PROPERTY MANAGEMENT
How to mitigate risk as a landlord
By Turnie Morolong
Risk is inherent in any business
enterprise. What is risk? Risk exists
whenever the future is unknown,
where there can be variation in
possible outcomes. Property owners
face various kinds of risks which may
threaten the survival of the property
economically. For example, a building
may be damaged by fire, a patron to
the property may slip and fall and sue
the owner or manager. The key is for
the landlord to protect and look out for
himself or herself, above all else.
Risk can be categorised into two types, pure or speculative. Pure
risk exists when there is a chance of a loss but no chance of a gain.
Speculative risk on the other hand exists when there is a chance of a
gain as well as a chance of a loss. For landlords looking to protect
themselves, it is important to know where to look and who to trust.
Specifically, a landlord will have to find and/or engage a property
manager in his or her area, as a property manager is likely to have an
intricate understanding of local laws, codes and regulations. • Paying attention to the property
A property manager keeps up with property maintenance and
ongoing issues. Additionally, a property manager will ensure that
the property remains both fit and habitable at all times and is
familiar and up-to-date with local building, safety and health codes.
Generally speaking in his/her day to day duties, a property manager is
unlikely to encounter speculative risk. He or she will however be involved
with pure risk of a physical nature. These may include but are not limited to:
• Fire
• Environmental risks
• Natural disasters
• Failures in the building (through structural, design, poor
maintenance or simple wear and tear)
• Political acts • Control
A property manager can restrict access to a potential risk causing
facility such as installing a fence or coded lock to keep out younger
What is it that a property manager can offer a landlord
to limit exposure to risk?
A property manager is well versed in the application of risk management
principles. Typically, his or her responsibilities will include life safety and
environmental issues, insurance and security. When a risk has been
identified, a property manager addresses it by:
• Excellent file and records keeping
Absolutely everything has to be in writing; only what is writing is
enforceable because if it is not in writing it doesn’t exist. In this
regard a lease agreement is key - who can occupy the premises,
from when, what activities are permitted, when is rent due etc.
ISSUE 34 - JUNE 2018
• Avoidance
A property manager is better equipped to make a decision to
remove a risk causing component, facility or equipment.
children from a swimming pool.
• Risk transfer
The most prevalent way of dealing with risk is to purchase
insurance to transfer the risk to the insurer. A property manager will
not wait until an accident happens or for a loss to occur. He or she
will ensure that the right insurance policy is in place to protect the
landlord and his assets.
A property manager will plan for any potential risks and/or problems,
keep excellent files and records of every activity, and continually access
these functions to determine if change is necessary. Instead of a landlord
personally drafting leases, handling all of the interactions with tenants,
collecting rent cheques and other monotonous t