Indemnification Clause in PM Agreement

Indemnification Clause in PM Agreement

Contractor · Helena, MT · Member since 2020 · 11 posts · 5 votes

Looking to hire a PM was going over the agreement. Saw this and it kind of concerns me that basically im on the hook for any stupid thing they do. As a General Contractor when i manage a site im used to being the one on the hook for everything. Not passing the buck to the homeowner that hired me. Is this standard fare for PM's. To me it defeats the primary reason for hiring a Property manager. 



9. INDEMNIFICATION AND HOLD HARMLESS
Except for the willful misconduct of Agent, Owner shall indemnify, defend, and hold Agent harmless from all loss, damage, cost,
expense (including attorneys' fees), liability, claims, investigations and lawsuits by third parties for personal injury, death or
property damage incurred or occurring in, on, or about the Premises that are connected with the management of the property,
during the term of this Agreement or after its termination, including any liability for error of judgment, a mistake of fact of law, or
for anything which Agent may do or refrain from doing hereinafter. Owner shall pay, except as provided elsewhere in this
Agreement, all expenses incurred by the Agent, including, but not limited to, reasonable attorney’s fees and Agent’s costs and
time in connection with any claim, proceeding, or suit involving an alleged violation by the Agent or Owner, or both, of any law
pertaining to fair employment, fair credit reporting, environmental protection, rent control, taxes, or fair housing, including, but
not limited to, any law prohibiting, or making illegal, discrimination on the basis of race, sex, creed, color, religion, national origin,
age, marital status, or mental or physical handicap, provided, however, that the Owner shall not be responsible to the Agent for
any expenses in the event that Agent is finally adjudicated to have personally, and not in a representative capacity, violated any
such law, unless such acts and or omissions are outside the course and scope of Agent’s duties hereunder. Nothing contained
herein shall obligate the Agent to employ counsel to represent the Owner in any such proceeding or suit. The Owner also
agrees to pay reasonable expenses (or an apportioned amount of such expenses where other employers of Agent also benefit)
incurred by the Agent in obtaining legal advice regarding compliance with any law affecting the Premises or activities related
thereto. If Agent or Owner are called upon to respond to any such claims, each party will promptly notifify the other. Upon receipt
of such notice, Owner will promptly notifiy Agent whether Owner will undertake the defense. If Owner does not respond
promptly and assume the defense of such claims, then Agent may take such steps as Agent deems necessary in connection
with the claims.
Agent assumes no responsibility or management of personal property left by Owner at Premises. Owner shall not hold the Agent
liable for any willful neglect, abuse or damage to the Premises by tenants or vandals or others nor for loss of or damage to any
personal property of the Owner or any tenant including loss due to exchange or theft by tenants or any third party. Further, the
Owner shall not hold the Agent liable for any error of judgment or mistake of law except in cases of willful misconduct or gross
negligence.

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Real Estate Broker · Cleveland Dayton Cincinnati Toledo Columbus & Akron, OH · Member since 2013 · 30k+ posts · 20k+ votes
6y

@John Weiss This is standard practice for the property management industry. If you found a property management company who didn't have one of these that'd be the real red flag.

See this reply in the discussion

43 Replies

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  • Real Estate Broker · Cleveland Dayton Cincinnati Toledo Columbus & Akron, OH · Member since 2013 · 30k+ posts · 20k+ votes
    6y

    @John Weiss This is standard practice for the property management industry. If you found a property management company who didn't have one of these that'd be the real red flag.

  • Real Estate Broker · Hyde Park Tampa, FL · Member since 2019 · 2k+ posts · 3k+ votes
    6y

    It's all blah, blah, blah...here's what matters:  do they have Professional Liability Insurance, often times called errors and omissions insurance (E&O insurance). It's standard coverage for claims against businesses that provide professional services — like property management. It covers the PM in case of wrongful evictions and tenant discrimination. I wouldn't hire a PM who could not provide me a copy of this coverage.

    Also, ask for their "General liability insurance (aka CGL)." It protects PM  from both individual and business’ claims of bodily injury, medical costs, and damage to property. Apartment complexes and commercial buildings  always carry this but it's also common with residential. If a repairman is injured working at a property, if a potential tenant breaks something inside a property they're showing - it covers all of those and more.  

    So if they had the foresight to lawyer up on the indemnification clause, hopefully they had it as well in securing professional liability coverage.  Hope this helps...





  • Investor · Valrico, FL · Member since 2012 · 32 posts · 9 votes
    2y
    Blah, blah, blah?  It's pretty much the exact opposite of blah, blah, blah.  That language is in there for a reason and the verbiage is very critical to how an issue would be handled.  Obviously an issue never arises and if that's the case, then the verbiage is irrelevant.  But if something happens, then the specific language is very important.

    I'm not an attorney.  I do work in insurance and have some rentals.  That language is trying to avoid using their E&O or GL insurance and making it go through your own owner's policy.  The question is when should that happen and when should their E&O/GL actually be applicable.  How that clause is phrased determines that and is pretty critical.  
  • Chris SeveneyBusiness Member
    Moderator
    Investor · VA · Member since 2015 · 21k+ posts · 19k+ votes
    2y
    Quote from @John Weiss:

    Looking to hire a PM was going over the agreement. Saw this and it kind of concerns me that basically im on the hook for any stupid thing they do. As a General Contractor when i manage a site im used to being the one on the hook for everything. Not passing the buck to the homeowner that hired me. Is this standard fare for PM's. To me it defeats the primary reason for hiring a Property manager. 



