awards.” In fact, they found that two out of three of the largest damage awards were from property man- agement cases. (They measured in millions of dollars, by the way.) I point out this litigation threat because when you say, “it depends,” you’re basically putting a giant target on your back and leaving your company exposed to litigation risk. Prior to working in the property management industry, I served as an executive vice president of a large labor union. Risk man- agement is a way of life in labor unions, because litigation is nev- er-ending. Labor unions are con- stantly making big decisions that affect thousands of their members, and it’s impossible to make every- body happy. That means lawsuits are inevitable. When I had to attend board meetings, legal briefings from our attorneys on the plethora of cases we had going at any given time were just a necessary evil, and it seemed that there was never a time when we weren’t in negotia- tions with insurers and re-insurers for our various insurance policies that protected us from litigation. This experience gave me a great understanding of risk management. I learned the best practices for avoiding litigation and for reducing financial exposure when litigation can’t be avoided. That experience has carried over quite well into the property management industry and helped me to put policies in place to avoid litigation risk. Here are the lessons I learned and have applied to my property man- agement business: NO. 1 First, consistency should be your goal. You never want to create a situation where you’re treating one person differently from anoth- er. This is true with tenants,
owners, and even employees and vendors. Disparity of treatment is a litigation magnet. NO. 2 Make sure your policies are all in writing, the revisions dated, and a record of all past revisions kept on file. Detailed records of your business practices make you look like a studious manager who is trying to treat everyone fairly. Business owners who keep their policies all in their head create a situation where they’re asking everyone to just take them at their word that a certain practice is company policy and uniformly applied to everyone. You don’t want to find yourself in court asking everyone to just trust you. Juries, and even judges, are far more likely to think the worst of you and assume that the reason you don’t have written policies in place is because you want to treat each person differently. NO. 3 Make sure every staff member receives a copy of the policy manual when they start with your company. Get them to sign an acknowledgement form stating that they have received, read, and understand the policies contained in the manual, and keep that form on file. When you revise your manual, go through the same process. When you take this level of care to ensure that your policies are understood by everyone in your organization, and you have the records to prove it, it makes for great evidence to defend yourself against a claim. In some cases, if an opposing attorney finds this level of detail in your policies and records during the discovery process, they may decide that it’s not worth pursuing. They’re looking for easy targets, so make sure you don’t look like one.
NO. 4 Make sure that your written policies pass the smell test. It isn’t enough to say “that’s our policy” if the policy itself is clearly arbitrary, discriminatory, or in bad faith. This goes back to Rule #1: don’t treat people differently. A good way to look at it is to ask yourself whether the policy is differentiating based upon the person or based upon the relevant circumstances. So, a policy that waives late fees if the 1st of the month falls on a federal holiday would be reasonable as it deals with the same kind of circumstance for everyone. However, a policy that waives late fees if the 1st falls on a religious holiday recognized by Christians but not if the 1st falls on a Jewish holiday, would not be kosher (pardon the pun). Having a written policy and enforcing it gives you a lot of cover, but it doesn’t protect you if your policies them- selves are the problem. NO. 5 Never deviate from your written policies and procedures. This goes back to the beginning of the article. “It depends” does not work. You cannot “wing it” and make up policy as you go along based upon the individual circumstances in each case. You need to make written policies and stick to them like your life depends on it. Because while maybe your life itself doesn’t depend on it, your livelihood cer- tainly does. Sometimes this means going against your gut and doing something that’s in the written policy even though you don’t partic- ularly like it in that specific circum- stance. For example, I recently had a tenant show up at my office asking for a late fee waiver because her husband had died, and she had been bogged down with arranging the funeral and completely forgot about the rent. My “gut” told me to have
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