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Misrepresentation in real estate What is it and how does insurance help? To most people, it’s property. But as a real estate agent, ensuring your listing stands out from the crowd and attracts the right buyers is critical to securing the best outcome for the vendor. But imagine if an advertisement you post has incorrect information, which a client relies on and suffers a financial loss? This is known as misrepresentation and is a very real risk for real estate professionals. Let’s take a look at misrepresentation in a little bit of detail and clarify where insurance coverage can apply.
What is misrepresentation? Misrepresentation occurs when an agent (unknowingly or deliberately) portrays or describes a property (usually in an advertisement) in way that is not accurate, or is considered misleading or deceptive.
Is misrepresentation covered by insurance? Misrepresentation is an event that may be covered under Professional Indemnity Insurance, depending on the level of cover you arrange. If a client alleges misrepresentation on your part, they 28 | THE ESTATE AGENT – AUGUST 2021
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may take legal action have to pay financial against your business if compensation to your Misrepresentation they believe they made client. Depending on occurs when an a decision based on your the nature of your agent portrays advertisements which misrepresentation, a or describes a caused them to suffer successful claim may a financial loss. If this also lead to a penalty property in way happens, you’ll firstly that is not accurate, from a regulatory be faced with the cost body. In such a case, or is considered of legal representation – professional indemnity misleading or even if the claim made can help cover both the by your client has no legal costs you incur deceptive. basis, you may incur some in defending yourself, legal expenses defending compensation you’re the claim. In addition, if the claim is required to pay, as well as financial proven to be legitimate, and you did penalties (non-pecuniary) to regulatory make a misrepresentation, you may also authorities. CONTINUED ON PAGE 31
