IREM Blogs

One Small Choice. One Big Problem.

September 21, 2017 | David G. Barrow CPM

A guy walks into a bar. The bar just happens to be a protruding bar on scaffolding being used by a painter working on one of your buildings. The “guy” is injured and goes to the hospital. He has permanent scarring and vision problems in one eye resulting from the injury. He sues, and the owner’s liability insurance settles the claim for $25 million and subrogates against the property owner, your company, and the painter for negligence.

When you hired the contractor, the property could barely pay the debt service and minor repairs due to high vacancy rates. The painting work was a small job that was intended to help increase leasing, but the contractor did not have insurance. The reason that you used this painter in the first place is because the owner told you to use him saying, “Jim’s my brother-in-law. He’s a great guy, is careful, and will cover it if something happens. It doesn’t matter that he’s uninsured. We can’t afford a large company to do this work. It’s a small job anyway. Use him on this job.” The owner of this property just happened to be your largest client, and at the time you had heard rumors that your competition was talking to him.

The outcome of the situation resulted in the owner defaulting on the property, the brother-in-law losing his house, and you taking a significant hit professionally and financially by losing your largest client.

How did you get here? Why did you let yourself get here? You knew better, right?

In this situation, the vendor was uninsured but the owner directed you to use him. You argued with yourself that that the chance of something happening was so small that it wasn’t worth the possibility of pushing your client to your competition. They’d only be working on site for four hours, right? Fortunately, the situation above is hypothetical, but it could happen given the right (or wrong) set of circumstances.

When a client request falls within an ethical “gray area,” what is your responsibility as an IREM member? Though it’s difficult to take a stand in some situations, Article 8 of the IREM Code of Professional Ethics obligates all IREM members to “… exercise due diligence in the maintenance and management of the clients’ assets and […] make all reasonable efforts to protect it against all reasonably foreseeable contingencies and losses.” As IREM professionals we have a sworn obligation to protect the best interests of our clients, whether they understand the risks or not. The IREM Code of Professional Ethics was established by a cadre of seasoned real estate professionals who have experienced the dilemmas we face every day. It’s a tool to elevate IREM Members above our competition in the way we do business and the way we protect the interests of our clients. Use it!

About the Author

Mr. Barrow is Associate Director of Asset Services for CBRE Richmond with over 14 years of real estate management experience. Previously, Mr. Barrow was an Aircraft Maintenance officer in the United States Air Force. He is a CPM member of IREM, a member of NAR and BOMA, a licensed real estate sales person in the state of Virginia, and holds a Bachelor of Science degree in Business Administration. He is a Past President of IREM Central Virginia Chapter No. 38 and a current member of the IREM Ethics Committee.

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