The new “Underquoting” law comes into effect on 1 May 2017 – are you ready?

By John Turnbull, Partner

Most licensed estate agents in Victoria will be aware that Consumer Affairs Victoria (“CAV”) has been particularly busy over the last 12 months, having conducted investigations into the selling practices of over 100 estate agencies across the state.

Most licensed estate agents in Victoria will also be aware that the state government introduced the “Estate Agents Amendment (Underquoting) Act” during the middle of last year which sought to implement a number of changes to the Estate Agents Act 1980 (Vic) (the “Act”).

These changes have particular application to section 47A of the existing law as it applies to agent’s estimates and representations to prospective buyers through advertising.

However, some estate agents may not be aware that the proposed changes (subsequently passed as law) have now been fast-tracked to take effect from 1 May 2017.

The fast tracking of these legislative changes continues the Victorian government’s resolve to “clean up the real estate industry” with the new provisions specifically targeted at increasing the level of statutory compliance required by estate agency businesses.

With less than 8 weeks before the new provisions become new law, estate agency owners must ensure that all of their staff are fully aware of their new statutory obligations, whilst continuing to maintain compliance with the ongoing requirements under the Act.

Underquoting Amendment Act – new obligations

Some proposed changes of particular importance include the obligation for all estate agents to:

  • not advertise any property:
    • for a price range of greater than 10%; or
    • with prices modified by words or symbols (i.e. such as “from”, “offers over”, “starting at”, or “+”);
  • prepare and keep a statement of information (to be included with any advertising, at inspections, and provided upon request), which includes:
    • an indicative selling price (which must not be less than the estimate in the engagement/appointment, a rejected written offer, or a price that the seller has advised is not acceptable);
    • the median selling price in the same suburb; and
    • details of 3 comparable properties (if available);
  • promptly update any advertising if the estimated selling price is revised or if the seller has rejected a written offer for a higher price; and
  • provide to the Director of CAV on request any information or documents to substantiate the estimate of the selling price, or the indicated selling price and/or comparable properties included in a statement of information. 

Estate Agents Act – ongoing obligations

Whilst ensuring their compliance with the new provisions soon to take effect, estate agents must also ensure they continue to comply with the existing provisions that continue to apply. Some of the common mistakes that we see include failing to:

  • correctly set out the legal entity acting as the appointed agent on the exclusive sales and auction authority (the “Authority”). The failure to identify the correct legal entity can disentitle the selling agent to claim a commission for the sale of a property;
  • correctly disclose in the Authority the amount of commission payable to the agent on the sale of a property. The commission must be disclosed in numbers and words, and must also refer to either the seller’s reserve or any other amount referred to in the Authority (i.e. a figure within the agent’s estimate). Too often agents calculate the commission off a figure unrelated to any amount on the Authority (i.e. a “best case” sale scenario);
  • provide the seller with a rebate statement along with the Authority, irrespective of whether or not the agent is claiming a rebate (in which case, disclosure is still required under the Act); and
  • disclose to the seller (as part of the Authority) where complaints can be directed to and provide an appropriate means for compliant handling.

It is fundamentally important that all Victorian estate agents ensure they are ready come the 1st May. Similarly agents must ensure they get the basics right and properly comply with the existing disclosure obligations under the Act as along with the pecuniary penalties that are attached to non-compliance, an invalid Authority often means the estate agent is not entitled to claim a commission.

Given the level of attention the industry has received from CAV over the last 12 months, it is unlikely the Regulator will afford any leniency towards any estate agent who runs afoul of their statutory obligations, particularly once the new provisions come into effect from 1 May.

For further information, please do not hesitate to contact us.

Get the latest news insights and articles straight to your inbox, simply enter your details.

Form
  • First Name
  • Last Name
  • Email

Private Advisory

Selling or Buying a Business? New CGT Rules Apply to Earnout Arrangements