REIX: Real Estate Insurance Exchange - Alberta, Saskatchewan

We’re a non-profit organization which means that premiums are used to pay the costs of defending claims and surplus funds are used to keep premiums low.

Safeguarding Against Lawsuits: Navigating the Financial Minefield

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This is the first in a three-part series taking a closer look at the top three causes of loss – financial mishaps, property condition and defective documentation.

In the high-stakes world of real estate, avoiding lawsuits is paramount. Understanding the top three causes of loss – property condition, defective documentation and financial mishaps – can help ensure a smooth path to success.

Financial claims are one of the most common reasons for legal battles in the industry. REIX, an expert in handling such claims, has identified several key areas that often lead to disputes. These include deposits, loss of income, mortgage issues, property value disagreements, tax concerns and condo fees disputes.

Let’s delve into some typical scenarios that may trigger financial claims:

  1. Deposit Disputes: Often arising from issues with handling deposits, such as disputes over who should receive the deposit when a deal falls through.

  2. Loss of Income: This category covers losses related to property income, such as potential rental income or commercial use income.

  3. Mortgage Problems: Claims may arise when buyers are unable to secure financing, or subscribers recommend waiving the financing condition prematurely.

  4. Property Value Disagreements: These claims occur when buyers or sellers feel that the property was overvalued or undervalued.

  5. Tax (GST) Conflicts: Claims may be due to misinformation or misrepresentation regarding taxes related to the property.

  6. Condo Fee/Special Assessment Discrepancies: Claims arise from misrepresentations of condo fees or special assessments.

To safeguard against financial losses, real estate professionals can take proactive measures:

  1. Refer to Experts: When clients have specific questions or concerns, it’s best to direct them to relevant experts, such as accountants or tax professionals.

  2. Direct Communication: Maintain clear and direct communication with clients only. Avoid engaging with third parties, like mortgage brokers, on behalf of the client.

  3. Outline Risks: Ensure that clients fully understand the risks involved in failing to close a deal or breaching contract terms.

  4. Understand Property Valuation: Educate clients that property value is determined by multiple factors and is ultimately dependent on a buyer’s willingness to pay and a seller’s willingness to sell.

By being cautious, well-informed and proactive, real estate professionals can minimize the risk of financial claims and steer clear of potential lawsuits.

The Real Estate Insurance Exchange (REIX) provides mandatory errors and omissions insurance to over 17,000 Alberta and Saskatchewan real estate industry members and more than 1,250 brokerages. We’re dedicated to providing high value to our subscribers through exceptional claims, risk and financial management. Be sure to follow us on Facebook and LinkedIn!

Multi-Factor Authentication on your business email account

If you already need a separate passcode (e.g. a code texted to your cell phone) to access your email  for the first time on a new device, or to view it on the web, then you already have this.

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Weekly backups for your business computer systems

Your computer systems, such as your PC and your phone, contain mission-critical data on them – regular backups are a simple and effective way to ensure disruptions to you and your clients are minimized in the event disaster strikes.

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Firewalls on your internet access

Almost all internet connections have a firewall built in to prevent people from freely accessing your home or business network, or worse, your computer’s files.  You most likely already have this in place, but we encourage you to familiarize yourself with the key piece of security equipment.

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Endpoint Protection (a.k.a. anti-virus)

An up-to-date endpoint protection software is key to keeping your PC safe from viruses – it’s simple to install and may already have it included free with your computer (e.g. Windows Defender). It scans files, emails, and more to make sure nasty viruses and code to infect your PC.

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Security and Privacy Liability

Provides coverage, including legal expenses and damages, for any claim made against you for any actual or alleged breach of privacy, damage to the computers or systems others, unauthorized disclosure of data, and more, arising out of your professional services.

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Data Recovery and Loss of Business Income

a) Pays for the expenses related to investigate, repair, and manage a cyber event, including but not limited to: damage and interruption by a computer virus or malicious code, accidental damage or destruction of data, and malfunctions.

b) Reimburses you for lost income as a result of a cyber event – subject to an 8 hour waiting period.

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Event Management Expenses

Covers the costs associated with a breach of your systems to ensure you meet the requisite privacy legislation requirements – including notification costs as well as credit monitoring and other support for affected clients.

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Data Extortion

Provides services and coverage for expenses related to cyber extorsion threats (e.g. ransomware) – including the costs to manage the event and, where necessary, pay the ransom.

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Social Engineering Fraud

This is coverage for your clients – it covers them for lost deductibles as a result of somebody using your identity and business relationship as part of a real estate deal to convince them to send their deposit to the wrong place.

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Security and Privacy Liability

Covers legal expenses and damages for any claim made against you for breach of privacy, damage to the computers or systems of others, unauthorized disclosure of data, and more, arising out of your professional services.

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Data Recovery and Loss of Business Income

Pays for expenses related to investigating, repairing, and managing a cyber event, and reimburses you for the income lost due to the event.

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Incident (Event) Management Expenses

Covers costs associated with ensuring you meet the requisite privacy legislation requirements post-incident — including notification costs, credit monitoring, and other support for affected clients.

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Data Extortion

Provides services and coverage for expenses related to cyber extortion threats (e.g. ransomware) — including costs to manage the event and if necessary, pay the ransom.

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Social Engineering Fraud

Covers the actions of third parties who fraudulently cause the diversion of deposit funds from a real estate trade.

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Multi-Factor Authentication (MFA):

Multi-step account login process that requires users to enter more information than just a password, like a code sent to their email or phone.

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Weekly Backup:

Copies your files to a safe secondary location for preservation in case of equipment failure or cyber incident.

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