Risk Mitigation for Property Managers Part III: Vendor-Related Claims

Risk Mitigation for Property Managers Part III: Vendor-Related Claims

In the third of our three-part series on risk mitigation for property managers, we address strategies to prevent the use of third-party vendors from becoming risky business.

Outsourcing any component of maintenance is a big decision for property managers. The process usually includes questions like:  

  • Which is more cost effective: full-time staff or outsourced vendors?  
  • What is our existing workload, and do we need more help?  
  • What types of repairs are most frequent? 
  • How do the repairs needed match our in-house skillset?  
  • Can we efficiently build a network of qualified vendors?  
  • Do we have the capacity to manage those vendors?  

While this is a great list, an important question is missing:  

  • Are we willing to take on the risk of using third-party vendors on our properties?  

Vendors bring important benefits to busy property management teams. They offer diverse skillsets, lessen the maintenance workload, and can resolve complex repair issues efficiently. But they also come with some risk that many companies overlook: vendor-related claims.  

To capitalize on the reward, it’s important to understand how to manage the risk of outsourcing maintenance to vendors.  

What Is a Vendor-Related Claim? 

Let’s use a couple of real examples that crossed our desk.  

A property manager contracted with a third-party vendor to repair a renter’s HVAC unit. Bees from a nest near the unit stung the technician, sending him to the hospital. The technician filed for worker’s compensation against his employer. He also sued the property manager for not providing a safe work environment—and won. The property manager ended up issuing a six-figure payout on what should have been a simple HVAC repair.  

Another property manager hired an external vendor for plumbing repairs on a rental unit. The repair represented a habitability issue, so the manager needed a quick resolution. They trusted that the plumbing vendor’s insurance was active without verifying coverage. Unfortunately, they found out after the plumber flooded the unit that no insurance policy existed. The property manager ended up footing the bill for $5,000 in water damage.   

How Do I Mitigate the Risk of Vendor Claims?  

Minimizing risk when using external vendors is a multi-step process.  

  1. Receive the renter’s repair request and collect the information needed by a third-party technician.  
  1. Work with your legal team to develop a contract outlining requirements for the vendor, such as liability insurance and licensure.  
  1. Include language in the contract to minimize exposure to third-party action-over claims. 
  1. Before work begins, have the vendor provide a current copy of their certificate of insurance, and ensure they have the right coverage. 
  1. Verify the contractor completed the work in compliance with the lease agreement and/or the state’s implied warranty of habitability.  
  1. Process the vendor’s invoice and issue payment within the agreed upon timeframe.  

If you manage many units or locations, multiply these tasks by every repair that comes into your office. Skipping these steps is tempting until an unexpected vendor claim breaks the bank.  

Do you have the time to manage the full process in a way that sufficiently mitigates your third-party risk?  

If the answer is no, there is another option. 

HomePRO Rental Property Protection transfers your liability related to critical system and appliance repairs to PWSC. The warranty removes the contractual relationship between vendors and property managers. PWSC takes responsibility for ensuring every vendor in our national network meets insurance and licensure requirements.  

With HomePRO, PWSC processes warrantied repair requests, sources an available technician, and issues vendor payments directly, all with no deductibles or service call fees. 

For property managers already using reliable third-party vendors, PWSC adds them as preferred partners with the first right of work order refusal. That means the same valued partnerships without the extra administrative work.  

PWSC ensures repairs are completed quickly and correctly.  Our quick-pay program incentivizes vendors to prioritize HomePRO jobs and provide high-quality work. PWSC tracks vendor performance ensuring only the best remain in the nationwide network.  

It’s hard to place a price on peace of mind, but HomePRO makes even that easy and affordable. See the cost and time savings our HomePRO warranty delivers to property managers across the country.  


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