By John Turnbull, Partner
On Tuesday of last week the much-anticipated new “Underquoting” Bill was read for a second time in the Victorian State Parliament following its introduction earlier last month. The Bill seeks to amend the Estate Agents Act  by introducing several measures designed to, in the words of Ms Marlene Kairouz the new Minister for Consumer Affairs, “act on areas of poor practice and complaints against estate agents”.
Ms Kairouz has picked up where former Consumer Affairs Minister Jane Garrett left off in late 2015 when she sent a clear message to the industry by announcing that legislative reform was coming to “change the culture of [the real estate] industry”. This message ultimately translated into a broad number of investigations undertaken by CAV into the practices of several prominent estate agencies across metropolitan Melbourne, which culminated into proceedings being issued against one high profile inner city agency in the Federal Court.
As an ironic complement to CAV’s investigations, the government foreshadowed its intention in early 2016 to amend the Estate Agents Act, notwithstanding that the Federal Court proceedings which are currently on foot relate to contraventions of the Australian Consumer Law, a law governed by Federal jurisdiction.
Indeed the proposed amendments to the Estate Agents Act, in particular to section 47A, introduce a number of new prescriptive measures that set out specific requirements for estate agents and agent’s representatives when both listing for sale and marketing a residential property on behalf of a seller.
These measures include:
- No advertising for properties with a price range of more than 10%.
- The removal of any references in advertising that modifies the price by the use of words or symbols, such as “from”, “over”, “starting at” or “+” (note: it seems however that “price on application” or “contact agent” in advertising has not been prohibited, although if asked by prospective buyers, the agent must quote the estimated selling price).
- All agents must prepare and keep a statement of information (that is 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, 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).
- An agent must promptly update any advertising if the estimated selling price is revised or if the seller has rejected a written offer for a higher price.
- Upon request, the Director of CAV may seek information or documents to substantiate the estimate of the selling price, or the indicated selling price and comparable properties included in a statement of information.
There also remain several points that will require further clarification and/or explanation before the Bill becomes law, such as certain references to “guides” and “forms” to be issued by the Director of CAV.
What is clear though is the State Government’s resolve to follow through with the direction that began in late 2015 by Ms Garrett.
Any agent careless enough to breach the new law post-implementation will undoubtedly experience the full extent of the regulator’s power, which also begs the question as to whether CAV will continue investigating estate agents for historical indiscretions or whether it will turn its attention to policing the new law.
In any event, our strong advice to all Victorian estate agents is to ready yourself for these new laws and run your business as if they apply from today.
- Review all of your current advertising and remove any references to “from”, “over”, “starting at”, or “+”.
- Train your staff and educate them carefully as to how they must operate and conduct themselves with both sellers and prospective buyers in pre-listing appointments and during selling campaigns.
- Incorporate compliance processes and procedures into your business operations and ensure that your compliance measures act as an appropriate roadblock that does not allow any non-compliant processes (such as incomplete or inaccurate Exclusive Auction Authorities) to slip through the cracks.
- Although not a legal requirement, we also suggest appointing a Risk & Compliance Manager.
These measures may at first seem an unnecessary expense, however given individual breaches of the Estate Agents Act can attract a 200 penalty unit fine (which currently equates to $30,334 per offence), or in certain circumstances the loss of commission earned on properties sold, consider it an important investment into your business.
We will continue to provide regular updates as further information comes to hand or as provided by CAV and/or the State Government, but in the meantime (and at the risk of labouring the point), start preparing yourself now for the new law.
You don’t want to be the first estate agent caught out as being non-compliant with the new law when it comes into effect in 2017.
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