overview of the agents act

OVERVIEW OF THE AGENTS ACT – REAL ESTATE

On 1 September 2003, the Property, Stock and Business Agents Act 2002 took effect and brought in important changes to the way property agents conduct business in NSW.
The Act supports consumer confidence in the industry by the introduction of requirements aimed at raising the competency and professionalism of agents. If you are associated in any way with the property industry in NSW, then it is vital you familiarise yourself with the Act and how it affects your day-to-day business operations.

QUALIFICATION REQUIREMENTS FOR LICENCES AND CERTIFICATES

The previous education and training requirements for obtaining a licence or certificate have been replaced with a more flexible, competency-based approach. 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. For more information, go to the entry requirements page.

AUCTIONEER ACCREDITATION

Under the Act, auctioneers need qualifications.
All real estate and stock and station agent licences are now 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. For more information, go to the auctioneer qualifications or the auctioneer accreditation page.

CORPORATE LICENCES

Only one of the directors need hold an appropriate licence. Business operations have to be supervised by a nominated licensee-in-charge.

CONDITIONAL LICENCES

Conditions can 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 under the Act includes caretaker-managers of residential premises. On-site residential property managers continue to be required to own and reside in a dwelling in the premises they manage.

A PROFESSIONAL INDUSTRY

Continuing professional education is 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. For more information, go to the continuing professional development page.
AGENCY CONDUCT
Poor supervision of employees can cause financial distress for consumers. It is a serious problem. For this reason, 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. Appropriate supervision is vital, especially when large sums of money and trust accounts are involved. Proper supervision also helps promote ethical conduct. The Commissioner for Fair Trading may issue guidelines from time to time about what constitutes proper supervision.
DEALING WITH CLIENTS
The Act introduced important reforms designed to ensure that clients are fully informed about the agency relationship.
STANDARD TERMS FOR AGENCY AGREEMENTS
Mandatory terms for agency agreements make it easy for home owners to understand their rights and obligations.
CONSUMER GUIDE
Agents are required to give residential land vendors a copy of an approved factsheet. View or download a copy of the Agency Agreements factsheet in PDF format (size: 16k) before the agreement is signed. This will help prospective clients make informed decisions.
COOLING OFF PERIOD
A cooling off period of one business day, including Saturdays, applies 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 are 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. Now, if agents want to retain entitlement to these benefits they must obtain the agreement of their clients.
DECLARING INTERESTS
The 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 legislation demands you make that fact known up-front and get the client’s consent in writing. You 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. To access the approved form for declaring a beneficial interest and other forms under the Act.
DISCLOSURE WHEN PROVIDING FINANCIAL ADVICE
Where agents give general financial advice as an incidental part of selling land, they are 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 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 is 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.
AUCTION PROCEDURES
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 have to be registered in a Bidders Record for the auction. They 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 is responsible for keeping the Bidders Record and verifying the identification details of bidders.
SINGLE VENDOR BID
The 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.
BIDDER'S GUIDE
Agents are required to supply consumers with a fact sheet prior to commencement of the auction. View or download a copy of the Bidder’s guide The guide explains the auction process for buyers.
CHANGES TO DISCIPLINARY PROVISIONS
GROUNDS FOR DISQUALIFICATION
The Act introduced 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 enables the Commissioner to take prompt and effective action to protect consumers. The Commissioner is 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 has the power to appoint a qualified manager to the business to ensure that existing clients are not disadvantaged.

PENALTIES

Penalties under the current Act are higher than under the previous Act. 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 may be reviewed by the Administrative Decisions Tribunal.
UNLICENSED TRADING
The 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 also includes clients who have suffered loss from their dealings with an unlicensed person acting as an agent.

PUBLIC REGISTER

A register of the licences and certificates issued under the Act is maintained by the Office of Fair Trading. In addition to licence and certificate details, the Register includes 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. Telephone access to the Register is available by calling 9619 8733.