    9. INDEMNIFICATION AND HOLD HARMLESS
    Except for the willful misconduct of Agent, Owner shall indemnify, defend, and hold Agent harmless from all loss, damage, cost,
    expense (including attorneys' fees), liability, claims, investigations and lawsuits by third parties for personal injury, death or
    property damage incurred or occurring in, on, or about the Premises that are connected with the management of the property,
    during the term of this Agreement or after its termination, including any liability for error of judgment, a mistake of fact of law, or
    for anything which Agent may do or refrain from doing hereinafter. Owner shall pay, except as provided elsewhere in this
    Agreement, all expenses incurred by the Agent, including, but not limited to, reasonable attorney’s fees and Agent’s costs and
    time in connection with any claim, proceeding, or suit involving an alleged violation by the Agent or Owner, or both, of any law
    pertaining to fair employment, fair credit reporting, environmental protection, rent control, taxes, or fair housing, including, but
    not limited to, any law prohibiting, or making illegal, discrimination on the basis of race, sex, creed, color, religion, national origin,
    age, marital status, or mental or physical handicap, provided, however, that the Owner shall not be responsible to the Agent for
    any expenses in the event that Agent is finally adjudicated to have personally, and not in a representative capacity, violated any
    such law, unless such acts and or omissions are outside the course and scope of Agent’s duties hereunder. Nothing contained
    herein shall obligate the Agent to employ counsel to represent the Owner in any such proceeding or suit. The Owner also
    agrees to pay reasonable expenses (or an apportioned amount of such expenses where other employers of Agent also benefit)
    incurred by the Agent in obtaining legal advice regarding compliance with any law affecting the Premises or activities related
    thereto. If Agent or Owner are called upon to respond to any such claims, each party will promptly notifify the other. Upon receipt
    of such notice, Owner will promptly notifiy Agent whether Owner will undertake the defense. If Owner does not respond
    promptly and assume the defense of such claims, then Agent may take such steps as Agent deems necessary in connection
    with the claims.
    Agent assumes no responsibility or management of personal property left by Owner at Premises. Owner shall not hold the Agent
    liable for any willful neglect, abuse or damage to the Premises by tenants or vandals or others nor for loss of or damage to any
    personal property of the Owner or any tenant including loss due to exchange or theft by tenants or any third party. Further, the
    Owner shall not hold the Agent liable for any error of judgment or mistake of law except in cases of willful misconduct or gross
    negligence.


     we always have our attorney bloody the heck out of this. Indemnification is important but it has to be even -kind of like - if I screw up on me if you screw up on you. Most PM agreements are like this and very lopsided. Some they literally could kill a tenant and you have to pay to defend them. Things my attorney typically mark up are we get rid of willful misconduct, the last sentence that we cannot hold them liable for mistake of law - umm sorry if they do not follow the law - that is on them - why are you paying them

    If you need a good attorney to review this I got one. Also make sure it goes both ways - make sure the PM indemnifies and defends you for things they do that are illegal.

    7e investments53 Reviews
  • Real Estate Broker · Cleveland Dayton Cincinnati Toledo Columbus & Akron, OH · Member since 2013 · 30k+ posts · 20k+ votes
    2y
    Quote from @Chris Seveney:
    Quote from @John Weiss:

    Looking to hire a PM was going over the agreement. Saw this and it kind of concerns me that basically im on the hook for any stupid thing they do. As a General Contractor when i manage a site im used to being the one on the hook for everything. Not passing the buck to the homeowner that hired me. Is this standard fare for PM's. To me it defeats the primary reason for hiring a Property manager. 



    9. INDEMNIFICATION AND HOLD HARMLESS
    Except for the willful misconduct of Agent, Owner shall indemnify, defend, and hold Agent harmless from all loss, damage, cost,
    expense (including attorneys' fees), liability, claims, investigations and lawsuits by third parties for personal injury, death or
    property damage incurred or occurring in, on, or about the Premises that are connected with the management of the property,
    during the term of this Agreement or after its termination, including any liability for error of judgment, a mistake of fact of law, or
    for anything which Agent may do or refrain from doing hereinafter. Owner shall pay, except as provided elsewhere in this
    Agreement, all expenses incurred by the Agent, including, but not limited to, reasonable attorney’s fees and Agent’s costs and
    time in connection with any claim, proceeding, or suit involving an alleged violation by the Agent or Owner, or both, of any law
    pertaining to fair employment, fair credit reporting, environmental protection, rent control, taxes, or fair housing, including, but
    not limited to, any law prohibiting, or making illegal, discrimination on the basis of race, sex, creed, color, religion, national origin,
    age, marital status, or mental or physical handicap, provided, however, that the Owner shall not be responsible to the Agent for
    any expenses in the event that Agent is finally adjudicated to have personally, and not in a representative capacity, violated any
    such law, unless such acts and or omissions are outside the course and scope of Agent’s duties hereunder. Nothing contained
    herein shall obligate the Agent to employ counsel to represent the Owner in any such proceeding or suit. The Owner also
    agrees to pay reasonable expenses (or an apportioned amount of such expenses where other employers of Agent also benefit)
    incurred by the Agent in obtaining legal advice regarding compliance with any law affecting the Premises or activities related
    thereto. If Agent or Owner are called upon to respond to any such claims, each party will promptly notifify the other. Upon receipt
    of such notice, Owner will promptly notifiy Agent whether Owner will undertake the defense. If Owner does not respond
    promptly and assume the defense of such claims, then Agent may take such steps as Agent deems necessary in connection
    with the claims.
    Agent assumes no responsibility or management of personal property left by Owner at Premises. Owner shall not hold the Agent
    liable for any willful neglect, abuse or damage to the Premises by tenants or vandals or others nor for loss of or damage to any
    personal property of the Owner or any tenant including loss due to exchange or theft by tenants or any third party. Further, the
    Owner shall not hold the Agent liable for any error of judgment or mistake of law except in cases of willful misconduct or gross
    negligence.


     we always have our attorney bloody the heck out of this. Indemnification is important but it has to be even -kind of like - if I screw up on me if you screw up on you. Most PM agreements are like this and very lopsided. Some they literally could kill a tenant and you have to pay to defend them. Things my attorney typically mark up are we get rid of willful misconduct, the last sentence that we cannot hold them liable for mistake of law - umm sorry if they do not follow the law - that is on them - why are you paying them

    If you need a good attorney to review this I got one. Also make sure it goes both ways - make sure the PM indemnifies and defends you for things they do that are illegal.


