FEATURE
AN OUNCE OF PREVENTION
Lead, mold, slips, and skips: Protect your property management business from these disasters waiting to happen.
BY MARIWYN EVANS
To most of us, the word disaster conjures up visions of explosions or uncontrolled torrents of wind and water. But for property managers, disaster lurks in the dust from a painted-shut window, the mold growing on the bathroom grout, or the pile of autumn leaves wet and slick from last night’s rain.
According to the 2001 NATIONAL ASSOCIATION OF REALTORS®Legal Scan of real estate–related court cases, seven out of the 10 highest monetary awards to plaintiffs were doled out in property management cases. “Property managers tend to have deep pockets, which can make them attractive targets,” notes Rick Fenton, a partner specializing in litigation with the Chicago office of Sonnenschein, Nath & Rosenthal. Managers are also the logical people to hold responsible, Fenton notes, since they usually have wide discretion in making decisions relating to a property.
Because property managers bear the burden when disasters happen, it’s good sense and good business practice to have well-planned procedures in place to mitigate potential problems. Whether these issues are environmental concerns or more run-of-the-mill hassles, it’s critical to ensure that site managers, maintenance workers, and outside contractors know and follow your policies.
1. Lead-based paint: Dust off your policy
The single largest damage judgment recorded by the Legal Scan in 2001 was the $5.35 million awarded to the family of a 13-year-old girl who suffered permanent cognitive damage from lead-based paint dust. Even though the Residential Lead-Based Paint Hazard Reduction Act (Title X) is a decade old, suits for the improper handling of lead-based painted surfaces are still being filed regularly by the U.S. Environmental Protection Agency and U.S. Department of Housing and Urban Development. Judgments against apartment owners now total more than $19 million. And although failure to comply with disclosure requirements is still a major cause of litigation, potential disaster can also arise when lead-painted surfaces need repair. Here, property managers too often adopt what one characterized as “the Clinton ‘don’t-ask, don’t-tell’ philosophy.”
Instead of taking such a passive approach, property managers should follow the law’s requirements, which apply to residential properties built before 1978 that are receiving any federal funds or mortgage guarantees, such as Section 8 or FHA financing. A person doing repair work on two square feet of any interior surface must first take an eight-hour certification course and follow lead-safe work practices, says Marvin Fleschman, a National Apartment Association-designated lead-safe work practices trainer. It’s prudent for all owners to employ contractors who follow these two practices.
Lead-safe work practices include using appropriate respirators, sealing off work areas with several layers of heavy-gauge plastic, wetting surfaces to reduce dust, and thoroughly cleaning up, first with a high-efficiency particulated air (HEPA) filter-equipped vacuum and then a detergent-based water solution.
“It’s essential to hire plumbers, electricians, and other contractors who can show that they have lead-certified workers. And even though clean-up is the contractor’s responsibility, you should inspect the site to be sure that all lead dust has been removed. Otherwise, the liability can come back on you,” says Len Frenkil, CPM®, whose company, The Time Group, manages 5,000 housing units in the Baltimore area. Keep careful records of all work done, Frenkil stresses, as well as copies of a signed acknowledgement that tenants were notified about the potential lead hazards of the work. Of course, if the repair is for something urgent, such as a leaking pipe in a wall, you can postpone notification. But you can’t close up the wall until you notify your tenants.
Frenkil has found that the difficulty of maintaining records makes remediation a much more attractive alternative. It doesn’t have to be too expensive, he notes, since in many properties only certain building components actually have lead paint. He advises testing individual components in random units; then, when you find lead in a component, test that component in every unit. “In one of our properties, we discovered that the lead was in only two closets and the front door moldings of 15 units. Once we replaced those moldings and encapsulated, or sealed in, the closets, the property was lead free and we didn’t have to worry any more about lead liability.” The work cost about $4,500 ($3,000 for testing and $1,500 for remediation) but it was well worth it, says Frenkil.
2. Mold: It’s everywhere
If lead is a problem only in older homes, mold contamination is everywhere—inside and out. In fact, a recent study cited in the April 2002 issue of Journal of Applied and Environmental Microbiology found that mold levels outside were typically higher than the level in most homes. But a few highly publicized mold lawsuits have raised tenants’ awareness and thus managers’ potential liability.
