UK: Claims Arising From Property Management

Last Updated: 15 October 2015
Article by Bryn Hodges and Alexia Prakas

In the world of real estate, the role of the managing agent is growing. As investment in various types of property increases, so does the need for property management. The type of properties that are managed might range from buy-to-let bedsits, to agricultural or industrial estates. The aim of this article is to focus on a few areas where claims may be brought against managing agents, and identify how such claims might be avoided.

In this article we focus on claims against managing agents where there is a contractual nexus between the parties, but agents should be aware that the Courts are willing to find that duties are owed to third parties in the absence of a contractual relationship. Hines v King Sturge (2010) is a case in point, where the Scottish Courts allowed a claim against managing agents to proceed to proof on the merits despite there being no contractual relationship between the claimant tenant and the agents. Agents should not, therefore, assume that their duties are circumscribed solely by the terms of their contractual appointment.

Occupier's liability

The most common type of claim brought against managing agents is for personal injury. If a visitor has an accident on the premises caused by a failure to keep the premises in adequate repair, the visitor may well claim compensation. The legislation in this area is fairly straightforward. The "occupier" of any property owes a duty to take reasonable care to ensure that any visitors will be reasonably safe in using the premises as needed. In certain circumstances the managing agent will be an 'occupier' of the property under management. Where a managing agent has been appointed, all notices and information relating to the relevant property should identify the managing agent as being the person responsible for its upkeep: so any claims would therefore be directed towards the managing agent (which is in any event usually employed to discharge the duty owed by the landlord).

The exact obligations a managing agent must perform will vary in each case and each contract. Some will be responsible for the management of an entire property, and others may only be responsible for an aspect of it. In Harrison v Technical Sign Co Ltd (2013) a firm of surveyors were appointed, as agents of the landlord, to inspect the awning over a shop window for damage supposedly caused by the landlord's workmen. When the shop's sign fell to the pavement causing serious injuries to passers-by, the surveyors were not held liable to compensate the injured persons or the shop owners. The surveyors' involvement was limited to inspecting the awning, as agents of the landlord: they had not been asked to advise the shop owner in relation to the condition of the shopfront in general.

As this case suggests, usually a managing agent will not owe a tortious duty that is greater or wider in scope than the duties assumed under contract with the landlord (however, note the possible Hines v King Sturge example referred to above). As long as the managing agent performs its obligations with reasonable care and skill, in the event of an accident it can usually look to the landlord for an indemnity.

Maintenance and repair

Managing agents might commission and conduct maintenance and repair to properties, ranging from homes to light industrial units. Some agency agreements will allow them to commission these maintenance and repairs on behalf of the principal; others will require the managing agents to obtain sign-off before any work is commissioned.

Where managing agents do undertake, commission or oversee maintenance and repair they are under the common law duty to take reasonable care in doing so. It is essential, in such circumstances, that managing agents ensure that property owners communicate exactly what is expected of them and the scope of the agent's duty is clearly delineated. In this regard, agents should bear in mind that, where a property is mortgaged and/or insured, there may be specific requirements in either the mortgage deed or insurance policy that must be complied with in certain circumstances, such as when significant work to the property is undertaken. For example, in EB v RC (2011), insurers of an empty property required weekly inspections and the draining of the water system during the winter. The principal, who was acting under a power of attorney, failed to pass this information on to the managing agents, and when the property subsequently flooded, insurers refused to indemnify the property owner for the damage sustained. In a subsequent dispute, the principal sought to blame the agents for the failure to comply with the insurers' requirements, but was given short shrift by the court, which held that the primary responsibility for ensuring that the policy was complied with lay with the principal. Whilst, in this case, it may be said that the allegations against the agents were weak, had the agents ensured that their terms of appointment included provisions that compliance with the requirements of third parties such as insurers lay with the principal, the dispute might never have arisen.

Negligent misstatement and misrepresentation

In some cases, managing agents may be required to enter into, or negotiate contracts on behalf of, the property owner. These situations provide a number of potential pitfalls. Even through a simple typo a managing agent could be at risk of a claim. In Knight Frank LLP v Du Haney (2011) the agent entered into a contract with Knight Frank and misspelt the name of his principal on certain documents. It was held that whilst the agent had misrepresented the name of his principal, he had only provided a warranty as to the fact of his being an agent, not as to spelling his principal's name correctly. Therefore, he avoided liability for the unpaid fee of his principal. To that end, managing agents would do well always to clearly emphasise in what capacity they are acting, and to be aware of the risks involved with signing any contract on their principal's behalf.

Property provisions and service charges

Managing agents should also keep their eyes peeled for questionable details in every document they read relating to the property. For example, in Ground Rents (Regisport) Limited v Mr Hamish Dowlen, Mr Andrew Greene, Mr William Rose (2014) a managing agent's misreading of a utility bill landed many tenants in a spot of hot water. In the mistaken belief that water invoices related to three blocks of flats, the appellant's managing agents apportioned the sums due and collected them through service charges payable by tenants in all three blocks of flats. In fact, the invoices related to only one of the three blocks. Five years down the line, the managing agent inspected the blocks and noticed for the first time that each had its own separate water meter. Only then did it review the invoices and realise they referred just to one of the blocks of flats. Unsurprisingly, the Leasehold Valuation Tribunal concluded that the managing agent should have realised something was amiss. As a guidance point, this case clearly evidences that managing agents should be trained properly for site inspections. Had a competent inspection been performed and slightly closer attention been paid to the relevant documents, disaster could have been averted.

Conclusion

Managing agents potentially face a number of different types of claim in the course of their professional duties. There are, however, practical precautions that can be taken and guidance that can be followed to avoid or minimise that risk. For example, managing agents should:

  • Ensure that clear written instructions are obtained from principals so that the extent of their obligations are properly understood from the outset
  • Be aware of, and comply with, regulations in relation to health and safety, particularly in relation to trip and slip hazards
  • Ensure that property inspections are carried out in accordance with the principals' requirements, and in any event regularly
  • Ensure that persons inspecting managed properties are properly trained
  • Ensure that all contractors and workmen instructed on behalf of the principals are appropriately qualified, certified and supervised

However, this is by no means an exhaustive guide, and many other issues related to the appointment of managing agents may arise. For instance there are frequently "double" insurance issues arising when a member of the public is injured (a public liability) at a property managed by an agent due to an alleged error or omission in the discharge of the agent's professional duty (a professional liability). Should you have queries or concerns in relation to any of the above, we can help you address and navigate them.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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