The Property Stock and Business Agents Amendment (Property Reports and Exemption) Regulation 2016 (NSW) will commence operation on 15 August 2016.
The regulation introduces a new clause, 46A, to the Property Stock and Business Agents Regulation 2014. This clause exempts real estate agents from regulation under the Property Stock and Business Agents Act 2002 (the Act) when undertaking commercial property agency work on behalf a large commercial property owner or of a related entity.
The definitions of the key terms in this clause are outlined below:
A corporate real estate agent which is either owned or controlled by the property owner, forms part of the same corporate holding group as the property owner or, less likely, controls the property owner, is a related entity to which the new exemption applies.
A large commercial property owner is an entity that owns a property that has an aggregate market value of $40 million or more, or an aggregate floor area of more than 20,000 square metres.
Commercial property agency work encompasses selling, purchasing, exchanging, leasing, managing or otherwise dealing with property that is not residential property or rural land.
Real estate agents are currently subject to regulation when undertaking property work on behalf of commercial property owners. For example, they must be licensed, have professional indemnity insurance to cover for certain civil liabilities that arises from their conduct as an agent, undertake regular professional development, and operate their trust accounts in accordance with the requirements of the Act.
However, this new regulation exempts real estate agents from operation of the Act when acting for a related entity or for large commercial property owners.
This change has been the subject of discussion over several years. Some believe it to be unnecessary for real estate agents engaging in commercial property agency work to be regulated when working for related entities or for clients who might be regarded as having sufficient commercial expertise and influence not to need the protections afforded by the Act.
Contrary arguments point to the fact that it is not just the agent’s principal with whom the agent deals. Buyers and lessees ranging from large corporates to sole traders have significant interaction with commercial real estate agents and frequently entrust not insignificant sums to them by way of deposits or rent. The removal of the protective operation of the Act in this sector of the real estate economy may not best serve the interests of the community in the long run.
The new regulation will only completely deregulate those commercial real estate agents who only undertake work for related entities or large commercial property owners. The remainder of commercial agents’ activities will continue to be regulated. It may be that these changes will affect only a small part of the commercial agency market.