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Insurance for estate and letting agents

03/04/2012

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Resident expert

With the notable exception of having children, investing in property is the single biggest financial and emotional commitment most of us will ever make.

So, to help us make the right decision, most of us seek expert help. And that expert help is usually an estate or letting agent.

That'll be you then.

It's no problem though, right? That sort of thing is right up your, ahem, street.

Well, yes, but your clients’ dream moves are fraught with potential issues. Are the details accurate? Is the property valued correctly? Is that your opinion or a statement of fact? Is your clients’ data secure?

Wrong move

There’s a decent argument to suggest that being an estate or letting agent is fundamentally risky, purely because of the amounts of money involved. Property isn’t cheap and when there’s thousands, perhaps millions of pounds swilling about you need to have your wits about you. Throw in an emotional edge and all of a sudden even a small mistake could turn into a big mess.

To compound the issue, and in the interests of maximising profits, it’s likely you’re not just limiting yourself to marketing property and negotiating sales/leases either. What about property management? Or financial services broking? Vital streams of revenue, sure, but all this adds to the risk mix.

In need of updating

Just in case you’re not already aware, you have something called a professional duty of care to your clients. Both legally and morally.

The fact that you're a professional is a bit of a double-edged sword. It means you can charge for your expertise but it also means you’re open to claims of professional negligence if something (however small) goes wrong.

The service you offer has got to be of a higher standard than that of the – no pun intended – average man in the street. It’s what your clients pay you for.

If that service isn't up to scratch, or you make a mistake and your client suffers a loss as a result, they’re perfectly at liberty to sue you. That’s what we insurance people call a breach of your duty of care.

What you have to think about is this: what could I be sued for? Where's my risk?

Dwell it like it is

We know that claims rarely arise from a basic lack of skill or competence. More likely, it’s something small and unexpected that leads to something big and expensive.

Thankfully, professional indemnity insurance for estate agents exists to help fend off claims of all sizes. Once thought of as luxury cover, members of both NAEA and ARLA now need it as a condition of membership.

That’s all very well but what sort of thing does it cover? Exactly what allegations can you face?

If it helps, here are some examples of actual claims:

  • Property misrepresentation. Does the property definitely have double glazing? Is the shed included? Double-check before releasing particulars.
  • Damaged property. It’s not unheard of for tenants to ‘trash’ property and leave without paying the rent. Is it your responsibility to get references or do periodic checks?
  • Underselling property. Is your valuation correct? If not, the seller could be asking you to make up the difference if their property goes too cheaply.
  • Breach of confidentiality. Who’s getting access to your clients’ property? Are you making sure you’re not passing on privileged information to (whisper it) burglars?
  • Property management. Is it your responsibility to repair faults? Do you have checks to make sure repairs have been carried out?
  • Employee dishonesty. What internal checks do you have? We’ve heard of employees setting up lettings and disappearing with numerous client deposits.

If you’ve not considered any of these circumstances before, it’s time to think long and hard about protecting your business.

Some simple checks and safeguards are usually all that’s required. Don’t forget, reputation is everything – particularly in your business.

Putting some risk management in place means you keep your reputation intact.

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