     Ya'll need to focus on the real world here... Can an attorney review it and ask for changes sure, but why spend the money? A legitimate PM company ain't changing their contract for any customer. Can you have your attorney review your contract with Verizon, sure, but why? They ain't doing anything about it. 

  • Investor · Valrico, FL · Member since 2012 · 32 posts · 9 votes
    2y
    That's a good question.  I'm asking them to edit theirs a bit.  We will see what their response is.  However, their contract language is a determining factor whether I'll use their service or not. 
  • Chris SeveneyBusiness Member
    Moderator
    Investor · VA · Member since 2015 · 21k+ posts · 19k+ votes
    2y
    Quote from @James Wise:
    Quote from @Chris Seveney:
    Quote from @John Weiss:

    Looking to hire a PM was going over the agreement. Saw this and it kind of concerns me that basically im on the hook for any stupid thing they do. As a General Contractor when i manage a site im used to being the one on the hook for everything. Not passing the buck to the homeowner that hired me. Is this standard fare for PM's. To me it defeats the primary reason for hiring a Property manager. 



    9. INDEMNIFICATION AND HOLD HARMLESS
    Except for the willful misconduct of Agent, Owner shall indemnify, defend, and hold Agent harmless from all loss, damage, cost,
    expense (including attorneys' fees), liability, claims, investigations and lawsuits by third parties for personal injury, death or
    property damage incurred or occurring in, on, or about the Premises that are connected with the management of the property,
    during the term of this Agreement or after its termination, including any liability for error of judgment, a mistake of fact of law, or
    for anything which Agent may do or refrain from doing hereinafter. Owner shall pay, except as provided elsewhere in this
    Agreement, all expenses incurred by the Agent, including, but not limited to, reasonable attorney’s fees and Agent’s costs and
    time in connection with any claim, proceeding, or suit involving an alleged violation by the Agent or Owner, or both, of any law
    pertaining to fair employment, fair credit reporting, environmental protection, rent control, taxes, or fair housing, including, but
    not limited to, any law prohibiting, or making illegal, discrimination on the basis of race, sex, creed, color, religion, national origin,
    age, marital status, or mental or physical handicap, provided, however, that the Owner shall not be responsible to the Agent for
    any expenses in the event that Agent is finally adjudicated to have personally, and not in a representative capacity, violated any
    such law, unless such acts and or omissions are outside the course and scope of Agent’s duties hereunder. Nothing contained
    herein shall obligate the Agent to employ counsel to represent the Owner in any such proceeding or suit. The Owner also
    agrees to pay reasonable expenses (or an apportioned amount of such expenses where other employers of Agent also benefit)
    incurred by the Agent in obtaining legal advice regarding compliance with any law affecting the Premises or activities related
    thereto. If Agent or Owner are called upon to respond to any such claims, each party will promptly notifify the other. Upon receipt
    of such notice, Owner will promptly notifiy Agent whether Owner will undertake the defense. If Owner does not respond
    promptly and assume the defense of such claims, then Agent may take such steps as Agent deems necessary in connection
    with the claims.
    Agent assumes no responsibility or management of personal property left by Owner at Premises. Owner shall not hold the Agent
    liable for any willful neglect, abuse or damage to the Premises by tenants or vandals or others nor for loss of or damage to any
    personal property of the Owner or any tenant including loss due to exchange or theft by tenants or any third party. Further, the
    Owner shall not hold the Agent liable for any error of judgment or mistake of law except in cases of willful misconduct or gross
    negligence.


     we always have our attorney bloody the heck out of this. Indemnification is important but it has to be even -kind of like - if I screw up on me if you screw up on you. Most PM agreements are like this and very lopsided. Some they literally could kill a tenant and you have to pay to defend them. Things my attorney typically mark up are we get rid of willful misconduct, the last sentence that we cannot hold them liable for mistake of law - umm sorry if they do not follow the law - that is on them - why are you paying them

    If you need a good attorney to review this I got one. Also make sure it goes both ways - make sure the PM indemnifies and defends you for things they do that are illegal.


     Ya'll need to focus on the real world here... Can an attorney review it and ask for changes sure, but why spend the money? A legitimate PM company ain't changing their contract for any customer. Can you have your attorney review your contract with Verizon, sure, but why? They ain't doing anything about it. 


     Have all the love for you james,but this clause is a very important clause in a contract and has significant legal ramifications and I will spend $250 all day long to have this reviewed and will not use that PM if it is grossly one-sided. 

    If a PM is not going to hold themselves liable for breaking the law which is what this agreement says since willful misconduct is almost impossible to prove as it has to be premeditated - then that is not a risk I will take. 

    Re: Verizon of course they will not amend their agreement (actually I have gotten them to amend a lease as a tenant...) , but the service they provide to you is very different than what a PM does. Now on the flip side I am 100% for a PM indemnifying themselves for whatever the tenant does - there are some owners who think if the PM brings in a bad tenant that is on them - I am 100% on PM side there, but this is a you screw up on you I screw up on me. 

    Let me ask this question - if one of your employees during work hours walks into a store and decides to rob it or someone picks a fight with them and kills them, will you legally defend them? I do not know who would, I would not, but this contract above is saying the owner of the property would be required to defend an employee of the PM for this instance - someone goes on property collects rent, gets in a fight and kills the tenant....

    7e investments53 Reviews
  • Stuart UdisPro Member
    Attorney · Philadelphia · Member since 2018 · 2k+ posts · 3k+ votes
    2y

    Not all indemnification clauses are created equally. Critical to understand the standard of care that triggers the clause and as the property owner you want negligence and not "wilful misconduct". In this case, the PM is only responsible for wilful misconduct which is commonly referred to as gross negligence. Customarily an insurance carrier will provide legal representation for negligence but depending on the fact pattern may not even pay for damages. That is the threshold for covererage. In this case, the carrier wouldn't even pick up coverage as Wilful Misconduct will be listed as an exclusion under their E&O and general liability policies. Therefore, this provision in your PM contract effectively eliminates any opportunity for you to utilize their insurance in the event of a claim, even if listed as additional insured. Unless you are confident the PM is going to foot the legal bills in the event of a willfull misconduct situation, you are in for a rude awakening. Also, how do you determine whether an action is negligent or rises to wilful misconduct? Here is the definition:

    Negligence is unintentional but irresponsible conduct that leads to an injury. Gross negligence is typically defined as conduct showing extreme indifference or a reckless disregard for someone's safety or property


    Good luck determining whether the PM's act rises to gross Wilful Misconduct/Gross Negligence. 

