This month, we have a critical question for you – regardless of whether you are a property owner or property manager. Do you have the necessary insurance in place to protect your properties, companies, and personal assets? While it may seem like an obvious question, and you may be tempted to answer “yes” and move on to another subject, we recommend that you continue reading, as it may turn out to be some of the best time you spend this year toward protecting your business and personal assets.
OK, let’s start with a basic refresher. Insurance is about risk management – you pay a premium to an insurance company, which provides you an insurance policy containing far higher financial protection from liability, property damage, and legal costs (to name a few) relative to that premium. Having insurance is a critical component to helping you save your business, investments, and personal assets in the event of an unforeseen problem with your landlord or property management business.
As attorneys, we see both sides of the coin:
- For the landlord with the appropriate insurance, claims by or against the landlord are handled fairly routinely, even though the issue may be extremely serious and demand lots of time and attention. In short, the landlord sends the claim along to the insurance carrier and provides whatever info or documentation is required by the insurance company and/or the landlord’s attorney (usually hired by the insurance company at its cost to defend the landlord).
- On the flip side, the landlord without the appropriate insurance can almost certainly expect any claim against him or his operation to result in a disastrous situation – wrought with massive headaches and complications. Indeed, from the beginning, the landlord has nowhere to “send “ the claim for handling, and must devote his personal time and energy to managing the claim, in addition to immediately facing the full scope of any potential financial loss (including the possible cost of hiring an attorney) and substantively responding to the claim.
So how do you know if you’re adequately covered? Landlords (and individuals) cannot buy insurance for every possible risk, but they can significantly limit their exposure to non-covered claims by taking a solid look at their existing plans. Here are four (4) key steps you can take now to solidify and possibly improve your insurance coverage program.
- First, engage an insurance broker or agent who works with other landlord or property management clients, is familiar with the possible insurance coverage that landlords can purchase, and has the ability to obtain quotes from multiple insurance companies. You are seeking to hire someone with expertise that is committed to you and your business, so apply the same approach that you would for other trusted advisors – seek out recommendations from peers, interview candidates, and contact their references.
- Second, confirm that you actually have coverage for each of your business entities and yourself as an individual. For example, if you own property in one corporate name, have a property management company in a second name, and have your own personal assets, you may need insurance policies for each of those three (3) areas. In other words, a general liability policy issued to cover the apartment or commercial building may not cover the property management company, and – most likely – no insurance purchased for a company will cover you as an individual, and vice-versa. Moreover, a single liability policy may not be sufficient even if you own the apartment or commercial building in your own name – for example, a policy issued for individual coverage may not include business coverage, such as claims arising from leasing and property management operations.
- Third, evaluate whether you have the necessary insurance plans in place – for example, every landlord knows that they need general liability and property damage protection, but they may also need (or benefit from) professional liability (e.g., for property management operations), automobile liability (for driving in and between offices and properties), flood, or discrimination coverage (to name a few).
- Fourth, evaluate whether you have the appropriate dollar amount of protection (known as “policy limits”). For example, you may need to increase the policy limits if you originally purchased insurance a decade ago, and your business has grown since then. Similarly, if your net worth has increased as your business interests have increased, you may consider further personal liability protection.
Contact your landlord attorney if you are looking for a good place to start with evaluating your insurance program, or to assist you with gathering the necessary information about your business to bring to a prospective insurance broker or agent.
Quick Tip:
A picture is worth 1,000 words – right?
We’ve all heard it before. But, when it comes to pictures of potential evidence in a legal case, a picture’s value can easily grow to over 10,000 words. The difference can be summed up in one word – perception.
Even the most artful poet and author, whose eloquence creates exquisite images for their readers, will create a different image in your head than the one conjured up in mine. Our histories filter anything we perceive, and listening to a description of someone’s “messy” apartment, for example, will simply look different for each of us based on our own experience. That’s why a picture can be so valuable.
Let’s look at the “messy” apartment scenario a bit closer as an example. Assume you are dealing with a tenant whose persistent housekeeping issues are causing you fits and creating problems in your community. If your sole evidence is an inspection report and your personal description of the problems in the unit, simply stating your case could be considerably less effective than if you had just one single picture. Here’s why. Telling a judge that ingress and egress are blocked causing safety issues is much different than showing the judge a photo of a window that is encased in trash bags, piles of clothing and children’s toys that present a minefield of challenges to evacuate the unit through that window in case of emergency. Get the picture?
Now, some of you may be asking “What about the tenant’s privacy?”. Well, first and foremost, a tenant is responsible for their own privacy, not you. If they are unable to maintain their unit properly and you discover that during a properly-noticed inspection, you have every right to enforce your lease and obtain the evidence necessary to do so. It is their conduct that has invited you to take the photo in the first place. The tenant can avoid you snapping shots of their housekeeping and safety issues by eliminating the problem to begin with. You are not invading their privacy; you are simply gathering valuable information regarding the condition of the unit.
