FAIR TRADING ACT 1968 (NSW)


The NSW Fair Trading Act 1968 has parallel provisions to the Trade Practices Act 1974. This allows consumer protection against bodies and individuals that the TPA do not cover because of constitutional restraints. The equivalent sections to those affecting the property profession under the TPA are shown below:


43   Unconscionable conduct

(TPA s 52A)
(1)  A supplier shall not, in trade or commerce, in connection with the supply or possible supply of goods or services to a consumer, engage in conduct that is, in all the circumstances, unconscionable.
(2)  Without limiting the matters to which the Supreme Court may have regard for the purpose of determining whether a supplier has contravened subsection (1) in connection with the supply or possible supply of goods or services, the Court may have regard to:
(a)  the relative strengths of the bargaining positions of the supplier and the consumer,
(b)  whether, as a result of conduct engaged in by the supplier, the consumer was required to comply with conditions that were not reasonably necessary for the protection of the legitimate interests of the supplier,
(c)  whether the consumer was able to understand any documents relating to the supply or possible supply of the goods or services,
(d)  whether any undue influence or pressure was exerted on, or any unfair tactics were used against, the consumer (or a person acting on behalf of the consumer) by the supplier or a person acting on behalf of the supplier in relation to the supply or possible supply of the goods or services, and
(e)  the amount for which, and the circumstances under which, the consumer could have acquired identical or equivalent goods or services from a person other than the supplier.
(3)  A supplier shall not be taken for the purposes of this section to engage in unconscionable conduct in connection with the supply or possible supply of goods or services to a consumer only because the supplier institutes legal proceedings in relation to that supply or possible supply or refers a dispute or claim in relation to that supply or possible supply to arbitration.
(4)  For the purpose of determining whether a supplier has contravened subsection (1) in connection with the supply or possible supply of goods or services to a consumer:
(a)  the Supreme Court shall not have regard to any circumstances that were not reasonably foreseeable at the time of the alleged contravention, and
(b)  the Court may have regard to conduct engaged in, or circumstances existing, before the commencement of this Act.
(5)  (Repealed)
(6)  A reference in this section to the supply or possible supply of goods includes a reference to the supply or possible supply of goods for the purpose of re-supply or for the purpose of using them up or transforming them in trade or commerce.

44   False representations

(TPA s 53)
A person shall not, in trade or commerce, in connection with the supply or possible supply of goods or services or in connection with the promotion by any means of the supply or use of goods or services:
(a)  falsely represent that goods are of a particular standard, quality, value, grade, composition, style or model or have had a particular history or particular previous use,
(b)  falsely represent that services are of a particular standard, quality, value or grade,
(c)  falsely represent that goods are new,
(d)  falsely represent that a particular person has agreed to acquire goods or services,
(e)  represent that goods or services have sponsorship, approval, performance characteristics, accessories, uses or benefits they do not have,
(f)  represent that the person has a sponsorship, approval or affiliation the person does not have,
(g)  make a false or misleading representation concerning the price of goods or services,
(h)  make a false or misleading representation concerning the availability of facilities for the repair of goods or of spare parts for goods,
(i)  make a false or misleading representation concerning the place of origin of goods,
(j)  make a false or misleading representation concerning the need for any goods or services,
(k)  make a false or misleading representation concerning the existence, exclusion or effect of any condition, warranty, guarantee, right or remedy,
(l)  make a false or misleading representation concerning a person’s rights or obligations under a residential tenancy agreement (within the meaning of the Residential Parks Act 1998) under which the residential premises consist of a residential site in a residential park or a moveable dwelling on such a residential site (within the meaning of that Act), or
(m)  make a false or misleading representation concerning a person’s rights or obligations under a village contract (within the meaning of the Retirement Villages Act 1999), or
(n)  make a false or misleading representation concerning a person’s rights or obligations under an occupation agreement (within the meaning of the Holiday Parks (Long-term Casual Occupation) Act 2002) under which the residential premises consist of a site in a holiday park (within the meaning of that Act).

45   False representations and other misleading or offensive conduct in relation to land

(TPA s 53A)
(1)  A person shall not, in trade or commerce, in connection with the sale or grant, or the possible sale or grant, of an interest in land or in connection with the promotion by any means of the sale or grant of an interest in land:
(a)  represent that the person has a sponsorship, approval or affiliation the person does not have,
(b)  make a false or misleading representation concerning the nature of the interest in the land, the price payable for the land, the location of the land, the characteristics of the land, the use to which the land is capable of being put or may lawfully be put or the existence or availability of facilities associated with the land, or
(c)  offer gifts, prizes or other free items with the intention of not providing them or of not providing them as offered.
(2)  A person shall not use physical force or undue harassment or coercion in connection with the sale or grant, or the possible sale or grant, of an interest in land or the payment for an interest in land.
(3)  Nothing in this section shall be taken as implying that other provisions of this Act do not apply in relation to the supply or acquisition, or the possible supply or acquisition, of interests in land.

