Is my rental agency liable for my agent’s fraudulent activities?
Our rental agency just dismissed a rental agent who was doing private leases. Evidence indicates his private bank account being used for deposit and rental payments. Our agency logo has also been used to perpetrate these fraudulent activities. I have two questions:
What is the legal position of the agency please?
Is there some protection we can put in place to prevent this in future?
#1 Unfortunately, this fraudulent conduct on the part of your erstwhile agent may have implications for your agency.
In this regard, it would appear from the context of your email that his conduct was perpetrated during the course and scope of his employment with your agency, and you are therefore vicariously liable for his actions and misgivings.
As I am sure you can well appreciate, any person who may have paid over deposits and/or other sums of money, will invariably want to look to your agency, especially since they were given to understand that they were dealing with your agency, as well as the fact that you have deeper pockets than your ex agent.
I note that although you may be of the view that the agent’s conduct was out of your control, the situation still raises questions of vicarious liability, given that any member of the public that would have come in to contact with the agent would have been under the impression that they were dealing with your agency.
Ultimately, and if you are indeed required to compensate any of the affected persons, as a result of the agent’s conduct, you will then have to take steps to recover these amounts from him.
#2 As regards protecting your agency to avoid similar situations such as these, unfortunately, your agency is not able to completely indemnify itself for the fraud and misgivings of its employees.
If an employee has acted fraudulently, and has misled a client during the course and scope of his/her employment with your agency, then that client, as a matter of legal principle, is entitled to recoup his/her losses from your agency.
It would, however, assist to bring certain things to your client’s attention, such as the fact that they are only to use your banking details for all transactions and engagements.
Insofar as the relationship between your agents and tenants are concerned, I would suggest the same approach be adopted, and that tenants be advised that they are only to utilise your agency documentation for all engagements.
If the above is brought to landlords’ and tenants’ attention, and they simply ignore your express instructions, then you may be able to limit your agency’s liability on the basis that any affected landlord or tenant would be deemed to have been negligent, and thereby contributing to their own loss (note: this will not completely extricate your agency).
Lastly, I am of the view that a charge of fraud may be laid against your erstwhile agent, however, any prospective prosecution will depend on the extent and outcome of the SAPS’ investigations.
In addition to criminal charges, I would also suggest reporting his conduct to the EAAB, as he is, in my opinion, unfit to practice as an estate agent, and it would be in the interest of the public at large for the EAAB to take appropriate action against him.
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Who is Marlon Shevelew?
Marlon Shevelew is the director of Marlon Shevelew and Associates Inc, a law firm specialising in rental property, sectional title, contractual, consumer and company law.