Estate Agents & Valuers

Estate Agents & Valuers

As an estate agent you might believe that you are sufficiently protected by the fidelity cover provided by the Estate Agents Affairs Board. You should be aware that:

  1. The Estate Agent Affairs Act 112 of 1976 (‘The Act’) provides for certain instances where the liability of the Estate Agents Fidelity Fund (‘the Fund) is excluded. For example in terms of section 18(3) of the Act, a person cannot claim compensation from the Fund, unless that person gave written notice to the Board within 3 months of their having become aware (or within 3 months of when they ought reasonably to have become aware) of the theft of the money by an estate agent or their failure to pay the money into a trust account.
  2. In terms of section 19(1) of the Act, no person is able to claim compensation from the Fund unless that person has exhausted all other legal remedies available to them to try to recover their money from the estate agent involved.
  3. The Fund would only provide cover of ‘last resort’ in respect of the theft of client funds. It does not provide you with any cover for claims made against you which arise out of allegations of professional negligence (for example loss arising from over or under valuation of a property).
  4. The EEAB’s disciplinary committee of Inquiry can aside from withdrawing your fidelity fund certificate, fine you up to R25,000 per contravention and may award up to 80% of the fine that they impose, to a claimant who has suffered a pecuniary loss.

These are just a few of the reasons why all estate agents should take out professional indemnity insurance. Whilst professional indemnity insurance cannot pay out your fines imposed by the disciplinary committee, it can pay for your legal defence costs, which in themselves could be substantial.

A professional indemnity insurance policy would also cover you for claims of professional negligence which the Fund does not.

It is also a good idea to have your own fidelity guarantee insurance cover in place, bearing in mind that the EAAB Fund is a ‘fund of last resort’ and that the client would first have to show that they have tried to reclaim their money from you. Fidelity guarantee insurance covers you for losses caused to you due to employee theft or fraud.

If you would like to arrange your own fidelity guarantee insurance please let us know as we can arrange to include this in your professional indemnity insurance (or arrange a separate policy for you depending on your requirements).

Professional indemnity insurance is no less important for valuers who are increasingly exposed to claims (which are often unmerited and which arise out of the poor performance of the property market over the past few years) and attendant legal costs which arise out of allegations of professional negligence and employee dishonesty, for example with regard to alleged over-valuations.

If you would like us to obtain quotes for your consideration, please contact us at info@cfpbrokers.co.za.

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Estate Agents & Valuers

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