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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
  • Rob Hailstone

    Working earlier with a solicitor/conveyancer that you tend to recommend already, when compiling the Material Information, would surely reduce your exposure to greater PII risks?

    Michael Day

    As you say, I wholly advocate getting a conveyancer involved for the seller at point of marketing, not point of sale. There is a significant good practice and commercial opportunity here for everyone.

    There may be an opportunity to mitigate PI risk for an agent in this situation - key as I said in the article is having an operational and strategic plan - the portals will often be showing "Ask the agent" in their rather basic tick box display of material information and I envisage the "blaggers" and the "poorly trained and informed" could be exposing themselves to greater risk.

    Conveyancers do, IMO, need to look at being prepared to work slightly differently to currently in order to create win, win, win scenarios - a win for the client, the conveyancer and the agent.

    IMO moving to a no move, no fee proposition would facilitate making this easier, lock clients in and provide a platform for higher fees.

  • icon

    Day is spot on, indeed I wouldn't be surprised if insurance providers stop cover on such aspects as its effectively impossible to calculate the risk.
    Whilst Trading Standards have good intentions, they have opened up estate agents to spurious claims for compensation from buyers who want to withdraw from transactions and to get their legal fees back. Its going to be a nightmare.
    Let's face it most buyers almost never read descriptions anyway.
    This needs challenging beyond Redress and taking to court.

  • Michael Day

    It will be interesting to see how it develops James.

    Of course, conveyancers are covered by Consumer Protection Against Unfair Trading Regs too but are better placed and qualified to make interpretations than the majority of agents.

    Whilst Trading Standards have sought to provide clearer guidance to agents, what is being covered in A< B and C as material information is not exhaustive and a "tick box" approach will, IMO, ultimately prove inadequate.

  • icon

    It appears as though the penny is beginning to drop for many, just what a potential disaster NTSELAT's "guidance" really is. I hope that NTSELAT will realise it in due course as well. Conveyancers and agents need to band together for once in defence of the property market, and put pressure on NTSELAT to go back to the drawing board.

    Michael Day

    I obviously share these concerns.

    The Consumer Protection Against Unfair Trading Regulations go far wider than NTSELAT's "guidance" and whilst well intentioned, they, alongside the portal "tick box" and the Propertymark PIQ approach will, IMO, leave agents potentially exposed to greater risks than intended as caveat emptor is kicked into history.

  • Trevor Cooper

    Now watch all those "No win, no fee" parasites jump on board this.


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