    Ultimately a good contract and contract management system will push the coverage on whomever is the bad actor, and any contract that contains this particular indemnification clause will fail to do so. 

  • Real Estate Broker · Cleveland Dayton Cincinnati Toledo Columbus & Akron, OH · Member since 2013 · 30k+ posts · 20k+ votes
    2y
    Quote from @Chris Seveney:
    Quote from @James Wise:
    Quote from @Chris Seveney:
    Quote from @John Weiss:

    Looking to hire a PM was going over the agreement. Saw this and it kind of concerns me that basically im on the hook for any stupid thing they do. As a General Contractor when i manage a site im used to being the one on the hook for everything. Not passing the buck to the homeowner that hired me. Is this standard fare for PM's. To me it defeats the primary reason for hiring a Property manager. 



    9. INDEMNIFICATION AND HOLD HARMLESS
    Except for the willful misconduct of Agent, Owner shall indemnify, defend, and hold Agent harmless from all loss, damage, cost,
    expense (including attorneys' fees), liability, claims, investigations and lawsuits by third parties for personal injury, death or
    property damage incurred or occurring in, on, or about the Premises that are connected with the management of the property,
    during the term of this Agreement or after its termination, including any liability for error of judgment, a mistake of fact of law, or
    for anything which Agent may do or refrain from doing hereinafter. Owner shall pay, except as provided elsewhere in this
    Agreement, all expenses incurred by the Agent, including, but not limited to, reasonable attorney’s fees and Agent’s costs and
    time in connection with any claim, proceeding, or suit involving an alleged violation by the Agent or Owner, or both, of any law
    pertaining to fair employment, fair credit reporting, environmental protection, rent control, taxes, or fair housing, including, but
    not limited to, any law prohibiting, or making illegal, discrimination on the basis of race, sex, creed, color, religion, national origin,
    age, marital status, or mental or physical handicap, provided, however, that the Owner shall not be responsible to the Agent for
    any expenses in the event that Agent is finally adjudicated to have personally, and not in a representative capacity, violated any
    such law, unless such acts and or omissions are outside the course and scope of Agent’s duties hereunder. Nothing contained
    herein shall obligate the Agent to employ counsel to represent the Owner in any such proceeding or suit. The Owner also
    agrees to pay reasonable expenses (or an apportioned amount of such expenses where other employers of Agent also benefit)
    incurred by the Agent in obtaining legal advice regarding compliance with any law affecting the Premises or activities related
    thereto. If Agent or Owner are called upon to respond to any such claims, each party will promptly notifify the other. Upon receipt
    of such notice, Owner will promptly notifiy Agent whether Owner will undertake the defense. If Owner does not respond
    promptly and assume the defense of such claims, then Agent may take such steps as Agent deems necessary in connection
    with the claims.
    Agent assumes no responsibility or management of personal property left by Owner at Premises. Owner shall not hold the Agent
    liable for any willful neglect, abuse or damage to the Premises by tenants or vandals or others nor for loss of or damage to any
    personal property of the Owner or any tenant including loss due to exchange or theft by tenants or any third party. Further, the
    Owner shall not hold the Agent liable for any error of judgment or mistake of law except in cases of willful misconduct or gross
    negligence.


     we always have our attorney bloody the heck out of this. Indemnification is important but it has to be even -kind of like - if I screw up on me if you screw up on you. Most PM agreements are like this and very lopsided. Some they literally could kill a tenant and you have to pay to defend them. Things my attorney typically mark up are we get rid of willful misconduct, the last sentence that we cannot hold them liable for mistake of law - umm sorry if they do not follow the law - that is on them - why are you paying them

    If you need a good attorney to review this I got one. Also make sure it goes both ways - make sure the PM indemnifies and defends you for things they do that are illegal.


     Ya'll need to focus on the real world here... Can an attorney review it and ask for changes sure, but why spend the money? A legitimate PM company ain't changing their contract for any customer. Can you have your attorney review your contract with Verizon, sure, but why? They ain't doing anything about it. 


     Have all the love for you james,but this clause is a very important clause in a contract and has significant legal ramifications and I will spend $250 all day long to have this reviewed and will not use that PM if it is grossly one-sided. 

    If a PM is not going to hold themselves liable for breaking the law which is what this agreement says since willful misconduct is almost impossible to prove as it has to be premeditated - then that is not a risk I will take. 

    Re: Verizon of course they will not amend their agreement (actually I have gotten them to amend a lease as a tenant...) , but the service they provide to you is very different than what a PM does. Now on the flip side I am 100% for a PM indemnifying themselves for whatever the tenant does - there are some owners who think if the PM brings in a bad tenant that is on them - I am 100% on PM side there, but this is a you screw up on you I screw up on me. 

    Let me ask this question - if one of your employees during work hours walks into a store and decides to rob it or someone picks a fight with them and kills them, will you legally defend them? I do not know who would, I would not, but this contract above is saying the owner of the property would be required to defend an employee of the PM for this instance - someone goes on property collects rent, gets in a fight and kills the tenant....


     I suppose we could go back and fourth on the validity of your example of the rent / fight / murder, but for now the purpose of what I am saying here is if a customer isn't comfortable with the contract, their time is better spent moving on to a different PM than spending time and money trying to change their contract, cuz it ain't happening.