“Unless you see mold penetrating the walls and growing on surfaces within the living area, you don’t need to be unduly concerned,” says Ronald E. Gots, M.D., with the International Center for Toxicology and Medicine in Rockville, Md. Mold is a health hazard only to those with mold allergies. Furthermore, says Gots, you can generally remove mold by washing walls with a bleach compound, HEPA-vacuuming, and treating fabric surfaces with a biocide. No special training is required, but seal off the work area to prevent spreading.
Prevention is the best cure for mold problems. “You have to educate tenants about how mold develops and encourage them to alert you immediately of any water leaks that could produce mold growth,” says Robert Griswold, CPM®, president of Griswold Management, San Diego, and author of Property Management for Dummies. Griswold also suggests adding an addendum to leases requiring tenants to report leaks or malfunctioning HVAC equipment promptly.
Taking prevention a step further, Martin Fleschman has developed a handout of housekeeping tips for tenants, which explains the use of windows and exhaust fans to vent humidity; cleaning procedures and products for tile, kitchen counters, and other moisture-prone areas; and proper dusting and vacuuming practices. He also inspects all his units twice a year to catch mold and other repair problems before they get out of hand.
Yet even prevention doesn’t always keep disaster at bay, as Mike Klein of Baltimore’s Metro Property Management Inc., learned all too well. When residents at a condo property called to say they heard running water in a vacant unit, he wasn’t too concerned. There was no water leaking into other units, and he assumed that the water was running from a faulty tap down the drain.
In fact, that proved to be the case when Klein gained access to the apartment four days later. But he also found that the constant flow of hot water in the closed unit had created a mold disaster. “It was everywhere,” he recalls. Klein brought in an industrial hygienist to test the air in the unit, in nearby units, and in the hall, which had been contaminated when his team entered the apartment.
To eliminate the mold, Klein had all the drywall removed and the walls treated with mold-retardant chemicals. The carpets and furniture were shampooed in the unit, the hall, and a unit above whose tenant complained of an allergic reaction. Workers sealed off the affected unit with plastic during the cleaning and used negative pressure fans to suck the air contaminated with mold spores outside.
After these efforts, all areas of the property once again had mold levels comparable to the outside levels. Nonetheless, Klein’s company is still facing a suit from the upstairs unit owner, who alleges that the property isn’t habitable and has declined in value.
One major litigation hurdle for managers is that there are no federal- or state-mandated standards for acceptable levels of mold, notes Kerri Barash, an environmental attorney with the Miami office of Greenberg Traurig, LLP. “What’s toxic for one person may not affect someone else; it depends on your susceptibility,” she says.
If you’re faced with mold in a building, as was Wayne Schulze, commercial division manager with Century 21 Paul & Associates in Burbank, Calif., all you can do is respond promptly and “hope that you have good enough relations with tenants that they call you before they call an attorney.”
3. Slips and falls: Clear the way
If it seems impossible to eliminate mold, it’s just as hard to completely avoid another common property management disaster—slips and falls. “They’re probably the No. 1 lawsuit for most managers,” says Griswold. A combination of regular inspection, prompt repair, and documentation is the key to heading off liability, advises Fenton.
And although it’s not foolproof, prevention pays in reducing slips and falls. “Most slips and falls are caused by man-made errors that can be eliminated with proper care and training,” says Bob Miata, president of Consolidated Risk Service Inc. of West Hampstead, N.Y., a safety adviser to many large real estate management companies. Good work practices, such as washing only half of an entry floor at one time and keeping electrical cords from snaking across walkways, can go a long way to reducing accidents, says Miata. He advises developing a checklist for repair workers to ensure that tools are put away, drain and other conduit covers are properly replaced after work, and debris is removed promptly.
Inspections are also important. Look for loose railings and heaved pavement caused by freeze-thaw cycles in the spring, sprinklers that create puddles on walks in summer, and burned-out lights and icy spots in the short days of winter. “So many of my readers think it’s great when they don’t get a maintenance call in six months, but that can mean small problems have time to turn into big problems,” says Jeffrey Taylor, former property manager and editor and founder of Mr. Landlord (www.mrlandlord.com), a newsletter for small property owners and managers. He suggests inspecting every property twice a year and driving by each rental once a month to look for faults that could lead to accidents. In addition, encourage your tenants to call you if they see a problem.
