Real estate agents – can you believe what your clients tell you?

Wynn Williams completes lots of defence work for real estate agents. Sometimes agents engage us directly; sometimes we act under instructions from their professional indemnity insurers. Either way, one recurring theme is claims against agents for passing on incorrect information received from the vendor.

This is understandably surprising to many of our clients. Why should an agent be liable for misrepresentation, if the information they passed on to a purchaser is exactly what they received from the vendor? This is especially the case if the vendor has been 'selective' with the information they have passed on, or even told outright lies about the property.

This article focuses on two topics: agents' liability for passing on a third party's report, and agents' liability for passing on incorrect information told to them by the vendor.

Agents' liability for passing on a third party's information - being a 'mere conduit' of information

The defence of 'mere conduit' is not a new invention. The law has developed a defence for agents (or other professionals), whereby they say they were merely passing information to a buyer, without endorsing the information as true. Typically, this will be building reports, property information from third parties, etc. There are limits on this defence. The Supreme Court has described what must be proved for a mere conduit defence to succeed:

In order to be seen to be a mere conduit, the conveyor of misleading or deceptive information must have made it plain to the recipient that he or she is merely passing on information received from another, without giving it his or her own imprimatur - that is making it appear to be information of which the conveyor has first-hand knowledge.1 Only the Supreme Court could get away with using the word 'imprimatur' - Latin for 'let it be printed' - meaning a 'seal of approval'. It is particularly difficult for agents to show that they have passed on information from the vendor without giving it their seal of approval. They are, obviously, the vendor's agent, owe a fiduciary duty to the vendor, and are paid by taking commission when the property sells. Experience tells us that this defence is normally only partly successful.

In order to bolster this defence, here are a few practical tips for agents:

Always make a point of advising, in writing, that buyers carry out their own due diligence. This is so common a piece of advice that sometimes it does not get formalised in writing...

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