  • Chris SeveneyBusiness Member
    Moderator
    Investor · VA · Member since 2015 · 21k+ posts · 19k+ votes
    2y
    Quote from @James Wise:
    Quote from @Chris Seveney:
    Quote from @James Wise:
    Quote from @Chris Seveney:
    Quote from @John Weiss:

    Looking to hire a PM was going over the agreement. Saw this and it kind of concerns me that basically im on the hook for any stupid thing they do. As a General Contractor when i manage a site im used to being the one on the hook for everything. Not passing the buck to the homeowner that hired me. Is this standard fare for PM's. To me it defeats the primary reason for hiring a Property manager. 



    9. INDEMNIFICATION AND HOLD HARMLESS
    Except for the willful misconduct of Agent, Owner shall indemnify, defend, and hold Agent harmless from all loss, damage, cost,
    expense (including attorneys' fees), liability, claims, investigations and lawsuits by third parties for personal injury, death or
    property damage incurred or occurring in, on, or about the Premises that are connected with the management of the property,
    during the term of this Agreement or after its termination, including any liability for error of judgment, a mistake of fact of law, or
    for anything which Agent may do or refrain from doing hereinafter. Owner shall pay, except as provided elsewhere in this
    Agreement, all expenses incurred by the Agent, including, but not limited to, reasonable attorney’s fees and Agent’s costs and
    time in connection with any claim, proceeding, or suit involving an alleged violation by the Agent or Owner, or both, of any law
    pertaining to fair employment, fair credit reporting, environmental protection, rent control, taxes, or fair housing, including, but
    not limited to, any law prohibiting, or making illegal, discrimination on the basis of race, sex, creed, color, religion, national origin,
    age, marital status, or mental or physical handicap, provided, however, that the Owner shall not be responsible to the Agent for
    any expenses in the event that Agent is finally adjudicated to have personally, and not in a representative capacity, violated any
    such law, unless such acts and or omissions are outside the course and scope of Agent’s duties hereunder. Nothing contained
    herein shall obligate the Agent to employ counsel to represent the Owner in any such proceeding or suit. The Owner also
    agrees to pay reasonable expenses (or an apportioned amount of such expenses where other employers of Agent also benefit)
    incurred by the Agent in obtaining legal advice regarding compliance with any law affecting the Premises or activities related
    thereto. If Agent or Owner are called upon to respond to any such claims, each party will promptly notifify the other. Upon receipt
    of such notice, Owner will promptly notifiy Agent whether Owner will undertake the defense. If Owner does not respond
    promptly and assume the defense of such claims, then Agent may take such steps as Agent deems necessary in connection
    with the claims.
    Agent assumes no responsibility or management of personal property left by Owner at Premises. Owner shall not hold the Agent
    liable for any willful neglect, abuse or damage to the Premises by tenants or vandals or others nor for loss of or damage to any
    personal property of the Owner or any tenant including loss due to exchange or theft by tenants or any third party. Further, the
    Owner shall not hold the Agent liable for any error of judgment or mistake of law except in cases of willful misconduct or gross
    negligence.


     we always have our attorney bloody the heck out of this. Indemnification is important but it has to be even -kind of like - if I screw up on me if you screw up on you. Most PM agreements are like this and very lopsided. Some they literally could kill a tenant and you have to pay to defend them. Things my attorney typically mark up are we get rid of willful misconduct, the last sentence that we cannot hold them liable for mistake of law - umm sorry if they do not follow the law - that is on them - why are you paying them

    If you need a good attorney to review this I got one. Also make sure it goes both ways - make sure the PM indemnifies and defends you for things they do that are illegal.


     Ya'll need to focus on the real world here... Can an attorney review it and ask for changes sure, but why spend the money? A legitimate PM company ain't changing their contract for any customer. Can you have your attorney review your contract with Verizon, sure, but why? They ain't doing anything about it. 


     Have all the love for you james,but this clause is a very important clause in a contract and has significant legal ramifications and I will spend $250 all day long to have this reviewed and will not use that PM if it is grossly one-sided. 

    If a PM is not going to hold themselves liable for breaking the law which is what this agreement says since willful misconduct is almost impossible to prove as it has to be premeditated - then that is not a risk I will take. 

    Re: Verizon of course they will not amend their agreement (actually I have gotten them to amend a lease as a tenant...) , but the service they provide to you is very different than what a PM does. Now on the flip side I am 100% for a PM indemnifying themselves for whatever the tenant does - there are some owners who think if the PM brings in a bad tenant that is on them - I am 100% on PM side there, but this is a you screw up on you I screw up on me. 

    Let me ask this question - if one of your employees during work hours walks into a store and decides to rob it or someone picks a fight with them and kills them, will you legally defend them? I do not know who would, I would not, but this contract above is saying the owner of the property would be required to defend an employee of the PM for this instance - someone goes on property collects rent, gets in a fight and kills the tenant....


     I suppose we could go back and fourth on the validity of your example of the rent / fight / murder, but for now the purpose of what I am saying here is if a customer isn't comfortable with the contract, their time is better spent moving on to a different PM than spending time and money trying to change their contract, cuz it ain't happening.


     that I can agree on :) Keep rocking it brother. 

    7e investments53 Reviews
  • Corey ConklinPro Member
    Investor · Member since 2021 · 129 posts · 209 votes
    2y
    Comparing Verizon (one of a handful of cell phone providers) and a PM company, which is ridiculously competitive industry, is comparing an apple to an orange. PM companies don't have the leverage like Verizon.

    I get what you're saying about companies not wanting to change their agreements but there are circumstances that a PM company would modify a contract for a potential client. I've worked in that world and we did it for the right circumstances. 

    If a large investor with 100 units wants to use you as their PM and their portfolio is a great fit for your business I know for a fact that almost every PM company will play ball and negotiate fair terms. If you just bought your first rental and are looking to negotiate the PM agreement, yeah that's not going to happen, they'll tell you to pound sand in that situation. Negotiating any situation is always about leverage. 

