The Landlord Lens - Vicarious Liability

Episode Date: January 14, 2024

As a landlord, you have a responsibility to provide your tenants with a safe and habitable living environment. However, there are also instances where you may be held liable for the actions of others on your property, even if you were not directly involved. This is the concept of vicarious liability.Vicarious liability is a legal principle that holds one person or entity responsible for the actions of another person or entity. In the context of landlords and property managers, this means that you could be held liable for injuries sustained by a tenant or other third party on your property due to the negligence of a tenant, employee, or contractor.In this episode of Be A Better Landlord, we explain the concept of vicarious liability and how it applies to landlords and property managers. We also discuss some of the steps that landlords and property managers can take to protect themselves from vicarious liability claims.

I'm Jonathan. This is Krista, and we're here to help you be a better landlord. So today we're going to talk about vicarious liability, which is a pretty decent band name, I think. But what does it actually mean? Let's start with what is liability? Sure. So liability is being held responsible for something. Okay. Vicarious liability. Yes, that's being held responsible for the actions of a third party. So for property owners, what does vicarious liability look like? You know, vicarious liability is a challenging topic when it comes to rental property management

because it feels very scary. Inherently, any time there's a third party interacting with your tenants, you could be at risk for being found vicariously liable for any kind of crimes, harassment, et cetera, that that third party enacts. So, for example, if you have a property manager who is harassing women in your rentals, that's a situation where you could be held vicariously liable for that person. person's actions, even if you don't know about them. So you said that property owners could be held liable, but who's actually doing the policing here? Who's the governing body?

So most often, any kind of vicarious liability is going to tie back to the Fair Housing Act. The Fair Housing Act is governed by the Department of Housing and Urban Development, HUD, for short. So most often when it relates back to any kind of claims of harassment, particularly regarding seven protected classes, HUD is going to be the ones who are getting involved. In fact, historically, we've seen HUD actually hold property owners liable, even though it's not in the Fair Housing Act, for these kinds of acts of discrimination. Yeah, makes sense. Okay, can you give us an example of somebody potentially being held vicariously liable? Sure. Actually, this is an example from real life. One of my best friends lives in Minnesota. She lived in a multifamily unit, and she

needed some maintenance done. So she calls the owner, they send in a maintenance guy. Unfortunately, this maintenance man was very creepy. He was making untoward comments. And then he started coming to my friend's rental without proper notice, which is a big no-no. We know that every single state requires specific notice to be given before anyone enters the unit. They were not doing that. At that juncture, my friend told the property owner, unfortunately nothing was done. He came back again for another situation and he actually made physical contact this time. And so she ended up breaking her lease. She could have pursued legal action against both the maintenance person and the owner of the property because she had actually told them. Even if she hadn't, there is an assumed

situation where they should know. So it gets really dicey, but that's why it pays to be in good communication with your tenants. Yeah, absolutely. It's an unfortunate situation. Yeah. Vicarious liability holds the property owner liable because they either knew about an action or should have known about an action. Can you talk about the should have known? Yeah. So again, it is, it's dicey, right? Because being told that you're being held responsible to something that you should have known feels bad. It's like, well, how should I have known this? Well, really, the way that you should have known this is by having set expectations with both the contractors and the tenants about how these kinds of situations can play out. Letting them know on the contractor side,

there are behaviors that are just unacceptable. If you conduct any of these behaviors, you will be penalized in these ways. We'll break this contract. We won't move forward. And also letting your tenants know that there is a clear communication pipeline, that if they feel unsafe, if they're concerned, if they even just have a question about maybe someone coming in, they can reach out to you and get those answers and not feel like they're suffering alone or confused by themselves. Because really, you want to try and mitigate any kind of suffering that could go on. You are providing that person housing. And when you bring in third parties, you are responsible for those third parties. accordingly. Is malicious intent required for vicarious liability? Great question. No, it's not. So even if the

maintenance man never intended to be creepy, it doesn't matter at the end of the day. The impact is more important, and that's what the courts keep in mind. So unfortunately, that's why you really have to make sure that you are in close communication either with your tenants directly or with your property management company with those set expectations from the jump. So in your example, and in a lot of cases of vicarious liability, we're talking about sexual harassment. But important to note here that that's not the only way you can be held liable. What are some other ways?

