THE FOREIGN SERVICE JOURNAL
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.
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
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, visitwww.bit.ly/managingproperty.