  • Diego AlvaradoBusiness Member
    Real Estate Agent · Flower Mound, TX · Member since 2016 · 295 posts · 139 votes
    2y
    Quote from @James Wise:
    Quote from @Chris Seveney:
    Quote from @James Wise:
    Quote from @Chris Seveney:
    Quote from @John Weiss:

    Looking to hire a PM was going over the agreement. Saw this and it kind of concerns me that basically im on the hook for any stupid thing they do. As a General Contractor when i manage a site im used to being the one on the hook for everything. Not passing the buck to the homeowner that hired me. Is this standard fare for PM's. To me it defeats the primary reason for hiring a Property manager. 



    9. INDEMNIFICATION AND HOLD HARMLESS
    Except for the willful misconduct of Agent, Owner shall indemnify, defend, and hold Agent harmless from all loss, damage, cost,
    expense (including attorneys' fees), liability, claims, investigations and lawsuits by third parties for personal injury, death or
    property damage incurred or occurring in, on, or about the Premises that are connected with the management of the property,
    during the term of this Agreement or after its termination, including any liability for error of judgment, a mistake of fact of law, or
    for anything which Agent may do or refrain from doing hereinafter. Owner shall pay, except as provided elsewhere in this
    Agreement, all expenses incurred by the Agent, including, but not limited to, reasonable attorney’s fees and Agent’s costs and
    time in connection with any claim, proceeding, or suit involving an alleged violation by the Agent or Owner, or both, of any law
    pertaining to fair employment, fair credit reporting, environmental protection, rent control, taxes, or fair housing, including, but
    not limited to, any law prohibiting, or making illegal, discrimination on the basis of race, sex, creed, color, religion, national origin,
    age, marital status, or mental or physical handicap, provided, however, that the Owner shall not be responsible to the Agent for
    any expenses in the event that Agent is finally adjudicated to have personally, and not in a representative capacity, violated any
    such law, unless such acts and or omissions are outside the course and scope of Agent’s duties hereunder. Nothing contained
    herein shall obligate the Agent to employ counsel to represent the Owner in any such proceeding or suit. The Owner also
    agrees to pay reasonable expenses (or an apportioned amount of such expenses where other employers of Agent also benefit)
    incurred by the Agent in obtaining legal advice regarding compliance with any law affecting the Premises or activities related
    thereto. If Agent or Owner are called upon to respond to any such claims, each party will promptly notifify the other. Upon receipt
    of such notice, Owner will promptly notifiy Agent whether Owner will undertake the defense. If Owner does not respond
    promptly and assume the defense of such claims, then Agent may take such steps as Agent deems necessary in connection
    with the claims.
    Agent assumes no responsibility or management of personal property left by Owner at Premises. Owner shall not hold the Agent
    liable for any willful neglect, abuse or damage to the Premises by tenants or vandals or others nor for loss of or damage to any
    personal property of the Owner or any tenant including loss due to exchange or theft by tenants or any third party. Further, the
    Owner shall not hold the Agent liable for any error of judgment or mistake of law except in cases of willful misconduct or gross
    negligence.


     we always have our attorney bloody the heck out of this. Indemnification is important but it has to be even -kind of like - if I screw up on me if you screw up on you. Most PM agreements are like this and very lopsided. Some they literally could kill a tenant and you have to pay to defend them. Things my attorney typically mark up are we get rid of willful misconduct, the last sentence that we cannot hold them liable for mistake of law - umm sorry if they do not follow the law - that is on them - why are you paying them

    If you need a good attorney to review this I got one. Also make sure it goes both ways - make sure the PM indemnifies and defends you for things they do that are illegal.


     Ya'll need to focus on the real world here... Can an attorney review it and ask for changes sure, but why spend the money? A legitimate PM company ain't changing their contract for any customer. Can you have your attorney review your contract with Verizon, sure, but why? They ain't doing anything about it. 


     Have all the love for you james,but this clause is a very important clause in a contract and has significant legal ramifications and I will spend $250 all day long to have this reviewed and will not use that PM if it is grossly one-sided. 

    If a PM is not going to hold themselves liable for breaking the law which is what this agreement says since willful misconduct is almost impossible to prove as it has to be premeditated - then that is not a risk I will take. 

    Re: Verizon of course they will not amend their agreement (actually I have gotten them to amend a lease as a tenant...) , but the service they provide to you is very different than what a PM does. Now on the flip side I am 100% for a PM indemnifying themselves for whatever the tenant does - there are some owners who think if the PM brings in a bad tenant that is on them - I am 100% on PM side there, but this is a you screw up on you I screw up on me. 

    Let me ask this question - if one of your employees during work hours walks into a store and decides to rob it or someone picks a fight with them and kills them, will you legally defend them? I do not know who would, I would not, but this contract above is saying the owner of the property would be required to defend an employee of the PM for this instance - someone goes on property collects rent, gets in a fight and kills the tenant....


     I suppose we could go back and fourth on the validity of your example of the rent / fight / murder, but for now the purpose of what I am saying here is if a customer isn't comfortable with the contract, their time is better spent moving on to a different PM than spending time and money trying to change their contract, cuz it ain't happening.


     I am not sure how other will take this, however in my experience a property management company has an specific job for a very little portion of the pie, which means that they need to assure that they are not liable (of course, I wouldn't sign a contract when they are no liable even for their own error, that seems to be a red flag).

    You have to understand what is the service that a PM jobs, in here we were comparing with Verizon, but I agree that this is different, however you can compare it with an assitant or a fractional operation manager, as that is their main job to do, and that is the work that they are taking from your shoulders.

    Another thing to review is what happen when the property goes vacant, are they providing another listing contract or are this also included into the PM agreement? That is another item to review, not to say that is good or bad either of them though.

  • Real Estate Broker · Cleveland Dayton Cincinnati Toledo Columbus & Akron, OH · Member since 2013 · 30k+ posts · 20k+ votes
    2y
    Quote from @Corey Conklin:
    Comparing Verizon (one of a handful of cell phone providers) and a PM company, which is ridiculously competitive industry, is comparing an apple to an orange. PM companies don't have the leverage like Verizon.

    I get what you're saying about companies not wanting to change their agreements but there are circumstances that a PM company would modify a contract for a potential client. I've worked in that world and we did it for the right circumstances. 