Yeah, so let's say that you hire a contractor and they are going to fix up a common area for your tenants, but they leave the work site really unsafe at the end of the day, and one of your tenants comes through and gets hurt. You could then be held liable for that unsafe work site because it's a common area in your rental. The tenant could still pursue litigation against both the company, but probably also you.

because you're the property owner. You're the one who has to make sure everything is staying safe. So most often it is going to tie back to the Fair Housing Act, but there are situations where there's physical well-being in question because of how something is left. So you've got to really stay up on both the maintenance requests and also just general relationships with your tenants so you know what's going on. Okay. And what would we say to a landlord whose position is the opposite of everything you were saying, that I don't want to be held vicariously liable. Therefore, I'm not going to ever talk to my tenants. That's why I hired a property manager. They'll do all the talking. I don't want to be a part of it. Therefore, I can't be held liable. I can understand why you would think that way, right? There's a sense

of safety in isolating yourself and saying, no, that's not my problem, not my circus, not my monkeys. However, that's just not how housing works. You are liable at the end of the day. Even if you have an LLC, even if your name is nowhere on the property, you are still responsible for what goes on there. So if somebody does want to use a property manager, what are some steps they can use to make sure they are avoiding being vicariously liable. Just like we're always preaching that your lease is the most important contract that you really have to have bolstered out, your contracts with your property manager need to be the same way.

So make sure you have everything in there regarding your expectations for how they'll conduct themselves with your tenants. When you want to be updated about various situations, you know, if there is a fair housing complaint, do you want to be told immediately? Yes. Yes, you do. Yes. And also the consequences, if things start to go wrong.

outline what you will do if a complaint comes in so that you can resolve it together and make sure that the tenant feels safe and heard. Put all of that language in your contract with the property management company and you will put yourself in a better position. You should also relay that to your tenant. Put it in the lease as well. Tell them that they have rights, remind them that they are entitled to feel safe in their house and that they can reach out to you if there are any concerns that they don't feel comfortable going to the property management company about. By putting forward that energy at the beginning and those efforts at the very beginning of your relationship with both the tenant and the property manager, you set yourself up for less work down the line because you know what to do

in this kind of tense, high energy situation. So we've mentioned the Fair Housing Act a few times. A lot of landlords and property owners are scared of the Fair Housing Act. And sometimes for good reason. I mean, it is good legislation, but it can feel like a trap sometimes. But the more you know, the less it feels like a trap. So how can people learn more about the Fair Housing Act? Great news. This is such an important topic that we actually developed a course on the Fair Housing Act here at TurboTenep.

So it is chock full of real-life cases where fair housing has come into play so that you and your property manager can know what not to do. And what I would suggest is that you mandate that your property manager take this course. Pass it. There are tests therein because then you can say,

I've done everything as a property owner to make sure that this person who's representing me knows the Fair Housing Act can follow it to a T. And here's the proof. Here's their completed coursework. Good to go. That should help protect you in the courts if it goes that far. Hopefully it won't. Hopefully they take this course. They really immerse themselves in it and don't violate the Fair Housing Act because that's, you know, best for everyone. Yeah. What are some other ways that property owners can make sure they're not held by Cariously liable? Sure. So I would say, again, keeping open good lines of communication. So for example, if you are reaching out to your tenants through TurboTenet, you can message them back and forth. You can have timestamps. You can really keep track of any kind of complaints that come in along with notes about the resolution, which is really important. We also have a tenant check-in feature so that every month

when tenants are paying rent, they have an opportunity to let you know how things are going. you could follow up with them. If they are sad or upset, they indicate that there's something wrong. It gives you a chance to solve that problem before it becomes a major issue. And of course, just making sure that you maintain a good relationship with them. Being proactive about maintenance requests, taking them seriously when they come to you with any kind of issues or questions, these are all things that you can do to improve your relationship and keep things ship shape. We want them ship shape.

We want them ship shape. So we talk a lot about having a good lease in place, and you've said in this situation, having a great contract with any third party handyman or property owners or property managers or whatever. What about screening? You know, we talk about the importance of screening your prospective tenants. What about doing some kind of background check on your third party resources? Yeah, 3,000%. I'd say if there's anyone who's going to come in as an intermediary between you and your tenants, you want to be as sure as possible that that's the same. they're going to represent you in your business in the way that you want to be represented.

And that means following the Fair Housing Act. So what I would do if I was looking to hire a property management company, I would first and foremost ask my peers if they had any recommendations, right? If there's somebody in my local landlord group who's really enjoyed their prop manager, I'll check them out. But I also want to make sure that I'm looking up online reviews. Do they have a better business bureau rating? How do they look online? What is the story that they're telling? what are other people saying about them? Are there a lot of complaints from former tenants, etc? And then moving forward with someone who is the best of the best,

realizing that I'm still going to have to pay 10% of my monthly revenue to them. So you really, given that price tag, you want to make sure that you're spending it on somebody who's going to do right by your business and not tank it and land you in court. Absolutely. Okay, well, thanks for taking us through Bicarious Liability. If you out there have any questions or comments about Bicarious Liability, leave them in the comments below.

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