To reduce icy slip-and-fall accidents, Frenkil instituted a “winter event” policy. His guidelines describe who would be responsible for snow and ice removal, the priority order of what will be cleared first (steps, walks to parking and exits, handicapped parking), and the time that work would begin. The manager at each property keeps a log to record the work. Since plaintiffs often have two to three years to file a claim, proper documentation is critical. Frenkil also keeps tapes of local news and clippings from the paper to document the timing and severity of each storm. This level of care has helped Frenkil eliminate slip-and-fall claims for four years.
If you’re faced with a high number of slip-and-fall accidents, analyze past incidents, look for factors that cause the majority of your problems, and then train workers to eliminate them, advises Miata.
4. Skips and late pays: The dog ate the rent
Careful monitoring is also an effective way to reduce skips and chronic late payers. Again, no amount of vigilance will totally eliminate this problem, but early warning signals can help you reduce your exposure.
“Thoroughly screen tenants before they lease,” advises Taylor. Among the red flags he looks for are tenants who have moved out of their last apartment without proper notice and those who need to move in quickly. (They may be expecting to be evicted soon.) His lease application also asks tenants for the name of a person who could help them in case of a financial emergency. “It’s not legally binding, but if applicants can’t offer that, it may mean that they’ve already had to call on their friends and have used up that resource,” he says.
Another possible sign of a growing financial problem is a significant increase in late notices in the last year or a credit report that shows a recent trend toward slower payment of accounts, says Howard Levin of Property Owners’ Exchange in Baltimore. Levin, whose company provides comprehensive tenant screening for private landlords, also suggests looking beyond the obvious questions to find misrepresentations. “It isn’t enough to get the name of the last landlord. You need to check tax records and be sure the person you’re calling is the bona fide landlord, not just a friend of the applicant,” he warns.
In the same vein, Levin verifies with the current landlord that the applicant has given a move-out notice. Sometimes, he says, even solid citizens will pose as a prospective renter to help out a friend or family member who can’t qualify for an apartment. Levin also accesses court records—often available online—for past eviction cases and criminal background checks. “Landlords have to be aware of whether a tenant could pose a threat to the safety of other residents,” he says.
Applicants’ work histories should get similar scrutiny. Levin’s company verifies employment, length of time on the job, salary, and prospects for continued employment. And again, be sure that the person’s boss isn’t just a friend, especially if the employer is a small company.
“We also try to ask every question several ways,” says Levin. “Most people want to be honest in references but will answer only the question they’re asked. So if you ask a former landlord, ‘Did you ask this person to move out?’ and, in fact, he just told the prospects not to expect a lease renewal, you may not get a true picture of the situation.”
Once the tenant is in place, avoid future payment problems by enforcing the rent collection policy strictly and collecting late fees without exception, advises Griswold. He favors a $5-a-day charge, up to a $50 maximum. “By keeping the penalty minimal if a tenant is only one or two days late, you won’t be tempted to waive the fee for a good tenant,” he says. Griswold also warns that regularly accepting late rent payments sets a pattern that may make eviction more difficult in the future.
Instead, if the rent isn’t paid on the due date, issue a warning notice at once, and don’t wait to institute eviction proceedings, advises Taylor. “If good tenants experience temporary financial problems, locate a church, charity, or state agency that might help pay their rent for a month or two.”
And to protect yourself from tenants who just sneak away, be sure your security deposit is at least as high as one month’s rent, says Schulze.
In the end, of course, no amount of care can totally protect property managers from some form of disaster. But with a little luck—and a lot of prevention—you’ll survive to rent another day.
For more on . . .
- Lead-safe work practices Download the Lead Paint Safety guide at www.epa.gov/lead/leadsafetybk.pdf.
- Controlling mold Look for the Mold Operations and Maintenance Training Program for Multifamily Housing Professionals video from the National Apartment Association, www.naahq.org.
- Mold in building Download documents from the National Association of Home Builders Research Center, www.nahbrc.org.
- General property management Visit www.mrlandlord.com for details on Mr. Landlord’s newsletter for small property owners and managers.
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