Managing Property Management Company Risk I hate to be a nag but it REALLY is important to update your documents and policies. Is this a priority for you and your company? This is one of the best risk management tools to utilize and it needs to be ongoing. If you are not continually updating, you are AT RISK!

Here’s a very sad (but true) story of two Broker/Owners who let things slide.

Broker Bob and Broker Betty (co-owners) have a well-known mid-size company, BB Property Management. Bob and Betty rarely update their forms and manuals. They have a good staff but they do not utilize their skills and talent and they rarely meet with them.

BB turned down Marjorie B’s application to rent a single family home. Marjorie was furious although there were valid reasons to refuse her application and there were other applicants with stronger applications.

Marjorie demanded the return of her application fee, and BB refused. She was so upset that she reported BB Property Management to Fair Housing and the state licensing board, contacted a tenant advocate for advice, posted terrible reviews online, and took BB Properties to small claims court for the return of her processing fee and damages. She challenged the denial because the rental application did not follow BB Properties’ own policies for tenant qualifications.

When Brokers John and Betty appeared in small claims court, the judge reviewed the application and BB Property Management’s written policies. This particular judge was well versed in state landlord/tenant law and immediately noted that BB Properties was in violation of the state’s processing fee laws and their documentation was in conflict. The Small Claims judge ruled in Marjorie’s favor.

Fair Housing and the state licensing board also investigated. They reviewed the application, the application processing, other documents, and the Policy and Procedures Manual. Nothing matched and most did not match their current practices. Fortunately, Fair Housing issued a warning with the condition that BB Property Management clean up their documentation and immediately change the processing fee to follow state law. The state licensing bureau required an audit, which caused innumerable problems. Broker Bob and Broker Betty did nothing to combat the bad publicity, which incurred client loss.

This experience was costly to Brokers Bob and Betty in both time and money. It is truly sad when you consider that Marjorie’s application was a poor one and if their documentation, policies, and practices were in order, this would have been simple to defend.

There is no reason you should follow in the footsteps of Broker Bob and Broker Betty. Do not program your company for high risk – take action now with these ten steps.

1. First, CHANGE your perspective. Do NOT view this task as a one-time miserable chore. It is amazing how much easier and more profitable this task will be when you make this procedure an everyday practice.

2. Utilize and use an update checklist (there is one available at the end of this article to customize). Figure out what is out of date: what is most critical, and put a plan in motion to revise your forms and manuals.

3. Do NOT attempt to do everything at once. Create and update file in your computer. Decide on the size of the update, and then PRIORITIZE.

  • Immediately tackle what is at the most risk, such as an application policy or a rental agreement.
  • Remove larger projects, such as a policy manual, from use until updated.
Example: you have not reviewed or changed your Policy and Procedures Manual for five years (this is sure to be out of date and dangerous), take it temporarily out of commission. Then review, update, and immediately return for use to reduce risk.
  • Continue to use this file for updates.

4. Set REALISTIC timelines – have a start date, review date, and target completion date.

5. EVALUATE who is going to update documents and assign tasks. Enlist your team to speed up the process – you do not always have to do everything yourself. They need to have an understanding of the importance and urgency of this task.

6. Stay CURRENT on new legislation/rules/trends. Read everything that comes your way; attend conferences; take classes. You may think you do not have the time, but consider what this could cost you in both time and money.

7. Create a SYSTEM for continual updates. Keep information in folders, both electronic and paper, until updates can take place. Once completed, use the system to accumulate information as it happens.

8. CHECK your progress on each project. If it is lagging behind or not moving forward, assess why, and adjust accordingly.

9. When the project is completed, thoroughly review all documents, and when appropriate, consult legal counsel to ensure you are meeting all criteria that could cause you future problems.

10. This is crucial to success – MEET with your team and train them on the new documentation and policies. Missing this step can cause other problems.

11. Do NOT stop when that project is completed; schedule and plan for the NEXT UPDATE! It feels great to complete any task but remember documentation and manuals are not static; they need periodic reviews and revisions. Updates take longer and can be costly when you wait or ignore them.

I do understand that continually updating can be a pain – I have to work at this constantly in my business. I recently made a great effort to schedule updates all year and most of all, I changed my attitude toward this process. As previously promised, I have a free Update Document / Systems Checklist to customize.

Do not be like Brokers Bob and Betty; REDUCE the risk in your business by being proactive in updating your company’s documentation and procedures.

Jean Storms - Owner and Author of LandlordSource ProductsJean Storms, MPM® is the founder/author of LandlordSource and has been a NARPM® member since January 1993.

Disclaimer: LandlordSource does not represent the article content in this website as legal advice. It is shared information only and up to the reader to use this information responsibly, seeking legal advice as necessary to their business.