    If a large investor with 100 units wants to use you as their PM and their portfolio is a great fit for your business I know for a fact that almost every PM company will play ball and negotiate fair terms. If you just bought your first rental and are looking to negotiate the PM agreement, yeah that's not going to happen, they'll tell you to pound sand in that situation. Negotiating any situation is always about leverage. 

     If you're an investor with 100 units you aren't posing this question or reading this thread for advice. I've been in the game a long long time. People reading this thread have like 1-3 houses, tops. It ain't happening bro, real world.

  • Melanie ThomasBusiness Member
    Real Estate Broker · San Antonio · Member since 2022 · 1k+ posts · 489 votes
    2y

    Standard practice for a legitimate PM company. 

    RentWerx Property Management4.73296 Reviews
  • Corey ConklinPro Member
    Investor · Member since 2021 · 129 posts · 209 votes
    2y
    Quote from @James Wise:
    Quote from @Corey Conklin:
    Comparing Verizon (one of a handful of cell phone providers) and a PM company, which is ridiculously competitive industry, is comparing an apple to an orange. PM companies don't have the leverage like Verizon.

    I get what you're saying about companies not wanting to change their agreements but there are circumstances that a PM company would modify a contract for a potential client. I've worked in that world and we did it for the right circumstances. 

    If a large investor with 100 units wants to use you as their PM and their portfolio is a great fit for your business I know for a fact that almost every PM company will play ball and negotiate fair terms. If you just bought your first rental and are looking to negotiate the PM agreement, yeah that's not going to happen, they'll tell you to pound sand in that situation. Negotiating any situation is always about leverage. 

     If you're an investor with 100 units you aren't posing this question or reading this thread for advice. I've been in the game a long long time. People reading this thread have like 1-3 houses, tops. It ain't happening bro, real world.


     Alright bro. I'll keep at it in the real world and know that if I ever need any answers that there is a guy on the internet that can always tell me how it is.

  • Real Estate Broker · Cleveland Dayton Cincinnati Toledo Columbus & Akron, OH · Member since 2013 · 30k+ posts · 20k+ votes
    2y
    Quote from @Corey Conklin:
    Quote from @James Wise:
    Quote from @Corey Conklin:
    Comparing Verizon (one of a handful of cell phone providers) and a PM company, which is ridiculously competitive industry, is comparing an apple to an orange. PM companies don't have the leverage like Verizon.

    I get what you're saying about companies not wanting to change their agreements but there are circumstances that a PM company would modify a contract for a potential client. I've worked in that world and we did it for the right circumstances. 

    If a large investor with 100 units wants to use you as their PM and their portfolio is a great fit for your business I know for a fact that almost every PM company will play ball and negotiate fair terms. If you just bought your first rental and are looking to negotiate the PM agreement, yeah that's not going to happen, they'll tell you to pound sand in that situation. Negotiating any situation is always about leverage. 

     If you're an investor with 100 units you aren't posing this question or reading this thread for advice. I've been in the game a long long time. People reading this thread have like 1-3 houses, tops. It ain't happening bro, real world.


     Alright bro. I'll keep at it in the real world and know that if I ever need any answers that there is a guy on the internet that can always tell me how it is.


  • Michael SmytheBusiness Member
    Real Estate Agent · Metro Detroit · Member since 2023 · 4k+ posts · 3k+ votes
    2y

    Fun discussion!

    James Wise knows the real world, but didn't provide a useful example.

    Here's one: tenant hires personal injury attorney to sue for lead poisoning of their child.

    Who gets sued?

    EVERYONE!

    Owner, PMC, any contractors that worked on the property, the mailman, etc.!

    Who's insurance covers this?

    What did the PMC do wrong?

    BTW: someone mentioned that PMC's should have GL insurance coverage. PMC's can NOT technically get GL coverage on a property they don't have an ownership interest in! A PMC has only two choices for GL coverage:

    1) Require the owner to have the GL coverage and be added as, "Additionally Insured". A growing number of insurance companies won't do this anymore and will only add a PMC as, "additional interest", which only alerts them if the policy is cancelled or needs renewal. It does NOT give them GL coverage.

    2) The PMC can get a Master Policy that they can add owner properties to. It's the reverse of #1 above and effectively replaces the need for an owner to get their own insurance policy. If an owner is silly enough to still have their own policy, the Master Policy company will do everything they can to put the owner's policy first in line for liability.

    E&O Insurance does NOT cover personal injury, lead poisoning, etc.

    So, any personal injury lawsuits will be covered by either option above, but the owner will be ultimately liable.

    Here's another real-life example: tenant hires personal injury attorney (+95% of tenants don't have funds to hire an attorney any other way) because the front steps handrail, that passed city inspection, failed to support them when they slipped and fell. Again, what did the PMC do wrong? Why should they be liable for anything? 

    What language do you all suggest a PMC use in their management contract to protect themselves from these issues?

    Logical Property Management4.9446 Reviews
  • Investor · Valrico, FL · Member since 2012 · 32 posts · 9 votes
    2y

    I don't mind those examples, Michael. My concern are things like fair housing violations on their ads or screening process.  If Ive indemnified them or held harmless for everything related to managing the property, then I've agreed to cover that, when that shouldn't be me.

  • Stuart UdisPro Member
    Attorney · Philadelphia · Member since 2018 · 2k+ posts · 3k+ votes
    2y

    @Michael Smythe General liability coverage  protects againgst property damage or bodily injury. By way of example a General Contractor will carry general liability coverage. Thes same can certainly and should apply to a PM that is hired to perform services on your property. It isn't necessarily coverage for the underlying real estate they manage, its obtained for their business operations. Let's say the PM is responsible for snow removal and this service is clearly outlined in the management contract, but the PM fails to clear the snow and a tenant slips and hurts themselves. The tenant's attorney will likely file a claim against both the property owner and the management company to take inventory of who has insurance and assuming the property owner is listed as additional insured under the PM's policy, the PM's carrier should pick up coverage and also represent the interests of the owner.  