Note also that similar controls on conduct are in the property stock and business agents act 2002 – nsw,


AGENTS AND AGENCY AGREEMENTS


On 1 September 2003, important measures were introduced to ensure that consumers selling residential or rural property are fully informed about the relationship they enter into with real estate agents.


Agency agreements are legally binding contracts. To ensure consumers are informed about their rights and responsibilities under each type of agency agreements, real estate agents must provide consumers with a copy of the Office of Fair Trading fact sheet Agency agreements. The fact sheet must be given to consumers before they sign an agreement with the agent.


Selling a home is something many people do only once or twice in a

lifetime, so it pays to do some homework before signing up with an

agent to sell your property for you. When you sign up with an agent, you

enter into a legally binding contract.


You have a cooling-off period of one day starting from when you sign the agreement. You can cancel the agreement in this time if

you are not happy with it. Choosing a real estate agent

to sell a home in New South Wales, an agent must have a real estate agent’s licence issued by the Office of Fair Trading. You

should check on the licence details of all agents you are thinking of using before signing up with your preferred choice.


To find the right agent for your needs, you should shop around. If possible, get the names of one or two agents from other

home owners in your area who have recently sold. We suggest you talk to at least three agents and:



SIGNING UP WITH AN AGENT


Before the agent can sell your property, they must sign a contract with you, called an Agency Agreement. An Agency Agreement is a legally binding contract and it is important that you read and understand it.


If you are not sure about the agreement terms you should get legal advice. Signing an agency agreement means that you authorise an agent to do certain things for you in relation to the sale of your

property, such as arranging advertising and inspections and receiving deposits from buyers. The agreement must specify what the agent is authorised to do for you and must state all commissions and any other

costs you may be liable to pay.


WHAT IS IN THE AGENCY AGREEMENT


The agency agreement must state:



You have the right to negotiate with the agent about the terms and conditions of the agreement and to ask for any legally permitted changes to be made. Alterations made to the agreement need to be signed by all parties.

FTR32 January 2005

The agent is required by law to give you a copy of the fact sheet

before you sign an agreement with them.


AGENCY AGREEMENTS FOR THE SALE OF RESIDENTIAL PROPERTY


COMMISSION, FEES AND EXPENSES


The amounts charged by agents are not set by law. You can negotiate with the agent about the amounts of any commissions, fees

or other expenses that you may be required to pay.


Before signing an agreement, it is a good idea to talk to a few agents and compare their prices. Ask each agent for a printed list

of their fees and commission rates and the expenses they charge.





DISCLOSURE OF REBATES AND DISCOUNTS


The agency agreement may require you to pay the agent for certain expenses in relation to the sale of your home, such as advertising,

auctioneer’s fee, or any other services the agent may arrange for you, such as cleaning, decorating or landscaping.


Sometimes the amount the agent has to pay for the service is less than what you are being asked to pay. This can occur if the agent receives a commission or discount from the provider of the service for being a

regular customer – for example, some newspapers pay a commission to the agency at the end of the year based on how much advertising was placed.


The agency agreement must state the amounts or estimated amounts of any such commissions or discounts and from whom they are received. You can negotiate with the agent about whether you should pay the

full amount.


ENDING THE AGREEMENT


The agency agreement usually has a specified period (a ‘fixed term’) during which the agreement cannot be ended unless you and the agent both agree. If the agreement is open ended (that is, it does not have a fixed term) it must state how the agreement can be ended.


The length of any fixed term is negotiated between you and the agent, there is no minimum or maximum set term.The fixed term will depend on how long you and the agent think it will take to sell the property.

If the fixed term is longer than 90 days, you can give the agent 30 days written notice to end the agreement after 90 days. Of course, if the fixed term has less than 30 days left to run, you can just give notice to end the agreement at the end of the fixed term - check your agreement to see how much notice you need to give. If you are not sure how to end the agreement, you should seek legal advice.


If you are not happy with an agent’s services, it is important to properly end your agreement with them before signing up with another agent. Otherwise both agents may charge you commission when the property is sold.


