All real estate agents must now have PI insurance

Compulsory professional indemnity is now a reality..

It is now a breach of the Property Stock and business agents Act 2002 if you or your company is supplying services in the real estate industry and you are not holding any Professional Indemnity insurance.Requirements took effect July 1 , 2013.

Section 22 of the Act now makes it mandatory for all Licencees, whether corporate or individual to take out Insurance to protect against claims for civil Liability  and vicarious liability.

The requirement applies to all License holders including real estate agents, stock and station agents, business agents, strata and community managing agents and on site residential property managers.

Some confusion has arisen within the industry in regards to non practising license holders and sales agents who work commission only or who contract their services to a real estate office.

The Act identifies non practising license holders as non active licensees and are therefore exempt from holding insurance until they actively become working in the industry. In other words, if you obtain a license from Fair Trading but are not yet working in the industry their is no obligation for you to hold P.I. insurance.

The moment you open up your own business however you will be required to effect immediate cover.

If you trade as an individual, that is a sole trader or partnership, then the policy will be owned by you as the sole trader or by the partnership. If you trade as a corporation then it is the company that owns the policy and all employees who are attached to your company (registered to your corporation with fair Trading) whether Certificate holders or full license holders, will be covered under the policy owned by the corporation... so that's good news for most real estate agents.

But contractors beware. Licensed agents who contract their services to one or more agencies may not be covered under a P.I. policy owned by the engaging agency. Contractors will generally need to effect their own cover as they are not attached to the contracted agency as they work independently and are therefore not supervised by a licensee. They are giving advice and information independently of any other agency and will therefore be liable for any consequences therein.

Penalties now apply to agents who may be audited and found not to comply with the change in legislation.