Real estate agents, occupiers’ liability and third-party entrants: The limits of agency

Real estate agents interact with properties in a variety of ways. At times they act as property managers, coordinating maintenance and liaising with landlords and tenants. At other times they are the person inviting members of the public onto the property, during inspections or open homes.

While most accidents at properties remain the responsibility of the occupier – usually the owner or the tenant – agents can, sometimes, assume liability where they exercise control over the premises or undertake safety-related responsibilities.

Understanding these distinctions can help agents manage risk in their day-to-day work.

The default position

Under common law negligence, a person will owe a duty of care to visitors entering land, if they are an “occupier” of the premises.^[1]

Whether a person is an “occupier” does not depend strictly on ownership of the property. Rather, the courts focus on who has control over the property and who has the ability to manage risks to those entering the property.^[2] An “occupier” is a person who has a sufficient degree of supervision or control over the property, including the ability to permit or prohibit entry.^[3] A person may be an “occupier” even if they do not say “come in”.^[4]

In the context of residential or commercial tenancies, an “occupier” will typically be the tenant, because the tenant has day-to-day possession and control of the property.^[5] However, an agent may assume the role of an “occupier”, if they exercise control over access to the property.

The agent acting as a property manager

When acting purely as a property manager, an agent generally performs administrative and coordination functions on behalf of the landlord. These duties commonly include arranging repairs, conducting periodic inspections and communicating with tenants. When acting in this capacity, courts do not treat agents as “occupiers” of the property.

This was made plain in the decision in McDonnell v Green.^[6] In that case, a visitor slipped on a driveway at a residential property and sought to hold the managing agent liable for the injury. The District Court rejected the claim, finding that the tenant was the “occupier” and, therefore, responsible for the safety of visitors to the property. The Court noted that:

“… significant public policy issues would arise if by an extension of the law of negligence, real estate agents were required to conduct slip tests on driveways of all tenanted premises, so as to satisfy the duty of care owed to persons who may come onto the property”.^[7]

Whilst that case was decided in 2002, the principle for which it stands remains correct.

The agent acting as a temporary occupier

When acting as a seller’s agent, a real estate agent will typically undertake activities such as arranging and conducting open homes, hosting private inspections, coordinating market campaigns and facilitating auctions. In performing these tasks, the agent may be responsible for inviting members of the public onto the property and supervising their attendance.

In these circumstances, courts may treat an agent as having assumed a sufficient degree of control over the property to be considered an “occupier” for the purposes of the law of negligence.

This issue was considered by the New South Wales Court of Appeal in the recent case of Jackson v Furner.^[8] In Jackson, the Court of Appeal found an agent was liable for injury to a third-party entrant.

Whilst McDonnell concerned a claim brought against a property manager, in Jackson a visitor sustained injury when they slipped on a freshly painted driveway while attending an open home inspection hosted and conducted by the real estate agent.

It was held that the agent was “controlling” the inspection and inviting members of the public onto the property, in such a manner that the agent was acting as an “occupier” of the premises at the time of the inspection.

This decision highlights that agents may temporarily assume the role as “occupier” when conducting open homes or inspections, even though they do not ordinarily control the premises during a tenancy.

What is important is the extent of the control exercised by the agent over the property.

The agent performing delegated safety responsibilities

A third situation arises where a property manager has accepted responsibility for safety or maintenance issues under a management agreement. The courts have recognised that a landlord’s duty to keep premises reasonably safe for third party entrants can, in some circumstances, be delegated to a property manager.

In such a case, the property manager may discharge their duty of care by exercising reasonable skill and care in engaging another person to take steps to keep the property safe. This includes ensuring appropriate terms of engagement of tradespeople and confirming that the person engaged is competent to perform the work and discharges their contractual duties.^[9]

However, where such a delegation occurs, the property manager engaged to perform those safety-related tasks may, themselves, assume a duty of care to persons entering the premises, if they knew, or ought reasonably have known, that they have been engaged to manage risks associated with the property.^[10]

For example, in Laresu Pty Ltd v Clark,^[11] a managing agent was found liable after a visitor fell down an unlit staircase in a commercial building. The court concluded that the agent had assumed responsibility for the safe condition of the premises and liability to third-party entrants for defects, in accordance with the management agreement.^[12]

This decision demonstrates that property managers may incur liability where they undertake responsibilities relating to the maintenance or safety of the premises and fall short in the discharge of their responsibilities.

Practical takeaways for agents

The nature and extent of the liability assumed by an agent will depend on the capacity in which they are engaged and the extent of the control they assume over a property.

When conducting open homes or inspections, agents are, in effect, the hosts inviting persons onto the property to inspect and, so, will typically assume the role of “occupier”, which enlivens a duty to take reasonable care for the safety of visitors.

Where a management agreement places responsibility on the agent for identifying the hazards at the rental property or arranging maintenance at the rental property, and the agent seeks to discharge their contractual obligations by engaging tradespersons, they may also be exposed to liability for the safety of third-party entrants, that is, the tradespersons they engage.

But it must be remembered the duty is to take reasonable care, not act to absolutely eliminate all possible risks.  An unlit staircase or a missing step are things that can be readily observed and warned about.  But less obvious, latent, defects, unobservable on a visual inspection, will not fall within the category of defects for which an agent can be held accountable.

Agents are urged to strictly clarify and limit (if possible) the capacity in which they are engaged, and make plain the extent to which they are “in control” of a property, in order to limit any liability to third party entrants.

Read more about agency practice: Artificial intelligence in real estate.

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