Can the owner of a residential rental property completely delegate responsibility for repairs and maintenance to their managing agent?
Consider this recent real-life case.
The tenant of a residential rental premises fractured her ankle slipping on stairs that required repair, and sued both the owner and the managing agent. The tenant was awarded over $400,000 in damages. Liability was apportioned two-thirds to the owner and one-third to the agent.
The owner appealed and the court found in Yeung v Santosa Realty that the owner’s duty of care was coterminous (i.e. “same boundaries or extent”) with that owed by the managing agent; i.e. the owner had relevantly delegated his duty to the agent and, as such, there was no residual duty owed personally by the owner to the tenant. Consequently, the agent was obliged to fully indemnify the landlord in respect of the tenant’s claim.
Risks for property managers
Managing agents are being increasingly targeted by injured tenants or visitors as co-defendants with property owners, or sued on cross-claims by property owners.
Agents should pay particular attention to the obligations and responsibility they accept in their management agreements for residential rental premises. Here are some tips to consider.
What to tell an owner
Before signing a management agreement:
- Consider advising the owner, in writing, of their obligations to properly maintain the tenanted premises.
- Encourage the owner to periodically engage qualified tradespeople to inspect and carry out a risk assessment, and attend to any maintenance issues.
- Disabuse the owner of the notion that they can wipe their hands of any duty to tenants or visitors by signing an agency agreement with you. They are endeavouring to pass their liability risk onto you and your insurers.
- Before taking on management of residential premises:
- recommend that owners engage an appropriately qualified tradesperson to carry out an inspection
- ask about any past maintenance issues
- prepare a questionnaire about the condition of the premises and check the owner's answers before signing a management agreement.
Injured plaintiffs and their lawyers often allege that the wording of the ‘repairs and maintenance’ clause means that an agent has the authority to organise repairs in the discharge of a duty owed to a tenant for an urgent maintenance issue. Consider altering this clause of the standard form to provide that even urgent cases require an owner’s authorisation before repairs are undertaken.
What to tell a tenant
When dealing with tenants:
- Inform prospective tenants that you have no authority in your management agreement to undertake repairs, urgent or otherwise. Requests will be submitted to the owner for instructions.
- Before ingoing and periodic inspections, prepare a questionnaire and ask about any repair or maintenance issues. Write down the responses. Afterwards, have the tenant sign the questionnaire to secure contemporaneous documentation should any disputes about what was reported arise. Consider asking permission to record the discussion or video the inspection on your smartphone.
After each ingoing or periodic inspection:
- Send the tenant copies of the report. Confirm any maintenance or repair issues from the inspection and indicate that these are being referred to the landlord for instructions. If appropriate, advise the tenant not to use parts of the premises until repairs or maintenance are undertaken. Give a realistic timeframe for compliance.
- Give a copy to the owners and seek specific instructions on maintenance or repair issues. Make a diary note to chase up owners for instructions. Keep a record of your communications, such as the urgency of the work, and the foreseeable risk of injury if work is delayed.
If you have any concerns or queries, or if you wish to talk through a potential circumstance that may give rise to a claim under your Realcover professional indemnity insurance policy, please contact the Realcover team on 1800 990 312.
This article contains general information only and does not take into account your individual objectives, financial situation or needs and may not suit your personal circumstances. All advice given by the Realcover team is general advice only. Realcover is an insurance product arranged by Marsh Advantage Insurance Pty Ltd (ABN 31 081 358 303 AFS Licence 238 369) (MAI). MAI is not the insurer. MAI is a business of Marsh and McLennan Companies (MMC). Cover is subject to the terms, conditions, limits and exclusions of the Policy. For full details of the terms, conditions and limitations of the covers and before making any decision about whether to acquire a product, refer to the specific policy wordings and/or Product Disclosure Statements. Copyright © 2021 Marsh Advantage Pty Ltd. All rights reserved.
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PETER MORAN is a Partner at Colin Biggers & Paisley.
Realcover is underwritten by QBE Insurance (Australia) Ltd and managed by JLT.