Show house: are estate agents liable for injuries?

Jun 21, 2018 | Local Property

Signs similar to that found at the entrance of parking garages should be found at the entrance of every show house

A recent article published in the USA stated that it is a relatively common occurrence for potential buyers to be wandering about a property and slipping or tripping on a stair or slippery floor. Potential buyers are unfamiliar with the property and so more likely to miss a step or small defects. Can a real estate agent be held liable for an injury on a piece of property they do not even own? Practicing attorney Michael Judin and insurance expert Teri Solomon weighs in on the topic in the following article.

We believe that an estate agent owes a duty of care to visitors to the premises of a show house to ensure that the property is safe to view. As in the US, during the open house, the agent “takes control” of the premises and the commensurate duty to use reasonable care to make certain that potential buyers are not injured. The US article ‘Is a real estate agent, or a seller, liable if a buyer injures himself whilst perusing a property?’ to which we refer states, and we agree, that an agent must undertake a reasonable inspection of the property to identify hazards or problems which could pose a threat to unsuspecting visitors. Sometimes that is a more formal process like a pool inspection, other times, it is common sense to simply walk the property and the areas which visitors can access to see if hazards exist. If there is a crack in a walkway or an over-waxed floor, simple precautions can be very effective.

In South Africa, it is not compulsory for estate agents to secure public liability insurance, although most reputable and responsible agents do carry the cover by virtue of their general insurance programme. We believe that they only require, as a minimum, professional indemnity insurance and fidelity insurance.

Let us now look at the relationship between the estate agent and the seller, and the estate agent and the potential buyer. In the first instance, the relationship will be invariably governed by a written document whether an exclusive mandate to sell or simply another contract governing the terms and conditions of selling the property. A well-crafted agreement of this nature would deal with all potential claims between the seller and the agent and their relationship would be (or should be) governed by a written contract. But what about the relationship between the estate agent and the potential buyer? That would not be covered by a written contract. However, the principles of South African common law which would apply would be as binding as a written contract. This we have dealt with above.

As South Africa becomes a more litigious environment, one may well see the day where written terms and conditions of entering the property are found at the entrance of the home being visited similar to those terms and conditions which one finds, for example, at the entrance to a parking garage. Entry to the garage, or in this instance to the home, would be governed by those terms and conditions once you voluntarily enter.

Sellers of immovable property should pay very careful attention to the contracts which they sign with their estate agent as that contract may contain a clause which states that if a potential buyer is injured in any way, then the owner of the property indemnifies the estate agent against any claim which may be brought against the agent. If that is the case, and the seller becomes legally liable for the damages suffered by the third party, the issue should be fully discussed so that agreement can be reached as to who is liable, in or under what circumstances and whether appropriate insurance exists or should be taken out.

In South Africa, we have a principle known as contributory negligence. Where a party fails to act prudently then the court can consider such action to be a contributory factor in the injury which a third party may have suffered. The classic test for negligence in South African law is whether a reasonable person whom would foresee the reasonable possibility of his conduct injuring another person or causing that person loss, would take reasonable steps to guard against such occurrence, and, notwithstanding that failed to take such steps. The standard of care that is required will be determined by the circumstances of each particular case. So, if assuming there has been negligence by both parties, the court would need to ascertain the degree to which the party claiming was at fault in relation to the damage. The result of that is that the person claiming, if there has been contributory negligence, may only be entitled to recover a portion of the loss suffered. In considering the above, one should bear in mind that our courts have held that estate agents are not liable for the contents of the home during a show day if theft of an item or money takes place, holding that the person opening their home must foresee such risks and thereby assumes such risks. We, however, believe that such decisions do not result in a bar to claiming damages for injury at a show house where the estate agent has acted negligently, whether entirely or partially, as we have set out above.

So, what should be done? In a perfect world there will be a well-crafted agreement between the seller and the estate agent covering all possibilities sitting alongside effective insurance policies. Signs similar to that found at the entrance of parking garages should be found at the entrance of every show house thus protecting the seller and the agent and making the potential purchaser aware of what risks are being assumed by entering. But, we do not live in a perfect world, especially insofar as the entry to the show house is concerned by a potential buyer. Sellers and agents should therefore ensure that there is proper insurance in place to cover any claim by a party visiting the home. In addition, as a result of the contributory negligence risk, sellers and agents should take reasonable steps to foresee any risks and to prevent them from occurring. Potential purchasers should exercise caution and care when visiting show houses and should ensure that children, elderly visitors and pets accompanying them are adequately catered for and taken care of during the show house visit.

Indeed, this was reaffirmed in the 2017 matter of Stedall V Aspeling. There, the court ruled that when a toddler is brought onto the private property of a homeowner in the custody and supervision of their parent, it would be unreasonable to impose liability on the homeowner should that child wander off and accidentally fall into a swimming pool, the gate of which was unlocked. The Stedall matter may bring some relief to estate agents, however, in the event that they are sued for damages, they will need to defend such claims. These can be extremely expensive and devastating to the agency’s reputation.

We conclude with the wonderful words of the author Ernest Agyemang Yeboah who wrote “My hope is that tomorrow will be fine, but, if tomorrow doesn’t go well, I shall still hope to be fine tomorrow!”

About the authors:
Judge Michael Judin is a partner in the Johannesburg-based law firm of Judin Combrinck Inc. He is a member of the King Committee and also a member of the task team which drafted King IV. He was the chairman of the sub-committee on the chapter dealing with negotiation, mediation and arbitration as contained in King III. He is also a non-executive director of, and legal adviser to, the American Chamber of Commerce in South Africa. He is the co-chairman of the Corporate Governance International Development Sub-Committee of the American Bar Association’s Business Law section.

Teri Solomon, head of the Financial and Professional Practice at Marsh. Teri is an admitted attorney with 20 years professional liability and management liability insurance experience. Teri is a member of the IoD SA’s Corporate Governance Network and is a regular conference speaker and writer on topics like professional indemnity, directors and officers liability and trustees liability risk management and insurance solutions.

Did you find this article useful? Please email any suggestions or comments to editor@propertyprofessional.co.za.