By Peter Moran
Professional negligence claims against property managers for rent default and debt recovery are becoming more common. Here are some examples of real-life claims.
Change in property manager
Passing a management on to another property manager can be tricky, as a recent District Court case highlights.
The outgoing property manager secured a tenant for a high-end residential property. Immediately before the lease was signed, the landlord instructed the outgoing property manager to pass the files onto another property manager. The outgoing property manager did as instructed.
The incoming property manager was informed by the landlord that money had been paid by the tenant to the outgoing property manager for the bond and first month’s rent. The tenant went on to default on their rent numerous times and was evicted. However, the landlord’s judgment for recovery of unpaid rent was not able to be enforced.
The landlord made a claim against the outgoing property manager alleging they had failed to carry out appropriate pre-lease investigations in relation to the prospective tenant. The landlord also claimed that the outgoing property manager had failed to advise of the non-payment of the bond and first month’s rent.
- Clearly inform both the incoming property manager and the landlord of any default by the tenant at the time the files are transferred.
- Confirm with the landlord the date and time when the files were transferred, so you have a clear point in time when obligations passed to the incoming property manager.
- Record any instructions and discussions regarding investigations in relation to a prospective tenant.
A commercial landlord asserted that the property manager was obliged to pursue a former tenant for CPI rent increases, proportionate outgoings, proportionate land tax and ‘make good’ expenses.
Even though the management agency agreement did not specifically deal with these issues, the landlord asserted that the property manager had a duty to advise the tenant as to the provisions of the commercial lease and that there were implied terms in the agency agreement. Further, the landlord asserted that the tenant should have been advised that the property manager had an obligation to ensure the landlord’s interests were protected.
- Discuss with the landlord precisely what they expect from you as a property manager in the management of their commercial property. Make a file note and send the landlord a confirmation email.
- In the event of oral variations to agreed functions, either enter into a fresh agreement or have an email trail that can be used in court or tribunal hearings.
- If an agreement uses words such as “refer to the principal”, keep a record of instructions. If you don’t, you may be left with an unsatisfactory ‘he said/she said’ legal argument (the result of which could go either way).
- Note that a lack of clarity may allow a court or tribunal to find that there was an implied term (i.e. not expressed, but nevertheless contractual) in the agency agreement.
The information contained in this article, which is current as at the date of publication, provides only a general overview of subjects covered. It is not intended to be taken as legal advice or advice regarding any individual situation and should not be relied upon as such.
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PETER MORAN is a Partner at Colin Biggers & Paisley (which is a panel lawyer of QBE).
Realcover is underwritten by QBE Insurance (Australia) Ltd and managed by JLT.