Introduction to Liability

Well, greetings. I'm Robert Locke, and thanks for taking the time to watch this video. The conversation we're going to have today is exposing the hazards of a resident rewards package. There's a lot of trainers out there, and vendors included, who are pushing people toward doing a resident rewards package without really thinking through some of the additional liability that comes with that package. Property managers are being exposed to litigation that they didn't think through.

And the purpose of this video is to think through that granularly, try to give you some answers and alert you to some things that might come back down the road to bite you. And we don't want that to happen. So I've engaged my friend, Monica Gilroy, who's a lawyer, to help me do this, because this is the legal side of the property management business, and it has to do with exculpatory language and limits of liability and stuff like that. So I thought she'd be the right person to bring in.

Expert's Background

Now, Monica's in litigation. What that means is she spends 20%, 30% of her time in front of judges and juries, arguing about liabilities and disclosures and exculpatory language and things that, kind of the battleground of where we are in the property management industry. And so she's the right person to tell us where's the liability, what's this going to look like in court, and what language might we need to eliminate or at least reduce that liability. Now, she is all about real estate and fair housing and property management. She's the general counsel for the Atlanta chapter of NARPM.

She's the go-to person for national NARPM on fair housing and litigation issues. So she's been around this industry for about 20 years and has handled an awful lot of litigation with property managers. So she's the one that we should lean into, not just any lawyer out there. We should lean into Monica, who knows what it's going to look like when you get to court, because she'll help you write really good documents to protect you.

Purpose of Video

So here's what we're going to do today. We're going to talk through where's the liability and how to remove or at least limit that liability. That's the focus of this conversation. It's about protecting yourself. It's about body armor.

So it's about things you and I can do to protect ourselves against disgruntled owners, tenants, vendors, and some of the pushback that we may get from a resident rewards package. Now, we're not doing this in a void. We understand that these series of videos are going to be about exposing the hazards. And in the end, we're going to direct you to a document that Monica created called "Bulletproofing Your Company Against a Badly Designed Resident Rewards Package." And it's a document you can download on our site, and it'll give you the language you need. You can literally copy and paste language into the various documents that you need for a resident rewards package that gives you all the exculpatory language and the disclosures that you need to protect yourself from the hazards that we're going to be talking through.

So we're going to jump right into it. I'm going to slice it up into pieces. And what I did was shoot some Zoom videos with Monica. So part of this is you're going to see conversation between Monica and myself. You want to listen to her more than you do me, okay?

Because she's the one that's going to maybe be defending you someday in court over some of the backwash that you might get if you don't pay attention to the answers that we are going to address here. So let's jump right into it.

Disclosing to Owners

The first one is disclosing to owners. Now, there's certain language that you might want in your property management agreement to disclose the fact that you're going to make money on selling services to your tenant. So let's listen to Monica's response to this and let's glean from her, okay? Here we go. Now, this particular video is about adding language to the management agreement to disclose to the owner what the manager is doing.

That is, getting permission from the owner, so to speak, to sell services to the tenant. So Monica, are you there? Hey, Robert. How are you? Good afternoon, Monica.

How are you doing today? I'm doing great, Robert. So happy to be here and really excited to talk today with our friends, so happy to have you lay out the problem and we can just tease it out together. Okay, good. What is happening in the industry, Monica, is that people are building resident rewards packages.

They don't always understand some of the hazards that are involved in them. And by not adding some liability of themselves, they want to build a system that they can sell benefits to their tenants. Now, it's not the benefit package that creates the liability so much as it is how they build it, how they set it up. So we've broken this down into 10 different messages. So let's get started with dealing with the owner side.

So the question we want to answer in this video is how do you handle disclosures to the owner on the resident rewards package? In other words, what might we do to disclose to the owner in the management agreement the issue of the resident rewards package? Great question. Most managers I would say we deal with, Robert, really don't feel that it's necessary to involve the owner or inform or disclose to the owner about the residence reward package for a couple of reasons. One, well, there's just no need really to put it into a property management agreement, a PMA, because the owner isn't paying for it, right?

It's not something that they're putting money out to do. And then number two, nor are any of the fees that are generated by it coming to them. That's something that certainly most of my clients, and the ones that you consult with as well, are under the model that the rent will go to the owner and the fees will go to the property manager. So to me, the resident rewards package is very much within the realm or the world of the property manager, such that there's really not a whole lot you need to disclose to your owner. Okay.

So as far as you know, license law, landlord-tenant law, have you seen any legal requirements to landlords that they would have to disclose something like this? I've never read any. Have you come across any? Yeah, I have not, because if you think about it, this is really a marketing sort of concept. This is a way to draw tenants into a certain property that the property manager does.

So no, I wouldn't think this is something that needs to be disclosed. And in fact, in my mind, I would not even have it be part of a property management agreement. Yeah, you convinced me of that 15 years ago when we were doing it. I agree with that, and we used it for years, never said a word in the management agreement about it, and nobody ever cared. Nobody brought it up.

However, there are some managers out there that feel differently, and maybe they're a little more paranoid with people. They're like, every part of their business and all the operational side of their business, they have to somehow tell the owner what they're doing. So for those listeners who kind of feel that, give me some of the rules. Tell me some of the limitations. How would you go about it if a manager came to you and said, "I really think I need to say something in my management agreement." How would you respond?

Sure, absolutely. Well, my rules are pretty clear. Number one, you want to just first and foremost, keep it very brief. The shorter, the better. That's a cardinal rule of mine is just say what you mean and say it concisely.

Number two, you don't need to go into any type of detail about what comprises the package, because as we know, package could morph over time, and you certainly don't want an owner thinking, "Well, wait a minute.

Management Agreement Conciseness

Locke told me they were going to be having this aspect of it," and then suddenly, because the manager decides not to, they don't. So to me, it's just really, number one, very concise, one sentence, no explanation, and two, no details as to what it's going to be comprised about. Yeah. Recently, when we've had a couple of managers want language like that, you put a document together, and we kind of, to give the manager the language to use in the management agreement. I think you did it in one sentence or maybe two.

So you wouldn't want to put any details because the resident rewards package will grow and morph and change- Exactly ... and modify over time. So you don't really want to say very much in the management agreement. Exactly. Now, just for our viewers' sake, as we go through this, we're going to draw out some concerns.

But Monica has created a kind of a legal document. It's kind of a white paper on what language would you put in the management agreement, to satisfy a manager in terms of disclosure to an owner, and each of the different hazards that we talk through, there's in this document that Monica has created, and we'll tell you where to find it. You can get all the language, all the legal language you need to satisfy this concern. So we'll tell you a little bit more about that as we go along.

Monica's Advice

Okay, now what Monica says is, first of all, she doesn't think you need to. I didn't through 10 years. We were doing 30, 40, 50 move-ins a month. That's 100 applications plus a month in the last eight or 10 years of our business. We didn't say anything in the management agreement about a resident rewards package, but not everybody agrees with that kind of thing.

There are some people that think every nickel they make in the property management business, they got to tell the owner about and expose it to the owner and have a discussion with the owner about who gets that money. So everybody kind of feels differently about this kind of thing. So I don't think you need to. Monica doesn't think you need to. You'll make that decision for yourself.

If you do, keep it brief. In other words, in the management agreement, Monica's narrowed it down to one or two sentences on what to say in the management agreement to keep it brief and give no details whatsoever. So that's Monica's advice. Let's kind of pause for two seconds, and then we'll move on to number two.