Why a Commercial Property Manager Needs Lessor’s Risk
Property managers act as the bridge between the owner and the tenant. In the eyes of the law, that bridge can often be held liable for anything that goes wrong on the premises.
1. Gap Protection for the “Management Triangle”
Standard management agreements often require the owner to indemnify the manager, but those agreements are only as strong as the insurance policy backing them. Lessor’s Risk provides the specific liability limits needed to ensure that if a tenant or visitor sues for negligence (such as poor maintenance or faulty lighting), there is a dedicated pool of funds to handle the claim.
2. Mitigating “Vicarious Liability”
Property managers are frequently named as “Additional Insureds” on an owner’s policy. Without a robust Lessor’s Risk policy in place, a manager’s own professional liability insurance could be drained by premises-related accidents that should have been covered by the property’s primary policy.
3. Protection Against Tenant Risks
Property managers can’t control every action a tenant takes. If a tenant’s business operations lead to property damage (like a kitchen fire in a retail strip) or a lawsuit (like a slip-and-fall in a shared lobby), the Lessor’s Risk policy protects the manager from the financial fallout of these third-party incidents.
Core Benefits for the Manager
| Need | How Lessor’s Risk Solves It |
|---|---|
| Maintenance Scrutiny | Provides a buffer if “deferred maintenance” is cited in a personal injury lawsuit. |
| Common Area Control | Covers accidents in parking lots, hallways, and elevators—areas the manager is directly responsible for. |
| Legal Defense Costs | Pays for specialized legal counsel to defend the manager’s reputation and actions in court. |
| Vacancy Stability | Protects the building’s value even when units are empty and the manager is actively searching for new tenants. |
The Professional Hand-Off
By ensuring a property is covered under a Lessor’s Risk LP policy, property managers can demonstrate a higher level of professional due diligence to their clients. It shows that you are not just managing the physical space, but also the financial stability of the investment.
Pro Tip: Always verify that the building owner has at least 75% of the square footage leased to third parties to ensure the Lessor’s Risk policy remains valid and enforceable.
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