Understanding Compliance Risks and How to Avoid Them

By Tim Blackwell Posted April 18, 2018

Understanding Compliance Risks and How to Avoid Them

For property managers, being in the know of the multitude of housing laws that may affect their properties and staying in compliance with them can be difficult. Knowing whether or not a property is in compliance isn’t easy and often takes an expert to navigate the many issues. Failure to comply with the many local, state and federal regulations required as part of asset management can result in big financial losses for owners and fee managers.

Among the most common compliance issues at apartment communities are those with accessibility. Violations can be costly in the form of hefty fines and lawsuits.

At first glance, the appearance of an office ramp or nearby handicap parking spaces for someone in a wheelchair or using a walker may seem to meet accessibility compliance, especially if the property is new. But the problem is that there is more to accessibility compliance than meets the eye.

And just because the property passed a city or county inspection following a new build-out or rehab project, operators can’t assume that all boxes are checked to ensure the property’s public and common use areas and dwelling units are readily accessible to and usable by persons with disabilities.

Unless the builder and owner have done their due diligence, the property can face exposure from the Department of Justice, government and state housing agencies, and civil litigation from residents, prospects and anybody who just happens to come onto the property.

For example, if handicap parking spaces don’t meet physical space requirements or the minimum total number of accessible parking spaces as cited in various accessibility laws the property is at risk. The same can be said for interior and exterior doors that aren’t wide enough to enable a wheelchair to pass through, or light switches that are too high to reach.

Even a payment box in the front office that is placed beyond the reach of someone in a wheelchair could trigger a discrimination complaint against the property.

While these are some of the most well-known accessibility requirements, the list of potential violations that apartment operators could incur goes well beyond. There are less obvious issues that affect move-in certifications, annual re-certifications and asset management inspections where compliance is critical.

Not to mention, it takes more than a full-time staff to manage existing compliance measures. Researching and learning new markets and new state and local regulations is a handful unto itself. It can be a huge burden on the property management company’s finances.

It’s a lot to keep up with, and it only takes one issue of noncompliance to hit home hard.

Identifying compliance issues so they can be corrected

Greg Proctor, an authority on housing compliance, has seen his fair share of violations at apartment communities. Sometimes he doesn’t have to get out of the car to realize a property is at risk with an accessibility issue.

Most of the time, he says, property operators think they are compliant and don’t understand the extent of liability for not following federal regulations. In recent years, Proctor said, the Department of Justice has brought claims against property owners who have large portfolios because of various violations, costing millions of dollars.

The problem is compounded by a recent trend of “drive-by lawsuits” generated from attorneys or individuals who are purposely looking for issues at multifamily communities, restaurants, gas stations and other places of business.

“I’ve never been to a single property – I’ve been to thousands of properties – where there is not at least one compliance problem,” said Proctor. “I tell them, ‘It’s right under your nose and you’re out of compliance. And nobody’s telling you that. You’re not worrying about it but sooner or later, somebody is going to come around and sue you for it.’ ”

It’s safe to say, keeping track of the many compliances can be difficult and time consuming, adding further complication to the day-to-day business of property management.

Leveraging innovative services to simplify business

At RealWorld July 15-17, Proctor will lead a discussion on how owners and property management companies can simplify their lives and avoid the potential for a financially damaging situation that tarnishes brand identity.

“All-Access Pass, a Compliance Diary” will focus on lessening the burden of compliance in one of many informative sessions on tap where investors, executives, regional managers and property managers can leverage innovative services to help mitigate risk and streamline the business of multifamily housing.

Check out the session at the RealWorld property management conference and simplify the management of compliance in multifamily!

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