    Another example would be the PM's construction arm is responsible for unit turnovers and the owner has the PM remodel the bathrooms as part of unit turnovers. If the PM installs faulty plumbing that later requires the entire bathroom to be ripped out including tile, walls etc to re-install correctly, this should fall on the PM's E&O policy.

    Another example, what if the PM was responsible for installing the railing? While it passed the inspection, it was later determined it was not installed correctly. This again should fall under the PM's coverage if proven to be at fault for the incorrect installation. 

  • Michael SmytheBusiness Member
    Real Estate Agent · Metro Detroit · Member since 2023 · 4k+ posts · 3k+ votes
    2y

    @Stuart Udis good point EXCEPT that I challenge you to find an insurer willing to give a PMC GL coverage on a property they have no ownership interest in!

    We've been looking for over 24 years and it's always the same - some newbie insurance agent says YES, I can get you that coverage and then comes back with a policy for GL on our office location ONLY.

    We're on the edge of our seat waiting for your solution to that problem...

    Logical Property Management4.9446 Reviews
  • Michael SmytheBusiness Member
    Real Estate Agent · Metro Detroit · Member since 2023 · 4k+ posts · 3k+ votes
    2y

    @Greg Martin we don't disagree with what you've stated. Typically, this should fall under gross negligence and the PMC's E&O would cover.

    EXCEPTION: applicant sues "just because they can"! 

    We actually had this happen! 

    Applicant just out of prison, with no good credit and just a few months on the job. We asked them for a cosigner, so they sent us cosigner credit info, but no income info. Cosigner had good credit, but we asked for income info - so, we could pursue them for nonpayment and maybe garnish wages if needed. Applicant filed Fair Housing complaint for discrimination. 

    #1 - what did we do wrong?

    #2 - who pays PMC legal fees for this?

    Logical Property Management4.9446 Reviews
  • Stuart UdisPro Member
    Attorney · Philadelphia · Member since 2018 · 2k+ posts · 3k+ votes
    2y

    @Michael Smythe I think you are still caught up on the GL policy being tied to the property. A GL policy can be obtained for your business. Again, lets revert back to my example about a general contractor. A general contractor will have a general liability policy. The PM as an independent contractor should have a general liability policy as well. In your property management business what type of insurance do you have if not GL? Just E&O? That GL policy can be called upon if the PM was the causation for the claim and the property owner is listed as additonal insured no differently than when a general contractor is the causation for the claim and the property owner is listed as addiitonal insured under the general contractors policy.

    Lets now say you as the PM subcontract out certain scopes of work. You should also be collecting GL insurance certificates from those vendors and their insurance certificate should list both your PM company as well as the property owner as additional insured. In the event that vendor is the causation, they should pick up coverage. Or perhaps they are found to be 50% responsible, then their carrier will contribute 50% towards plaintiff's award/settlement. The same shared causation can apply to the example above as well.

    Also, with respect to your comments to @Greg Martin  If there is gross negligence, this may eliminate coverage as conduct that rises beyond neglgience is usually treated as an exception under the policy. In fact, depending on the fact pattern  even negligence may only lead to representation as the carrier will agree to defend the insured under reservation of rights.

    It's very important for real estate operators to understand the role insurnance plays and the mechanisms of coverage and relationship between transactional participants. It is admittedly a complicated system but can be an effective asset protection tool if used effectively. Not to mention, can lead to lower insurance premiums as you can often push the coverage when claims arise on the bad actor (as long as your contracts are papered correctly and your insrurance certificates are in order). 

  • Real Estate Broker · Cleveland Dayton Cincinnati Toledo Columbus & Akron, OH · Member since 2013 · 30k+ posts · 20k+ votes
    2y
    Quote from @Greg Martin:

    I don't mind those examples, Michael. My concern are things like fair housing violations on their ads or screening process.  If Ive indemnified them or held harmless for everything related to managing the property, then I've agreed to cover that, when that shouldn't be me.

     Couple years ago we represented a buyer & then took over management of this duplex in Cleveland. This duplex had 2 non paying tenants when our client bought it. White lady & a black dude. Our job was to represent the buyer, take over management and evict both of the deadbeats, which is what we did.

    Few months later we're hit with a fair housing lawsuit. Black dude claimed we evicted him because he's black. Not only did he sue us as the PM, he also sued the current owner, former owner, and former PM company. Former PM company was one I've worked with many times, owner of that company is also a black dude lol.

    Anyway, moral of the story, we won the case, but incurred thousands of dollars in legal costs. Guess who paid for all of our attorney costs? The new owner. Because that's how it goes. If you think a PM is opening themselves up to these types of liabilities without making you pay for it you are out of your mind. Ya'll can keep your $150/mo duplex property management fees lol.

  • Michael SmytheBusiness Member
    Real Estate Agent · Metro Detroit · Member since 2023 · 4k+ posts · 3k+ votes
    2y

    @Stuart Udis "A GL policy can be obtained for your business"

    NOPE, challenge you to find one!

    Everything else you wrote is blah, blah, blah until you address this:)

    Logical Property Management4.9446 Reviews
  • Stuart UdisPro Member
    Attorney · Philadelphia · Member since 2018 · 2k+ posts · 3k+ votes
    2y

    @Michael Smythe challenge accepted :) I am not trying to give you a hard time but you need to find a new insurance broker if you are being told only a property owner can obtain general liability coverage. All businesses should have this coverage.  Again, why would a general contractor or even a sub contractor for that matter be able to get this coverage but not a PM? It makes absolutely no sense.  Here's a copy of last years policy for my construction business. It is not tied to a specific property. The only wrinkle with this certificate is the fact the city of Philadelphia, where my construction company is  licensed has to be listed as a certificate holder so that the city is then notified in the event a contractors insurance lapses. However, when the construction company performs work on a job site, the owner of the property is then added as additional insured and any subcontractors who perform work list my company as well as the property owner as additional insured. That's how the system is supposed to work.   I am sure as a PM you sub contract services for properties you manage. From what you are telling me, nobody who is performing work at your clients properties has GL insurance? That should really be addressed both for your clients benefit as well as yours.

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