Ethical Conundrum Facing Property Management Owners

By DANIEL BORNSTEIN, ESQ.

 

Are you properly overseeing your or a client's independent contractors, handymen, or construction trades persons? Are they licensed? Are the requisite permits obtained? If not, you are exposing yourself to substantial liability.

 

We can cite countless cases where landlords and property managers dismissed this requirement because "it's always worked out just fine before". But if something goes awry, a nightmare can unfold. For example, if you retain an unlicensed contractor to do work on a heating system and tenants suffer carbon monoxide poisoning as a result of the shoddy work, an enormous legal problem awaits.

 

It's your responsibility to ensure your construction people or fixer-uppers are licensed, and that you do not hire people that are above and beyond the scope of their expertise.

 

Property management companies, in particular, are vulnerable to this cardinal sin because sometimes, clients put pressure on them to do a renovation project inexpensively. They may something to the effect, "I have a cousin that can do this kitchen renovation fairly cheaply. Let's use them".

 

Your client's willingness to do unpermitted work will not insulate you from liability. You will still be held liable for authorizing unpermitted work, and this creates an ethical conundrum.

 
The property manager is forced to balance their fiduciary duty of following the client's directive, against their obligation to provide a habitable unit to tenants.

 

When the unlicensed contractor performs work that is injurious to the tenant, rest assured, the property manager will be named in a lawsuit, even though they received instructions by their client. Every property manager will be faced with this tug-of-war. On one hand, they are tasked with completing something, and on the other hand, they knowingly engage in a potentially dangerous project that exposes them to liability.

 

Everyone will have a different litmus test on whether they are willing to participate in projects without a permit, but you must understand the repercussions of conceding to a client's request to have unpermitted work done at a property.

 

At Bornstein Law, we have encountered property management companies that are willing to be complacent with unlicensed work, and others that adamantly refuse to oversee the project.

 

Of course, there are other consequences attendant to hiring unlicensed contractors, a subject we will continue in future posts.

 

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As the founding attorney of Bornstein Law, Broker of Record for Bay Property Group and expert witness, Daniel Bornstein is a foremost and well-respected expert in landlord-tenant disputes and other property management issues with over 23 years of experience in handling real estate and civil litigation related disputes in and throughout the Bay Area. More than a litigator, Daniel manages rental properties, assists in completing real estate transactions and is well known for his educational seminars. He is always eager to answer questions and engage with Bay Area landlords, property owners and real estate professionals. Email him today.