Material information raises professional indemnity risks - warning

The increased focus on upfront material information could push up estate agency professional indemnity (PI) requirements, an industry trainer has warned.

Michael Day of Integra Property Services said that while the Consumer Protection Against Unfair Trading Regulations 2008 have been around for years, the latest parts A, B and C guidance from Trading Standards is creating a “different landscape.”

Requirements include disclosing lease restrictions and flood risk information.

Day said: “Agents should deal and quote facts, not provide ‘interpretations’ of the information disclosed. This may be easier to suggest than comply with when being asked by consumers about the property.

“Parts A, B and C are there to try and be helpful to agents in focusing on basic material information. There have, however, been many prosecutions and redress scheme awards relating to other elements that were considered as material information and either disclosed incorrectly or not disclosed at all.”

He suggests obtaining material information to display on listings will “undoubtedly also expose agents to a greater risks.”

It is currently compulsory for agents to be member of a redress scheme but Day said only The Property Ombudsman has a mandatory requirement on members to hold at least £100,000 of PI cover.

The Property Redress Scheme does not have this requirement, just a recommendation to have cover in place.

Day said: “With the portals likely to include a descriptor of ‘Ask the agent’ whenever an item of material information is omitted from property details, there is the strong possibility of agents receiving larger numbers of queries and questions about aspects of a property and the likelihood that the agent may stray into providing advice or comments accordingly.

“This will increase the risk of erroneous information or an interpretation of that information being passed to a consumer with the subsequent risk of complaints and/or prosecutions increasing.

“Without PI cover in place, an agent could be facing the entire costs of handling the complaint and making whatever compensatory award or fine etc that may result, themselves. Appropriate PI cover will, at least, mitigate this position.”

Day added that he believed it should be mandatory for all agents to have PI cover and said it would be good business practice for an agent to ensure that their cover is adequate and appropriate.

His advice to agents is:

• Look at what is required going forward both operationally and strategically and ensure you are up to speed with what is required.
• Review your PII cover
• Look at current systems and processes to ascertain whether fit for purpose
• Develop a new plan which uses compliance as an enabler not a constraint and develop a compliant differentiator for your business
• Train staff accordingly