TYPES OF AGENCY AGREEMENTS


There are several different kinds of agency agreements for the sale of residential property. It is important to be aware of the kind of agreement you sign, because it affects your rights and the amount of

commission you may have to pay. You should discuss the agreement with a legal adviser if you are not sure about your rights.


The following is an overview of the different types of agreements.


EXCLUSIVE AGENCY AGREEMENTS


Exclusive agency agreements are commonly used for the sale of residential property. In this kind of agreement, you give exclusive

rights to one agent to sell your property. This may entitle the agent to be paid commission if the property is sold during the fixed term of the agreement, even if the property is sold by you or by another agent.


The agent may also be entitled to commission if the property later sells to a person who started negotiating for the property with the original agent.


SOLE AGENCY AGREEMENTS


This is similar to an exclusive agency agreement. You give rights to one agent to sell the property but you may find a buyer yourself. If you find a buyer who has not been introduced by the agent, then no commission is payable to the agent.


GENERAL LISTING / OPEN AGENCY AGREEMENT


This lets you list your property with a number of agents. You pay a commission to the agent who finds the buyer.


It is your right to negotiate the terms and length of the agency agreement as well as the fees.


It is important to properly end the agreement if you want to change agents.


Under an exclusive agency agreement the agent may be entitled to commission even if you or another agent sells the property.


MULTIPLE LISTING


This occurs when you deal with an agent who is part of a network of agents working together to sell your home. It covers both auction and private treaty. You pay a commission to the agent you signed up with.


AUCTION AGENCY AGREEMENT


This is effectively an exclusive agency agreement where the property is listed for auction.


COOLING-OFF PERIOD


The agency agreement becomes binding when the principal (that is, you as the owner/s of the property, or someone who is legally acting for you) and the agent have signed it. There is then a cooling-off period of one business day during which you can cancel (or ‘rescind’) the agreement.


Saturday is included for the purposes of the coolingoff period, but public holidays are not.


The cooling-off period starts when you sign the agreement and ends at 5pm on the next business day or Saturday. For example, if you

sign the agreement on a Friday, the coolingoff period ends at 5pm on Saturday. If you sign up on Saturday, the cooling-off period would usually end at 5pm on Monday, unless that is a public holiday, in which case it will end at 5pm on Tuesday.


The cooling-off period gives you time to read the agreement, consider the terms you have agreed to, including the agent’s fees, and get independent advice if you have concerns about any aspect of the agreement.


Talk to the agent – they may be willing to change things in the agreement that you are not happy about.


CANCELLING THE AGREEMENT DURING THE COOLING-OFF PERIOD


If you decide to cancel (or ‘rescind’) the agreement during the cooling-off period, you need to deliver a ‘notice of rescission’ to the agent.


This simply means giving the agent a written notice or letter which:



You can hand the notice to the agent in person, deliver it to or leave it at the agent’s office or the agent’s address as given in the agency agreement, or fax it to the agent. Make sure to keep a copy for your records.


The agent cannot charge you any fees or costs in relation to an agreement that has been rescinded correctly. Any money you

have already paid to the agent must be refunded to you.


WAIVING YOUR COOLING-OFF RIGHTS


If you are sure that you wish to go ahead with the agency agreement, you can waive, or forego, your right to a cooling-off period by signing a separate waiver form when you sign the agreement.


The cooling-off period can be waived only if the agent gave you the following documents at least one business day before you signed the agency agreement:



For example, on Thursday morning the agent gives you a copy of the unsigned agreement and this fact sheet, which you read and consider carefully. On Friday afternoon you sign the agency agreement and the waiver form. The agency agreement immediately becomes binding

and the agent can get to work on selling your home.


THE CONTRACT OF SALE


A residential property cannot be advertised for sale until a Contract of Sale has been prepared. The contract must contain a copy of the title documents, drainage diagram and the Zoning Certificate (s 149) issued by the local council.


Property exclusions must also be included and a statement of the buyer’s cooling off rights must be attached. The draft contract must be available for inspection at the agent’s office. It is important that you

consult your solicitor or conveyancer about preparing the contract to make sure that everything is in order.


The agency cannot start marketing your property until you have given them the contract of sale.


EXCHANGE OF CONTRACTS


The contract exchange is a critical point in

the sale process:



Once contracts have been exchanged, sellers are generally bound to complete the agreement.

There is no cooling off period when purchasing at auction.


IF YOU ENCOUNTER PROBLEMS


If an issue arises during the sale process that you are unhappy with, check your copy of the selling agency agreement to clarify your

rights and obligations. Try to sort out the problem by talking to

the agent.


Make certain that any instructions you give the agent are in writing, and keep a copy.


