Seven ways to lower your risk in the property sector

Seven ways to lower your risk in the property sector

1. Follow your client’s instructions

As a general rule an agent should always follow their client’s instructions. As the agent, you are under a legal obligation to act for, on behalf of, and in the best interests of your client. Failure to act in accordance with your direct instructions is a breach of your obligations in contract, a breach of your fiduciary obligations and could also expose you to a claim in negligence.

2. Keep adequate records

One of the most important tips that can be provided to agents operating a busy business is to ensure that you keep complete records and take file notes. Adequate record keeping is a must and includes:

  • taking file notes of conversations particularly when a tenant is verbally informing an agent about problems or defects in a property or when an agent is discussing finer aspects of a contract for sale. A court will be more inclined to accept the contents of a contemporaneous file note (signed and dated) over your recollection of a two minute conversation that you may have had with someone three years earlier;
  • keeping a complaints register;
  • if in doubt, seeking clarification of your client’s position in writing. For example, if an owner provides you with instructions not to sell their house for less than $700,000, obtain those instructions in writing;
  • documenting steps taken in dealing with tenants, difficult landlords or in dealing with vendor/purchasers solicitors;
  • filing letters and correspondence in the right place and in chronological order. Although a tiresome administrative task, if a legal claim is made against you the first thing that your lawyer will ask you for is a copy of your file. Alternatively, the lawyer will ask you to produce relevant documents and documents of a certain date/ time. If your record keeping is poor and you are unable to find documents you run a risk of missing that one critical document that could assist you.

If a claim develops, and the matter goes to court, good record keeping may be the difference between winning and losing your case.

3. Do not perform work that you are not qualified to do

There are occasions where agents act outside their level of expertise, which potentially exposes their employer to liability. For example, agents providing valuation advice in circumstances where they are not qualified to do so or hold very little qualifications in that area. The risk taken by the agent in performing that task is that the valuation may be negligent or in breach of Consumer Protection Legislation and entitle the claimant to sue. The agent’s Professional Indemnity insurance may not be adequate to cover these kinds of claims thereby leaving the agent exposed.

4. Audit  your accounts regularly

Fidelity claims are on the rise. Business owners should not leave the management of trust accounts to one person or leave that one person unchecked. Business owners should audit their trust accounts on a regular basis. This could include:

  • performing audits of its accounts every six months;
  • having professionals (such as your accountant or an auditor) review the books annually;
  • undertake spot reviews and checks on employees work;
  • have monitoring systems installed that can be cross-checked;

Most importantly be observant! This is your business and your reputation on the line. If you receive calls from owners querying missed payments, take these warnings seriously and investigate how and why your client’s are not being paid. Cases have shown that it is generally either a complaint from a client or an audit performed by the business owner that has revealed the untoward conduct of the employee.

Most Professional Indemnity policies limit fidelity claims to $50,000. Therefore, in the event that substantial losses are incurred it is likely that you will only be able to recover a fraction of the actual loss. Therefore, the outstanding sums not covered under the policy will be borne the agent. Given an agent is legally required to replace any funds that have been removed from the trust account as soon as possible, this could result in significant financial burden.

5. Perform regular property inspections and report

It is important to remember to conduct regular inspections of rental properties and to report to the owners promptly. Whilst this would seem an obvious tip, there are many legal cases of agents failing in this basic duty resulting in risk exposure to the company and potential increases in premiums. Agents should diarise review dates and try to adhere to booking inspections when those dates appear in their diary.

6. Be careful what you say

It is important that agents go that extra mile to ensure that what they are saying is accurate. For example, agents should ensure that the descriptions of the properties they are selling are a true reflection of that property. Failure to do this will leave the agent exposed to claims for misleading and deceptive conduct under Consumer Protection Legislation. It is important that agents check their facts. Critical issues that can affect a purchaser’s decision to buy should be reviewed by the agent prior to advertising and prior to discussing the property with the potential purchaser.

The following are a set of issues that have given rise to legal claims by buyers who insisted that the agent acted in a manner that was misleading and deceptive:

  • whether the property has city views;
  • whether there are any encumbrances on the land;
  • the size of the land;
  • whether the property has one or two car spaces;
  • whether the property is strata title;
  • whether the land was subject to an easement;
  • if the property was heritage listed or if the property had a heritage listing application; and
  • whether a vacant block of land had title to an attached jetty
7. Check your documents

It is at times difficult to keep up with work demands and ensure that you are checking all your documents and records properly. However, it is worth your time and effort to take that extra 10 minutes to check that you have:

  • picked up the correct document;
  • made the requested changes;
  • ensure that your records confirm what is actually for sale.

A simple check of your documents can save you from legal proceedings.

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