Southern California Industrial Real Estate Blog

Management, real estate management professionals were much more likely

to end up facing a suit than those engaged in other real estate activities, and

premises liability issues were the single biggest cause of lawsuits against

managers during the two years (2005 and 2006) covered by the Scan.

Real estate managers also have the dubious distinction of much higher

damage awards than other real estate specialties, with 23 percent of damage

awards reported in the management section of the Scan reaching at

least $500,000. This compares to only 7 percent of awards above that figure

in other real estate-related cases. Three of the five top damage

awards—totaling $18.9 million—resulted from cases addressing dangerous

conditions on a tenant’s property that the management company failed

to correct. In part, the emphasis on premises liability may reflect the fact

that some 39 new laws and regulations on the issue have been adopted by

states in the last two years. The laws range from smoke detector ordinances

to disclosure requirements relating to meth labs and airport noise.

The largest single management award reported in the Scan was $9 million

to a tenant who was raped in her apartment (Anonymous Female v.

EPT Management Co., 2005). The case focused on the fact that, although

numerous crimes had occurred at the property, the management company

failed to take steps to improve security.

Premises liability (with 57 percent) also topped the list of future legal

issues among the IREM members surveyed. Debt collection was also a big

concern for 53 percent of respondents. Legal disputes involving age discrimination

and wrongful termination were also on the radar.

Fair housing complaints, especially those focused on race and disability,

saw the biggest increases—28 percent and 31 percent respectively—in

court cases in 2005 and 2006, according to the Scan. Racial discrimination

cases, as well as discrimination cases based on national origin, may

also rise in the future, according to survey respondents, perhaps reflecting

the expansion in multiculturalism in the United States. Respondents also

expect discrimination cases based on sexual orientation to rise over the

next two years.

Again, the present may predict the future since fair housing received significant

legislative and regulatory attention in the last two years, with 44

new laws or regulations reported in the Scan.

Survey respondents also focused in on what training should be put in

place to reduce future legal liabilities. Unsurprisingly, concerns for training

closely tracked the hot issue list. Events at a property (54 percent),

national origin discrimination (52 percent), and property condition and

common areas (each 50 percent) were top topics for future staff meeting

agendas, said respondents. Training in wrongful termination of employees

also ranked high (48 percent).

While legal issues remain a source of concern and a financial burden to

the real estate community, perhaps the best news is that approximately twothirds

of all cases against brokers and agents were decided in their favor.

View the entire 2007 Legal Scan under the Law and Policy section of