If you think the agent has charged a fee to which they are not entitled, or believe the fee charged is excessive, you can apply to the Consumer,Trader and Tenancy Tribunal to settle the matter.


OTHER MATTERS


If you need further assistance to resolve a problem, consider the following:



SIGNING UP WITH AN AGENT


Before the agent can sell your property, they must sign a contract with you, called an Agency Agreement. An Agency Agreement is a legally binding contract and it is important that you read and understand it. If you are not sure about the agreement terms you should get legal advice.


Signing an agency agreement means that you authorise an agent to do certain things for you in relation to the sale of your property, such as arranging advertising and inspections and receiving deposits from buyers. The agreement must specify what the agent is authorised to do for you and must state all commissions and any other costs you may be liable to pay.


WHAT IS IN THE AGENCY AGREEMENT


The agency agreement must state matters such as:



You have the right to negotiate with the agent about the terms and conditions of the agreement and to ask for any legally permitted changes to be made. Alterations made to the agreement need to be signed by all parties.


COMMISSION, FEES AND EXPENSES


The amounts charged by agents are not set by law. You can negotiate with the agent about the amounts of any commissions, fees or other expenses that you may be required to pay.


Before signing an agreement, it is a good idea to talk to a few agents and compare their prices. Ask each agent for a printed list of their fees and commission rates and the expenses they charge.

Disclosure of rebates and discounts


The agency agreement may require you to pay the agent for certain expenses in relation to the sale of your home, such as advertising, auctioneer’s fee, or any other services the agent may arrange for you, such as cleaning, decorating or landscaping.


Sometimes the amount the agent has to pay for the service is less than what you are being asked to pay. This can occur if the agent receives a commission or discount from the provider of the service for being a regular customer – for example, some newspapers pay a commission to the agency at the end of the year based on how much advertising was placed.


The agency agreement must state the amounts or estimated amounts of any such commissions or discounts and from whom they are received. You can negotiate with the agent about whether you should pay the full amount.


The agency agreement usually has a specified period (a 'fixed term') during which the agreement cannot be ended unless you and the agent both agree. If the agreement is open ended (that is, it does not have a fixed term) it must state how the agreement can be ended. The length of any fixed term is negotiated between you and the agent, there is no minimum or maximum set term. The fixed term will depend on how long you and the agent think it will take to sell the property.


If the fixed term is longer than 90 days, you can give the agent 30 days written notice to end the agreement after 90 days. Of course, if the fixed term has less than 30 days left to run, you can just give notice to end the agreement at the end of the fixed term - check your agreement to see how much notice you need to give. If you are not sure how to end the agreement, you should seek legal advice. If you are not happy with an agent's services, it is important to properly end your agreement with them before signing up with another agent. Otherwise both agents may charge you commission when the property is sold.


THE SALE PROCESS


THE CONTRACT OF SALE


A residential property cannot be advertised for sale until a Contract of Sale has been prepared. The contract must contain a copy of the title documents, drainage diagram and the Zoning Certificate (s 149) issued by the local council. Property exclusions must also be included and a statement of the buyer’s cooling off rights must be attached. The draft contract must be available for inspection at the agent’s office. It is important that you consult your solicitor or conveyancer about preparing the contract to make sure that everything is in order.

Contract exchange


Exchanging sale contracts is the legal part of selling a home. There wil be two copies of the sale contract: one for you and one for the buyer. You each sign one copy before they are swapped or 'exchanged'. This can be done by hand or post and is usually arranged by your solicitor, conveyancer or the agent. At the time of the exchange, the buyer will be required to pay a deposit, usually 10% of the purchase price.


The contract exchange is a critical point in the sale process:

The buyer or seller is not legally bound until signed copies of the contract are exchanged.

Buyers of residential property usually have a cooling off period of five working days following the exchange of contracts during which they can withdraw from the sale.


If the agent arranges exchange of contacts, the agent must give copies of the signed contract to each party or their solicitor or conveyancer within 2 business days.


The cooling off period can be waived, reduced or extended by negotiation.


There is no cooling off period for sellers. Once contracts have been exchanged, sellers are generally bound to complete the agreement.

There is no cooling off period when purchasing at auction.


SETTLEMENT


Settlement usually takes place about six weeks after contracts are exchanged.


SELLING AT AUCTION


In recent years, auctions have become an increasingly popular way to sell or buy residential property. But before you decide to go down that path, do your homework and familiarise yourself with the process and what it involves.


SETTING A RESERVE PRICE


The reserve price is the lowest amount you are willing to accept for your property. Before bidding begins, advise your agent what you nominate as the reserve price. This is usually not told to the prospective buyers.


