I am a fairly new agent interested in purchasing a property management business that manages approximately 190 homes/apartments. My broker knows my professionalism and likes the idea, but she's concerned about the liability (even though she can't name a single property manager that's ever been sued).

My question: how do I operate a business under her brokerage without increasing her liability? I'm the property manager and will carry maximum insurance, so does she have a legit concern?

I personally think she's just nervous because she recently went through a lawsuit. I know I probably need to speak with a lawyer, but wanted to see what others thought first. Thanks!

She should make sure she is covered under her E&O policy for providing property management service.

Yeah that will make her rate go through the roof............

I don't allow property management unless it is on my agents personal investments.

Property management is the highest category of litigation. Don't believe me call an E and O company. They track ALL the stats and risk just like car insurance companies do.Short sales are at the top of that as well followed by REO and commercial.

The least amount of risk is assessed to regular real estate transactions.

If you want you should pay for the broker to set up a second brokerage for just property management with a separate E and O policy. Then if lawsuits happen that separate corp can be shut down without affecting her main brokerage.

good luck

The least amount of risk is assessed to regular (residential) real estate transactions.

Her risk will go up so just make it worth it for her. Or go completely on your own.

This is a tricky situation. I'm not an attorney and I live here in Georgia. I know for sure E&O insurance doesn't always cover you. A person can personally sue through loop holes. It happened here with another agent. I have an attorney friend who lives in Florida who can answer these questions for you with a quick phone call. Email me at blessedandU@gmail.com and I can forward you the information.

Property management is a high risk area for litigation. Typical claims include bodily injury/property damage (which is excluded from a lot of E&O policies, but can be added by endorsement through some companies), wrongful entry, wrongful eviction, libel/slander, discrimination, violation of fiduciary duty, failure to renew contracts/leases and on and on.

Ultimately, in most states, the broker is responsible for ALL actions performed by their agents through vicarious liability. Her concerns are legitimate, but a proper risk management plan can help alleviate some of the risk involved.

Actually I was told managing REOs isn't any additional risk or cost to my policy.

But you are right, traditional managment of commercial and apartments will make it skyrocket, as will doing escrows.