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Implementing risk management plans is difficult given the 24-hour exposure of multifamily properties, experts say.
“The problem with risk management as it relates to habitational is it’s different … because you have a third party living on your property,” said Barry Whitton, managing director, Burns & Wilcox Brokerage, based in Atlanta.
Tenant-friendly laws interfere with a landlord’s ability to manage risks because “depending on where properties are located, a landlord has limited rights to enter the apartment,” said Mark Humphreys, vice president of litigation and risk management for real estate developer Watt Cos. in Santa Monica, California.
To offset the risks, property management firms are building a renter’s insurance program into their leases, he said.
Good risk management protocols involve having the right rules for tenants, experts say.
“Milk no-smoking policies to the extent you can, no barbecues or grills on decks. Have a good tenant screening process, and make sure your maintenance of properties is sufficient,” said Marc Reisner, Boston-based multifamily practice leader at Marsh LLC.
Risk management steps such as having and implementing a maintenance check list or contracting an ice removal and snow plowing service in winter help tell a narrative to liability insurers, said Brian Davidian, Los Angeles-based executive vice president and casualty and habitational expert at R-T Specialty LLC, a unit of Ryan Specialty Group LLC.
“It’s easy to stop someone tripping over a carpet if you give good customer service in maintenance. People sue because owners and landlords are neglecting them,” he said.
Owners, managers and operators of habitational real estate properties such as apartment buildings are facing sharply increasing rates, shrinking capacity and higher deductibles as property insurers look to correct course after mounting weather-related losses compounded an already distressed risk.