If the highest bid is below the reserve price, the property will be 'passed in'. You will then either try and negotiate a price with interested bidders or put the property back on the market.


If the bidding continues beyong the reserve price, the property is sold at the fall of the auctioneer's hammer.


SUCCESSFUL BIDS


The successful bidder must sign the sale contract and pay you a deposit on the spot (usually 10%). There is no cooling-off period for anyone who buys a property at auction. If the property is passed in at auction but contracts are exchanged on that same day, the cooling-off period still does not apply.


BUYING AND SELLING


Whether you’re buying or selling a home or property, knowing how to do it right can save you time, money and headaches.


Visit the Buying section if you are intending to buy and new home. You will find information on a range of topics including getting finance and property inspections.


On 1 September 2003 new property laws were introduced to provide consumers with better protection against unfair and unethical industry practices.


PROTECTION FOR BUYERS AND SELLERS


NSW consumers buying or selling residential property will be better protected against unfair and unethical industry practices by laws that commenced on 1 September 2003.


In this substantial overhaul of the property industry, consumers will benefit from new ethical standards set for industry, transparent auction procedures and the introduction of requirements to ensure they are fully informed about the terms and conditions of the agency agreement before it is signed.


POSITION POSITION POSITION


A key reform has been designed to ensure consumers are fully informed about the different types of agency agreements that exist and what their 'position' is under each of them.


Before an agent can sell a property, the owner must sign a contract with them, called an agency agreement. An agency agreement is a legally binding contract, with specific terms and conditions that consumers should be aware of before signing.


Agency agreements must include details on the source and estimated amount of all rebates, discounts or commissions that the agent may receive in connection with expenses payable by the property seller.


Agents must give sellers of residential property a copy of a fact sheet about agency agreements. The fact sheet explains the different types of agreements, what each must contain and how to properly end an agreement in the event of wanting to change agents. It also includes important information about the new cooling-off period for agreements, a key reform that ensures consumers have more time to be certain they want to proceed.


An agent can give property sellers the fact sheet up to one month before the agreement is signed. Consumers should use that time to read both the fact sheet and the agreement thoroughly before signing. View or download a copy of the Agency agreements fact sheet in PDF format (size: 16k).


DUMMY BIDDING OUTLAWED


The procedures at residential and rural property auctions have been tightened through a number of reforms that make the process fairer and more transparent for consumers.


To deter the practice of dummy bidding, all potential bidders at auctions held after 1 September have to give the selling agent their personal details - name, address and proof of identity. These details will be recorded by the agent in a Bidders Record. At the auction, registered bidders will be given a number that must be displayed when a bid is made. Auctioneers are not permitted to accept a bid from a person unless they are registered.


Registering for an auction does not mean you must bid - it simply gives you the right to bid.


To ensure bidders are aware of the new registration arrangements, agents are required to give them a copy of a fact sheet explaining the new procedures. View or download a copy of the Bidder's guide fact sheet here in PDF format (size: 16k).


Other reforms to auction laws include:


MORE REALISTIC REAL ESTATE


The issue of selling price estimates has long been a sore point with consumers and ethical agents. In the past, some agents gave consumers inflated estimates of the value of property in order to obtain a listing.


It is now an offence for an agent to quote to a property owner an estimate of the selling price that does not reflect their true estimate. It is also an offence to publish an advertisement or a make a statement in the course of marketing a property that falsely understates the estimated selling price to potential buyers.

The Commissioner for Fair Trading has the power to ask an agent to justify any estimate given. The purpose of this reform is not to penalise agents in a situation where the eventual sale price exceeds the agent's genuine estimate, but to ensure that agents do not deliberately understate their estimated selling price in order to deceive hopeful buyers.

The marketplace is constantly changing and it is vital that agents keep abreast of the latest developments. The reforms make it compulsory for all licensees and certificate holders to undertake continuing professional development courses throughout their career to improve the quality of service they deliver.


Poor supervision of employees can cause financial distress for consumers. For this reason, new obligations have been imposed to ensure licensees are responsible for the acts of their employees. Licensees now have increased responsibility for the actions of their employees. Appropriate supervision is vital, especially when large sums of money and trust accounts are involved.


The Property, Stock and Business Agents Act 2002, to took effect from 1 September 2003, ushers in important changes to the way property agents conduct business in NSW.


NEW QUALIFICATION REQUIREMENTS FOR LICENCES AND CERTIFICATES


The current education and training requirements for obtaining a licence or certificate are being replaced. A more flexible, competency-based approach is being adopted. It concentrates on the skills needed to do a particular job and recognises that competency can be gained in various ways.