So, get the picture – it’s not only your right, it could prove to be a valuable tool in your efforts to combat a tenant’s disruptive behavior.
Quick Tip:
HUD Letters – Look closely to identify the true intent.
The U.S. Department of Housing and Urban Development (“HUD”) often issues letters to owners of HUD-assisted properties about required policies and procedures that accompany their federal financial support. However, in addition to specific instructions regarding their programs, HUD is also sometimes known to send such letters as simply recommended guidance. The difference is that if you don’t look closely, you may miss the intent behind the letter and act unnecessarily or inappropriately.
Case in point… Recently, HUD issued a letter regarding the development of policies and procedures to address the housing of released legal offenders. In it, HUD utilizes the word “encourages,” which is a signal that the letter is likely just guidance and does not signify a mandate. Therefore, the potential significant legal difference between requirement and guidance in this letter is an important evaluation that landlords need to undertake – especially those landlords who want to continue taking a strong position against ex-offenders in their communities.
However, making the distinction between a HUD requirement and recommended guidance may not be appropriate for all landlords. For some, there may be a practical reason why they do not wish to distinguish between the two. Often, landlords consider more than just the law, such as the landlord’s other projects with the government or its core business principles and objectives. Their interaction with HUD and these other agencies may dictate how these landlords receive and evaluate the HUD letter, and reciprocally, whether they choose to implement what HUD passes down in that letter.
Finally, there is always the underlying question as to whether HUD has the power to implement certain policies and procedures. This does not mean that landlords should call every HUD letter into question; however it does mean that when the agency fundamentally alters something to the significant detriment of landlords, it may make sense to confirm whether there is a legal foundation for HUD’s letter.
Contact your landlord attorney if you have questions regarding any HUD letter you may have received and what it means for your company and your federally supported properties.
Quick Tip:
Don’t let “the principle” drive your decision.
As landlord attorneys, it is not unusual for us to find clients in difficult situations. Frankly, that’s why they reach out to us. Unfortunately, we often find these clients both personally and emotionally involved and immersed in the conflict at hand. In many instances, the situation started simply enough, however as time progressed, the problem began to deteriorate itself to a point where “the principle” became the driving motivation for the landlord’s conduct. Word of warning – this is where the deepest issues often arise.
When it’s “the principle” of the matter that you are focused on, you must prepare yourself to spend lots of time and effort to see your “principle” vindicated. Now, don’t get me wrong. We have principles upon which we live and operate as well. And, it’s not unusual for us to ask our clients to advocate their principles in an effort to achieve a greater good and impact in their communities. Such a pursuit is often valuable and the return on the investment in it is often quite impressive. However, one should think twice before deciding to elect this approach. Choosing to handle a difficult situation on a “principle” basis may require time and effort that cannot be underestimated and, in many cases, the outcome can often be unpredictable. However, on the positive side, once the commitment is made, you may find that the clarity and decisions that drive you toward your goal are much more likely to reap positive effects.
Being driven by a personal or emotional “principle” is a choice you must make. Be sure you understand that achieving the outcome you desire may be the right one in your mind; but it may take some time and effort to get there.
Quick Tip:
Two more good reasons to join the CT Apartment Association.
In previous articles, we have talked about and advised our clients to join the CT Apartment Association (“CTAA”), the local branch of the National Apartment Association (“NAA”). In these discussions, we have noted the critical importance of having a heavyweight trade organization in your corner – one that actively works to ensure that landlords get a fair shot in the legislative and regulatory environments – allowing you time to spend on improving your portfolio’s performance and profitability.
This month, we’d like to highlight two (2) additional reasons why a membership in these organizations is so valuable – and worthy of your support.
- First, earlier this year at the national level, the NAA (along with National Multi Housing Council (“NMHC”), its legislative action partner) lobbied for, and obtained, a letter from HUD stating HUD’s intent to revise the onerous bed bug guidance document that HUD issued last fall.
- Second, NAA and NMHC are supporting a Senate Judiciary Committee bill to reauthorize the Violence Against Women Act (“VAWA”), including adding authority for property owners and manager to require third-party verification before extending benefits under the Act, when the landlord receives “conflicting information” about a domestic violence incident.
Both of these national efforts are valuable initiatives that could ultimately invoke very positive changes for landlords within CT.
See our July 2011 and March 2012 editions for past discussions on the work the CTAA and the NAA are doing for landlords both within CT and across the country. Also, feel free to contact us if you would like more information about getting involved and lending your support to the CTAA (and ultimately the NAA), or if you have specific questions about bed bug or domestic violence matters involving your tenants.
DISCLAIMER:
The reading of this newsletter does not form an attorney-client relationship. The contents of this newsletter are for informational purposes only and do not constitute legal advice. Nothing in this newsletter is intended to imply or predict the outcome of any legal matter that you may be considering or be involved in. The Landlord Law Firm makes no warranties of any kind regarding the information contained in this newsletter.