Misrepresentation in real estate Pages

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

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may take legal action against your business if they believe they made a decision based on your advertisements which caused them to suffer a financial loss. If this happens, you’ll firstly be faced with the cost of legal representation – even if the claim made by your client has no basis, you may incur some legal expenses defending the claim. In addition, if the claim is proven to be legitimate, and you did make a misrepresentation, you may also CONTINUED ON PAGE 31

have to pay financial Misrepresentation compensation to your occurs when an client. Depending on agent portrays the nature of your misrepresentation, a or describes a successful claim may property in way also lead to a penalty that is not accurate, from a regulatory or is considered body. In such a case, professional indemnity misleading or can help cover both the deceptive. legal costs you incur in defending yourself, compensation you’re required to pay, as well as financial penalties (non-pecuniary) to regulatory authorities.

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Preventing misrepresentation

Allegations of misrepresentation may happen to even the most seasoned professionals. Although you can’t control how someone may interpret your advertisements, there are some areas, which, if paid specific attention to, can help prevent the likelihood of misrepresentation claims: • Communication: Sometimes, claims of misrepresentation can be avoided with clear communication. If you receive instructions or information which appear vague, no matter what aspect of your service it relates to, ensure you reiterate with your clients before acting. • Records of conversations: Written records of conversations often prove to be the most helpful if disputes or allegations arise. Even if you and your client agree to something on a phone conversation, it’s good practice to send an email afterwards confirming your understanding

• Stay within your scope of work:

You may prioritise exceptional customer service above all else, but in doing so, sometimes its easy to cross the line, and provide advice that is outside your qualifications or field of expertise. Therefore, always be mindful of the bounds of your role and act in

accordance with what your client has Allegations of hired you for. misrepresentation may happen When to contact your broker Under most insurance policies, you to even the don’t need to contact your broker until most seasoned you need to make a claim. However, as professionals. misrepresentation is an event usually covered under Professional Indemnity, you may need to contact your broker as soon as you receive a hint of an imminent claim. It may not be enough to wait until you actually have to make a claim. If you sense a client of yours has been unhappy with any of your actions, and feel they may take legal action against you, you should contact your broker immediately and notify them. Even if a claim doesn’t perpetuate, your broker needs to be made aware. – Aon Please note: Aon has taken care in the production of this document and the information contained in it has been obtained from sources that Aon believes to be reliable. Aon does not make any representation as to the accuracy of the information received from third parties and is unable to accept liability for any loss incurred by anyone who relies on it. The recipient of this document is responsible for their use of it.