This can include undertaking specialist courses, on-the-job learning or assessment by registered assessors.


AUCTIONEER ACCREDITATION


Under the new Act, auctioneers will need additional qualifications. All real estate and stock and station agent licences will now be subject to the condition that the holder must not act as auctioneer unless their licence is specifically accredited. People who have obtained the relevant competency, or completed approved training, can apply to have their licence accredited – either when applying for their licence or later.


The qualifications cover competency in the areas of auction conduct and ethical practices. This change was introduced to counter a

discernible drop in auctioneering standards over the past decade.


The current law means that only one of the directors need hold an

appropriate licence. But business operations will still have to be supervised by a nominated licensee-in-charge.


CONDITIONAL LICENCES


Conditions can now be imposed on licences and they will appear on the licence or certificate. For example, a conditional licence may indicate that the licensee is restricted to acting as a buyer’s agent only.


ON-SITE RESIDENTIAL PROPERTY MANAGERS


This licence category is expanded under the Act to include caretaker-managers of residential premises. On-site residential property managers will continue to be required to own and reside in a dwelling in the premises they manage.

August 2003

CHANGES TO PROPERTY AGENTS LAW


Continuing professional education will become a condition of annual licence and certificate renewals. Agents need a wide range of skills to deliver their services and keep abreast of current developments in their

fields. Continuing professional development acknowledges the changing nature of the marketplace and provides agents with the

training they need to meet the demands of the various types of agency work.


A copy of the Commissioner for Fair Trading’s Guidelines for Continuing Professional Development for the Property Agency Industry

can be found at:


www.fairtrading.nsw.gov.au


AGENCY CONDUCT


Poor supervision of employees can cause financial distress for consumers. It is a serious problem. For this reason, new obligations

have been imposed to ensure licensees are responsible for the acts of their employees.


The Act requires a licensee to be in charge of each place of business unless an exemption has been granted by the Commissioner for Fair Trading. Matters to be considered will be specified under the Property Stock and Business Agents Regulation 2003.


Appropriate supervision is vital, especially when large sums of money and trust accounts are involved. Proper supervision also helps

promote ethical conduct.


DEALING WITH CLIENTS


The new Act introduces important reforms designed to ensure that clients are fully informed about the agency relationship.


Standard terms for agency agreements:




If you, or anyone associated with you, purchases property you are offering for sale in your capacity as agent, then the new legislation demands you make that fact known up-front and get the client’s consent

in writing. You will also need to get the client’s written consent to be paid a commission for the sale. A breach of these requirements can lead to up to 2 years imprisonment.


DISCLOSURE WHEN PROVIDING FINANCIAL ADVICE


Where agents give general financial advice as an incidental part of selling land, they will be required to give the following information and warnings:


soon be available from

ESTIMATED SELLING PRICE


This issue has long been a sore point with consumers and ethical agents. In the past, some agents gave consumers inflated estimates of the value of property in order to obtain a listing. The new Act makes it an offence for an agent to quote to a property owner an estimate of the selling price that does not reflect their true estimate.


It is also an offence to publish an advertisement or make a statement in the course of marketing a property that falsely understates the estimated selling price to buyers.


The Commissioner for Fair Trading has the power to ask an agent to justify any estimate given. A statement in the agency agreement of the agent’s estimated selling price will be recognised as evidence of the

agent’s true estimate. This substantiation provision applies to both auction and private treaty sales.


The purpose of the substantiation power is not to penalise agents in a situation where the eventual sale price exceeds the agent’s genuine estimate, but to ensure that agents do not deliberately understate their

estimated selling price in order to deceive hopeful buyers.


ALTERED AUCTION PROCEDURES FOR RESIDENTIAL PROPERTY AND RURAL LAND


The Act introduces significant changes to auction procedures in order to address consumer concerns about the fairness of auctions.


BIDDERS RECORD


To deter the practice of dummy bidding, all bidders at auctions will have to be registered in a Bidders Record for the auction. They will need to supply their personal details – name, address and proof of identity. Once registered, bidders must be given a number to display when bidding.


Auctioneers are not permitted to accept a bid from a person unless they are registered.


The selling agent will be responsible for keeping the Bidders Record and verifying the identification details of bidders.


SINGLE VENDOR BID


The new Act restricts vendors to a single bid. This can be used, for example, to initiate the auction process. The

right to use the vendors bid must be included in the conditions of sale. When the auctioneer accepts a bid from the vendor or any person acting on behalf of the vendor, the auctioneer must clearly state that it is the

vendor bid.


