The increased focus on upfront material information under the Consumer Protection Against Unfair Trading Regulations 2008 may have a serious impact on estate and letting agents PI insurance requirements says Michael Day of Integra Property Services.
Whilst the regulations have been in force since 2008, the recent guidance from National Trading Standards is creating a different landscape in which sales and lettings agents have to operate.
The provision of upfront material information (Parts A, B and C in trading standards parlance) covers elements to do with a property where (A) is always considered material to all properties regardless of location – items such as tenure, price, council tax etc. (B) is information that must be established for all properties and includes items such as utility types and provision, details of the accommodation and details of non-standard construction and (C) is information that may or may not need to be established depending on whether the property is affected or impacted by the information. This could include any restrictions such as listed building, conservation area, easements, wayleaves and servitudes. Elements such as flood risk, coastal erosion, accessibility, building safety, planning and mining.
Crucially, 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.
Michael Day says: “Whilst these changes, which will become visible on the portals within the coming weeks, will mean agents have to start obtaining the information required and there are opportunities to improve business, it will undoubtedly, also expose agents to a greater risks.
It is currently mandatory for agents to be member of a redress scheme (either TPOS or the PRS). The TPOS has a mandatory requirement on members to hold at least £100,000 or PI (professional indemnity) insurance cover. The PRS does not have this requirement, just a recommendation to have cover in place.”
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 PII 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 PII cover will, at least, mitigate this position.
Michael Day added: “I believe that having an appropriate level of PII cover should be mandatory for all agents and it would certainly be good business practice for an agent to ensure that their cover is adequate and appropriate.
The outline proposals for ROPA, i.e. mandatory qualifications, a new regulator and licensing of agents doesn’t specifically mention the need for PII cover although it is likely to include, should it ever become mandatory.
My advice to agents, is fivefold:
(1) Look at what is required going forward both operationally and strategically and ensure you are up to speed with what is required.
(2) Review your PII cover
(3) Look at current systems and processes to ascertain whether fit for purpose
(4) Develop a new plan which uses compliance as an enabler not a constraint and develop a compliant differentiator for your business
(5) Train staff accordingly
Michael Day MBA FRICS FNAEA FARLA, Managing Director of Integra Property Services