If you do not appoint an NPC to act as the bailiff of one of your fiefs, that fief is run by an anonymous character called the "auto-bailiff." Under this lout's management, your fief will run itself and produce a minimal profit for you. Loyalty will not necessarily decline, thus there will be little risk of the place going into rebellion. If the fief is attacked, the auto-bailiff will defend it much less well than an NPC selected for his bailiff skills.