FAIR TRADING ACT 1968 (NSW)
NB
The law applying to real estate and agents is in a continua state of
flux. You should ascertain the current status of the law before relying
on the following article
The NSW Fair Trading Act 1968 has parallel provisions to the Consumer Law of Australia (CLA). This allows consumer protection against bodies and individuals that the CLA do not cover because of constitutional restraints. The equivalent sections to those affecting the property profession under the CLA (as at the date of writing) are shown below:
(CLA 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.
(CLA 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
(CLA 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 agentto
sell a home in New South Wales, an agent must have a real estate
agent’s licence issued by the Office of Fair Trading. Youshould
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:
make sure they have a valid licence
get a list of all their fees
find out if they have a good knowledge of your area
ask if they adhere to a code of ethics.
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 yourproperty, 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:
the services the agent will provide for you
the amounts of any fees or commission you agree to pay for those services
the circumstances in which the agent is entitled to payment – for example, commission is usually payable only when the property is sold
how and when payment is to be made – for example, whether the agent can deduct their commission from the deposit money paid by the buyer
warnings about circumstances in which you might have to pay commission to more than one agent.
the extent of the agent’s authority to act for you – for example, whether the agent is permitted to exchange a sale contract on your behalf or make changes to the sale contract.
the agent’s estimated selling price or price range for the property.
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 sheetbefore 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 aregular
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 thefull 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 ofcommission
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 yousign
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:
is addressed to the agent (use their name as given in the agency agreement),
states that you are rescinding the agreement, and
is signed by you (and any other person named on the agreement as a principal) or by your solicitor/s.
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 youhave 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:
a copy of the proposed (unsigned) agency agreement, and
a copy of the fact sheet.
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 bindingand 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:
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 contracts, 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.
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 yourrights 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:
If your agent is a member of a professional association, contact that association. They can be helpful in resolving disputes.
You can also seek legal advice from a solicitor or the Chamber Magistrate at your nearest Local Court.
If your complaint concerns your solicitor or licensed conveyancer, you can lodge a complaint with the Office of the Legal Services Commissioner.
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:
the services the agent will provide for you
the amounts of any fees or commission you agree to pay for those services.
the circumstances in which the agent is entitled to payment – for example, commission is usually payable only when the property is sold.
how and when payment is to be made – for example, whether the agent can deduct their commission from the deposit money paid by the buyer.
warnings about circumstances in which you might have to pay commission to more than one agent.
the extent of the agent's authority to act for you – for example, whether the agent is permitted to exchange a sale contract on your behalf or make changes to the sale contract
the agent's estimated selling price or price range for the property.
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:
auctioneers must be accredited
vendors (the person selling the property) will be restricted to a single bid
when the auctioneer accepts a vendor's bid, they must clearly state that it is the vendor's bid.
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 anappropriate 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 theirfields. Continuing professional development acknowledges the changing nature of the marketplace and provides agents with thetraining 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 obligationshave 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:
New mandatory terms for agency agreements will make it easier for home owners to understand their rights and obligations.
Consumer guide: Agents
will be required to give residential land vendors a copy of an approved
Guide to Agency Agreements before the agreement is signed. This will
help prospective clients make informed decisions.
Cooling off periods: A cooling off period of one business day, including Saturdays, will apply to all agency agreements for the sale of residential property or rural land. This gives consumers time to read and understand the terms of the agreement, seek independent advice and consider whether the services and fees are appropriate.
Disclosure of benefits: Licensees will be required to disclose in the agency agreement the source and estimated amount of all rebates, discounts or commissions they receive in relation to expenses payable by the client.
These usually involve costs associated with advertising and maintenance. In the past, many consumers remained unaware of the existence of these benefits and were charged the full costs of these services. In future, if agents want to retain entitlement to these benefits they must obtain the agreement of their clients.
Declaring interests: The new Act prohibits real estate agents and their sales employees from obtaining or being connected to the obtaining of a beneficial interest in the sale of a property, unless agreed to by the client.
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:
warnings that the advice is general advice, and has not been prepared taking into account the individual circumstances of the person to whom it is given
warnings that intending purchasers should assess the suitability of any investments in the property in light of their own individual needs and circumstances, which they can do themselves or by consulting an appropriately licensed person.
the provision of information relating to any conflicts of interest of the adviser (such as if the adviser is also acting for the vendor or the developer)
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 thevendor bid.
AUCTION GUIDE FOR CONSUMERS
Agents will be required to supply consumers with an Auction Bidder’s Guide when they register theirdetails 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:
being an undischarged bankrupt or a person involved in the management of a corporation that is being wound up or is
in the hands of an administrator
failing to pay a contribution to the Compensation Fund
failing to pay a debt due to the Crown for money paid out of the Compensation Fund
failing to pay a penalty incurred as a result of disciplinary action
failing to provide an auditor’s report to the Commissioner for Fair Trading
having a conviction for dishonesty in the last 10 years
a conviction of licence/certificate lending.
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 sh w 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 indictableoffence 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 forcollusive practices at auction sales.
Disciplinary action by the Commissioner, as well as decisions about licence applications and conditions, may be reviewed by theAdministrative 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. Inaddition 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:
licensed conveyancer
solicitor
do it yourself.
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:
look up the Yellow Pages (under ‘Conveyancing Services’)
call the Law Society of NSW on 9373 7300 or 1800 357 300
(outside Sydney)
do a search for specialists in ‘property law’ in your local area
on the Law Society’s Web site -
www.lawsocnsw.asn.au/directory/members/
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:
Law Consumers’Association Tel. 9267 6154
Australian Property Law Kits. Tel. 1800 252 808.
FTR10 May 2003
DEFINITION
Conveyancing is a term that describes the legal work involvedin transferring property ownership.
THE
CONVEYANCING PROCESS
The conveyancing process can involve the following steps:
arranging building and pest inspections
examining a strata inspection report if the property is part of a strata scheme
arranging finance if necessary
examining and exchanging the contract of sale
paying the deposit
arranging payment of stamp duties
preparing and examining the mortgage agreement
checking if there are outstanding arrears or land tax obligations
finding out if any government authority has a vested interest in the land or if any planned development could effect the
property (eg. local council, Sydney Water, Roads and Traffic Authority)
finding out any information that may not have been previously disclosed such as a fence dispute or illegal building work
calculating adjustments for council and water rates for the property settlement
overseeing the change of title with the Land and Property Information NSW
completing any final checks prior to settlement
attending settlement.
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:
a title search
certificate fees charged by authorities with responsibility for water, electricity, roads, schools etc.
photocopying
registering the mortgage.
Costs
other than legal fees and disbursements will usually include:
building and pest inspections
survey report
establishment of mortgage
home building insurance
valuation fees
mortgage insurance
stamp duty and mortgage duty
council and water rates.
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:
rent-to-buy
vendor finance
vendor terms; or
wrapping
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:
Legal title remains with the seller
If the seller doesn’t make regular payments on their own mortgage the financier could sell the property and throw the buyer out.
The buyer may have what is known as an ‘equitable interest’ in the property – but to have this equitable interest recognised, the buyer would have to commence expensive legal proceedings and be successful.
The buyer will not obtain any equity in the property until the final payment is made, which may be years into the future.
The interest rate set by the vendor may be several points higher than the rate charged by other lenders.
The buyer is not able to alter, extend or rent the home without the approval of the seller.
The seller may be able to terminate the contract, and not return any moneys to the buyer, when a single payment is missed.
The buyer is not given any of the protection or benefits that come with a residential tenancy (rental) agreement.
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 paymentto
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 seekexpert
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 cannotmake
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 torecover 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 claimany
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.