AUCTION GUIDE FOR CONSUMERS


Agents will be required to supply consumers with an Auction Bidder’s Guide when they register their

details in the Bidders Record. The guide explains the auction process for buyers.


CHANGES TO DISCIPLINARY PROVISIONS


GROUNDS FOR DISQUALIFICATION


The Act introduces additional grounds for disqualifying a person from holding a licence. These include:



SIMPLIFIED PROCEDURES


Disciplinary action is now the responsibility of the Commissioner for Fair Trading. This will enable the Commissioner to take prompt and effective action to protect consumers. The Commissioner will be able to initiate disciplinary action by issuing a notice to show cause. A show cause notice gives the agent 14 days to respond if they believe that disciplinary action should not be taken against them.



Show cause proceedings will be commenced in circumstances where, for example, the licensee has failed to comply with a provision of the Act or is no longer a fit and proper person to continue to hold a licence. If the Commissioner is satisfied that the grounds for disciplinary action as specified in the show cause notice would, if established, justify suspension or cancellation, then a licence or certificate of registration can be suspended immediately to reduce the potential for ongoing harm to consumers.


The Commissioner will have the power to appoint a qualified manager to the business to ensure that existing clients are not disadvantaged. Disciplinary action by the Commissioner may be reviewed by the

Administrative Decisions Tribunal.


UNLICENSED TRADING


The new Act enhances the power of the Office of Fair Trading to prosecute for unlicensed trading. Fair Trading

investigators have been given the right to enter premises to inspect the books and records of a person suspected of unlicensed trading. Access to the Compensation Fund has also been extended to clients who have

suffered loss from their dealings with an unlicensed person acting as an agent.


PENALTIES


All penalties have been increased. For example, a person who commits trust account fraud will be guilty of an indictable

offence and liable to imprisonment for a term of up to 10 years. A maximum penalty of $22,000 will apply for unlicensed trading by a corporation and $11,000 for an individual. Similar penalties apply for

collusive practices at auction sales.


Disciplinary action by the Commissioner, as well as decisions about licence applications and conditions, may be reviewed by the

Administrative Decisions Tribunal.


PROFESSIONAL INDEMNITY

INSURANCE


Implementation of the requirement for licensees to hold professional indemnity insurance is being deferred until 2004 to allow full consultation with industry and other stakeholders.


PUBLIC REGISTER


A register of the licences and certificates issued under the Act will continue to be maintained by the Office of Fair Trading. In

addition to licence and certificate details, the Register will also include information about disciplinary action taken against the holder,

payments from the Compensation Fund and other matters. Members of the public are entitled to inspect any entry in the Register.


CONVEYANCING


If you want to buy or sell a home, land or investment property you’ll have to sign a contract. The legal work involved in preparing the sales contract, mortgage and other related documents, is called

conveyancing. It’s possible to do your own conveyancing, however, most people get a licensed conveyancer or solicitor to do the work for them.


WHO CAN DO CONVEYANCING WORK?


You have three options to get your conveyancing done:



Before you start organising your conveyancing, it’s important to do

your homework first.


USING A CONVEYANCER


In NSW, conveyancers must be licensed with the Office of Fair Trading. Most conveyancers hold an unrestricted licence that allows them to perform the full scope of conveyancing work for residential, commercial and rural property. Conveyancers are licensed to do legal work such as preparing documents, giving legal advice on contracts and explaining the implications. Before you decide to use a particular conveyancer,

check if they are licensed with us first.


Licensed conveyancers must have professional indemnity insurance to protect you in case they make a mistake or are negligent in their work. If they are dishonest with the money you have entrusted to them, you may

have access to the Compensation Fund administered by the Office of Fair Trading.


USING A SOLICITOR


While conveyancers and solicitors are equally qualified to do conveyancing work, solicitors can also give you legal advice about other matters. Solicitors, like licensed conveyancers,must also have professional indemnity insurance for your protection. Here’s how to find a solicitor who does conveyancing:



DOING YOUR OWN CONVEYANCING


Doing your own conveyancing can be risky because you can’t get the same insurance available to a licensed conveyancer or solicitor.This means that if you make a mistake you are responsible and there’s

nowhere you can go for financial compensation.


For example, your solicitor or conveyancer may fail to make sure the vendor has disclosed everything they are legally required to, such as an order to demolish the place. If you suffer loss as a result of this negligence you may be able to take action against them – that’s the difference!


It’s advisable to buy a do-it-yourself conveyancing kit from one of these

organisations:


FTR10 May 2003

DEFINITION


Conveyancing is a term that describes the legal work involved

in transferring property ownership.


