A Matter of Ethics

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Aproperty manager has many duties, but one thing that is at top of the list is acting as a liaison for the owner and the many contractors, vendors and service providers that are involved with the property. A good property manager will have established relationships with these third parties and this can be a benefit for the underlying owner, as it can ensure that the third-party vendor is reputable, dependable and capable of providing high-quality services. But it can also be a source of potential conflict and create an ethical dilemma for the property manager. This month, we are going to discuss some strategies that can be used to ensure that these third-party relationships don’t become a liability.

Make sure that there is a company policy regarding third-party relationships. A written policy will help take the property manager out of the middle and frame what they can and cannot do. This type of policy will usually include specifics regarding choosing vendors, circumstances when multiple bids must be obtained, how those bids are handled and other “rules of the road” directly related to relationship between the property management company, the service provider and the owner.

Have a structure in place that treats all service providers equally. Although this sounds straight-forward, property managers sometimes have a bias built in that they may not even be aware of. Using a systematic approach can help to eliminate any such bias, whether intentional or unintentional. All service providers should receive the same information and a consistent scope of work when being asked to submit a bid. Hosting a formal walk through or information session where all of the prospective third-party providers are present at the same time, will help to ensure consistent distribution of information. If questions are asked directly, either on a phone call or in an email, be sure to include all prospective third parties in the response.

Keep any third-party relationship “above board.” Familiar or personal relationships are a particularly troublesome ethical issue for property managers. Suppose that a potential third-party vendor is owned by a person that is a cousin of the property manager. On one hand, this vendor shouldn’t be removed from consideration just because of this familiar relationship. But on the other hand, this relationship can raise an immediate ethical red flag. At a minimum, any familiar or personal relationships with third-party vendors should be disclosed in writing. If the relationship is deemed to create a conflict, it is best to replace the conflicted member with another property manager.

Beware of those bearing gifts. It is not uncommon, and often an effective business practice, for a third-party vendor to provide gifts to property managers. Perhaps it’s a bottle of wine during the holidays or tickets to a baseball game in the summer. But these gifts can create an ethical conflict – while a fruit basket is one thing, an all-expenses paid trip to a ski lodge that the service provider owns in Vail is quite another. A common way to address this is within the property management company’s written policy. There will typically be a passage regarding the circumstances in which a gift can be accepted and this often has a dollar value associated with it. For example, any gift with a value over $100 cannot be accepted.

Tony Vain Investigations

Take measures against being guilty by association. While property managers cannot directly control the actions of the third-party service providers that they chose, they can have a structure in place to deal with issues should an ethical violation occur. For example, suppose that a cleaning company that was hired by the property manager is discovered to be stealing items from a tenant that leases space in the office building. While the property manager would not be directly responsible for the actions of the service provider, their actions will reflect poorly on the property management company if they don’t respond in an ethical manner. Any agreements with third-party vendors should include language that very clearly spells out specific actions or practices, that would be grounds for immediate termination.

Although written guidelines and structure certainly help to define the balance of a relationship between third party service providers and the property manager, it really starts with experience and expertise. If something feels like it’s wrong or crossing the ethical line, it probably is. Being constantly aware of this inner voice and adapting the relationship accordingly can go a long way to avoiding a potentially much larger conflict down the road. Jill Dzina

Golf Expert Witness

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