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MAY 2017



The Case

According to the law of agency, the fiduciary duty of an

agent to his principal is one of the highest duties one person

can owe another. It means that the agent—in this case, the

property manager—must act in the best interest of the prin-

cipal—me. The property manager-owner relationship is a

textbook agency relationship, and everyone who has been to

law school knows this.

But that’s the difference between law school and the real

world. Practicing lawyers know that common law principles are

sometimes scrapped altogether by business-friendly state leg-

islatures. As it turns out, the Virginia Code rewrites the property

manager-owner relationship to exclude any duty of the property

manager to act in the owner’s best interest.

Okay, that hurts. But I still had the law of negligence, right?

Enter the economic loss doctrine, a business-friendly legal

principle that says, in essence, that if you have a contract with

a service provider such as a property manager, and he doesn’t

do his job properly, but you don’t suffer any personal injury or

physical loss due to his poor performance, you cannot sue for


All I was left with, at that point, was what was in the contract.

What were his promises in that document? To collect rent. To find

tenants. And that was about it.

Case dismissed.

Aside from revealing my naïveté as a lawyer, there is a point to

sharing this story. My hope is that others in the Foreign Service,

whether they are lawyers or not, can learn a few lessons frommy


Lessons Learned

First, as a property owner, don’t go around thinking “the

law” protects you from your property manager’s incompetence

if your losses are purely economic and not very shocking. Legal

doctrines and pieces of legislation designed to protect businesses

have a way of cropping up.

Second, and more importantly, take an active role in the nego-

tiation of your property management contract. When I signed my

contract, I assumed, like many, that I had little power to negoti-

ate. Increasingly, the contracts in our daily lives are “take it or

leave it” agreements—“Click here to agree to all of this gobble-

dygook.” But sometimes there is room for negotiation, especially

with more personal business relationships.

In fact, on looking at my contract again, I discovered that it

had a few blank lines I could have used to enter my own terms. If

I had used those lines to write, “property manager owes owner a

duty of due care in the management of owner’s property,” I might

have seen a different outcome. At the start of your relationship

with a property manager, or when the contract is up for renewal,

check that the agreement requires the property manager to act

with due care. If that language isn’t in there, ask for it. It’s not an

especially onerous request, and if the property manager wants

your business, they will probably accept it.

Finally, don’t have illusions about what a property manager

can do for you. Relying on that same principle of the property

manager acting in the owner’s place, I once asked a property

manager to attend an important condominium association

meeting for me where a critical topic—condominium redevelop-

ment—was to be discussed. When I lived in the States, I didn’t

go to condo association meetings very often; maybe once a year,

if that. But this is one I certainly would have attended if I were in

town. The manager said simply, “Sorry, we don’t do that.”

I should have figured out then what I finally know now, several

years and one lawsuit later: Property managers are there to col-

lect rent, help you find a tenant (sometimes) and make basic

repairs. They are not you. They don’t act in your best interest, but

rather, in their best interest—which, if you are smart about your

contract, might coincide with yours.


How Can You Protect Your Investment?

• Choose your property manager carefully—ask friends and colleagues for references.

• Review the contract carefully before signing, and insist on any necessary changes.

• Make plans to tour the property whenever you are in the area—some trips will

be partially tax-deductible, so keep receipts for your tax adviser.

• Don’t assume the property manager is doing what needs to be done.

Ask questions, ask for current photos and receipts, and stay involved.

• For a lot of good information from the State Department's Transition Center

about managing your property from overseas, visit