Effectively managing risks often requires effectively applying ethical reasoning to them.
Not doing so can imperil every aspect of your business, from your finances, to the
physical wellbeing of your clients, to your and your company’s reputations. A strong
ethical foundation is your guide towards safety when the waters get murky. Test
your judgment by looking at the scenarios below, and determine how you’d react to
You are a property manager responsible
for a 125,000-square-foot office building. The asset’s Property & Casualty
and General Liability insurance policies
are coming due. You and your team
have been successful growing rents and
controlling expenses, meeting NOI
projections and earning regular bonuses.
When the policy renewal arrives for
review, you note the Lost Income coverage no longer meets the project’s recent
rent levels. Adjusting the Lost Income
coverage will cause premiums to exceed
budget, reducing projected NOI and
possibly reducing your and your team’s
Article 1 of the IREM Code of Professional Ethics (the Code) states a Member shall be diligent in protecting the
interests and property of the employer
and client and not engage in activity
that could be construed as contrary to
the interests of the client or employer.
In addition, Article 8 of the Code states
every Member shall make all reasonable efforts to protect a client’s assets
from reasonably foreseeable losses. In
this instance, knowingly underinsuring
the asset’s potential income puts the
asset at financial risk.
You are an Executive CPM of an AMO
Firm that recently spent months pursuing the purchase of a 360-unit apartment community on behalf of a client.
Shortly after the acquisition closes, it is
brought to your attention that various
life-safety conditions exist on the property. However, you also learn that while
the life-safety conditions do not meet
current national and local safety codes,
the conditions are “grandfathered” due
to the age of the community. The cost
of addressing the life-safety issues was
not anticipated in the investment pro
forma, and there is no legal obligation to
correct the conditions.
Article 12 of the Code and Article 1 of
the AMO Code of Professional Ethics
(the AMO Code) specifically state that
neither a Member nor an AMO Firm
shall engage in any conduct that is
in conscious disregard for the safety
and health of the persons lawfully on
the premises of the client’s property. Although there may be unforeseen costs required to address the
life-safety conditions, not addressing
them creates significant liability risk
for tenants, the management company
and its client.
C S What Would You Do?
By K. David Meit, CPM, ARM
While searching for a new property
manager to fill a position in your AMO
Firm’s growing fee management portfolio, the CEO of a large client asks that
you interview a family member who has
an MBA in Finance but no real estate
experience. You have already met with
three qualified candidates, all of whom
have achieved their CPM designations
and have years of real estate experience.
However, the client is pressuring you to
hire his relative.
By hiring the client’s relation, you
and your AMO Firm may be at risk
of running afoul of your company’s
hiring practices and breaching local,
state and federal laws. Article 11 of the
Code and Article 10 of the AMO Code
state neither a member nor an AMO
Firm may deny equal employment
opportunity and must comply with
all applicable laws and regulations
regarding equal opportunity. Any number of qualified candidates of various
protected classes could construe the
hiring of the client’s family member as
K. David Meit, CPM, ARM, (kdmeit@
oculusrealty.com) is founder of Oculus Realty,
LLC, in Washington, DC, and serves as its
president & CEO.