THE CONVEYANCING PROCESS


The conveyancing process can involve the following steps:


COSTS


Fees will vary between solicitors and conveyancers as there is no official charge for conveyancing. In addition to a legal service fee you will usually be charged for ‘disbursements’. These can include:


Costs other than legal fees and disbursements will usually include:



VENDOR FINANCING


If you are a first home buyer don’t let the dream of your own home make you sign a contract you might regret. Vendor financing arrangements sound, and seem, simple, but they have the potential to deprive vulnerable people of their hard-earned savings.


For people trying to buy their own home the offer of signing a contract with a seller, without a mortgage, to make regular payments to the seller seems like an offer too good to be true – and often this is precisely

the case.


This option being laid at the feet of first home buyers operates under a number of names, the most common being:



COMMON CONCERNS WITH VENDOR FINANCING


If you are stuck in the rental cycle because of rapidly increasing house prices vendor financing might seem to be the only way out – but there are some common concerns you should be aware of:



POTENTIAL FOR TROUBLE


Vendor financing is also being promoted in many wealth creation schemes. The ‘get rich quick seller’ may have multiple properties heavily financed. If one or two properties do not sell or they are empty for long periods, the seller’s heavy borrowing strategy could collapse leaving the buyer homeless after having spent thousands or hundreds of thousands of dollars.


Basically vendor financing occurs where the vendor is in a position to obtain finance for a property purchase, or otherwise owns the property. They then seek a buyer to enter into a finance contract for the property with them. This contract may include an interest rate that is a higher percentage than the market rate. The buyer makes the payment

to the vendor, the vendor pays whatever is required to his lender - and the rest is profit.


In addition to the regular payments, the seller may also take a deposit from the buyer, and in many cases the first home owners grant is used for this purpose.

FTR36 March 2004

Repayments, to the seller, are usually a large percentage of the buyer’s income. If the buyer’s income is adversely affected by employment problems, illness, or anything else and a payment deadline cannot be met, the vendor can then terminate the contract and the buyers are evicted.


The vendor may then place the property back on the market looking for another buyer. The original buyer may lose all the money that they have previously paid. The Office of Fair Trading is aware of a case where a single property has been sold four times in this way in a little more than 12 months.


Vendor finance is not illegal. It may suit some people, but anyone considering it as a way of purchasing a home should seek

expert and independent legal opinion.


Many rent-to-buy deals advise buyers to refinance the home to buy out the vendor. Payments to the vendor do not classify as a saving record for credit application and consideration, so refinancing may prove

extremely difficult.


CASE STUDIES


SCENARIO 1 - BUYER IS INJURED AND CANNOT EARN INCOME.


Frank buys a home under a vendor finance contract. He pays a $6,000 deposit and is contracted to pay $1,100 per month. After 18 months of the contract Frank is injured at work, his income stops and he cannot

make the monthly payments.


The vendor exercises his right to terminate the contract because a due payment is not made. Frank is evicted from the property and loses the $25,800 paid in deposit and instalments.


Frank’s only recourse to any claim on the property is through legal proceedings. With no income, Frank cannot afford to engage

legal assistance.


SCENARIO 2 – VENDOR (SELLER) GOES BROKE AND BANK TAKES ACTION


Jane buys a home under a vendor finance contract. She paid an $8,000 deposit and has repayments of $950 per month. A lending institution has a mortgage over the property the vendor sold to Jane. Three

years into the contract the vendor’s business goes bad, and the lending institution enforces its security over the property that has been sold to Jane.


The institution sells the property to recover its debt from the vendor.


Jane has paid a total of $42,200, but has no equity in the property. Jane’s only recourse is legal action, but Jane may not be able to

recover any of the money she has outlaid.


SCENARIO 3 – INTEREST RATES INCREASE


Dave and Deidre’s loan applications are rejected by lending institutions. They enter into a vendor finance contract of $250,000 over 30 years at an initial interest rate of 7.5%.Their repayments begin at $1,748 per

month.


Market interest rates increase, and Dave and Deidre’s contract ensures they pay 2.5% higher interest than market rates. When market rates reach 7.5% Dave and Deidre are paying 10%.Their repayments increase to $2,190 per month.


They struggle to pay this and miss a payment. Under the vendor finance contract the vendor can terminate the contract, and Dave and Deidre may find themselves forced out of their home, with no right to claim

any money paid to this point.


Because of the unusual and complex nature of these contracts, you are urged to seek independent legal advice before you make any verbal or written commitments.




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