Estate Agents and Letting Agents - Why You Need Professional Indemnity Insurance

tenancy agreement with house keysRunning a successful estate and letting agency is far from simple...

Both buyers and sellers rightly expect you to be the expert, and more often than not you will be. But nobody is perfect and even the most diligent estate or lettings agent is not beyond making mistakes. Fortunately, there are ways you can cover your business from any mishaps that you might have to deal with such as professional indemnity insurance. Here we take a better look at what professional indemnity insurance is and why your agency should buy it.

Why you need Professional Indemnity Insurance

Of course, no estate or letting agent ever intends to give bad advice. But unfortunately, mistakes can happen every now and again.

Disgruntled clients – whether they are sellers, buyers, landlords or tenants – can feel so strongly that they may take legal action against your firm in a bid to claim for compensation, lodge a complaint to a property ombudsman, your professional body, or even to the local press.

A recent survey from Deloitte showed that 41 per cent of respondents who had experienced a reputation risk event, reported loss of revenue as having the biggest impact on their business. So it’s essential that every precaution is taken to protect the financial health of your business, should you make any costly errors. This means taking out a professional indemnity insurance policy to ensure that you are not left to foot the bill for any legal expenses (which can run into the thousands of pounds) that you may have to deal with.

Reputation is key

There is also a growing focus on the professionalism of estate agencies – with many calling for licensing of sales and letting agents, as well as a constant stream of criticism of ‘rogue agents’ in the media. Indeed, many renters now expect their letting agents to be a member of a professional body such as the NAEA or the RICS – both of which require Professional Indemnity Insurance to become a member. In addition to this, all agents need to belong to an independent redress scheme, such as The Property Ombudsman –which again requires that the agent has Professional Indemnity Insurance in order to join.

What to look for

But although professional indemnity insurance is incredibly important to both the reputation and financial health of any estate or letting agent, you need to be sure that the policy you’re taking out is a comprehensive one.

A comprehensive professional indemnity insurance policy should cover you for:

  • Compensation for awards made by The Property Ombudsman and The National Approved Letting Scheme
  • Consumer Protection from Unfair Trading Regulations 2008
  • Defence costs, such as lawyers, experts and other court costs. These are payable in addition to the policy limit
  • Claims made against you due to any civil liability
  • Compensation up to the chosen policy limit
  • Claims made against you caused by loss of or damage to documents
  • Data protection defence costs

So before you sign on any dotted line make sure your policy meets the requirements of major Estate and Letting Agent professional bodies such as the National Association of Estate Agents (NAEA) and the Association of Residential Letting Agents (ARLA).

Some examples of professional indemnity insurance claims


It was alleged that the agent undersold a property. Five months later it was resold for double the previous price. Amount Paid £ 200,000

An employee of the business altered the amounts and wordings of cheques, enabling him to obtain the proceeds. Amount Paid £ 50,000

The agent advised a client to sell a farm by auction. The client later alleged that a higher price could have been obtained if the land and buildings had been sold separately. Amount Paid £ 45,000

A property was put up for sale by the agent but it was alleged that this had not been requested. Amount Paid £ 40,000

The agent valued a client's house in excess of £ 500,000 and it was subsequently put on the market. In anticipation of a quick sale, the client purchased two properties. The house was overvalued, however, and after a long delay was sold for a substantially lower price. A claim was brought for the cost of bridging finance and other expenses incurred as a result. Amount Paid £ 30,000


An agent was retained to negotiate a rent review but failed to agree an early figure.Tenants had to pay higher rent. Amount Paid £ 700,000

A notice to quit was served on the tenant of a farm. The firm failed to serve a counter notice under the Agriculture (Miscellaneous Provisions) Act 1976 within the time limit. Amount Paid £ 75,000

The insured was managing a client's property and replaced a clay roof with concrete tiles. Because the property was a listed building, planning permission should have been obtained. The local authority required that the clay tiles be refitted. Amount Paid £ 20,000