your contract, might coincide with yours.