Secret Agents' New Code
Real estate agents are subject to new laws, which came into effect 1 September 2003. [Property, Stock and Business Agents Act NSW] Consumers buying and selling rural and residential property and agents include those affected.
This was a legislative response to community concerns about rogue agents and non-disclosure of secret benefits.
Some agents over quoted the estimated selling price of property, as a bait to sign up the vendor on the agency agreement and get the business. Some also understated the estimated selling price to get purchasers to inspections and to auctions. This practice encouraged unrealistic expectations of price by the vendor and purchaser alike; “conditioned” vendors to give in and accept less; and incurred costs for unsuccessful purchasers. The Act makes it an offence for an agent to make a “false representation” to a seller of residential property as to the agent’s true estimate of selling price (or price range) and/or to understate it to a purchaser. The maximum penalty upon conviction is $21,000.
Some agents received rebates from advertising, which were not adequately disclosed to vendors. The Act now requires specific disclosure by licensees of the source and estimated amount of “all” rebates in the agency agreement with residential and rural sellers [S57]. Failure to do so renders the agent not entitled to any expenses. An agency agreement that fails to comply with regulations and the standard terms means that the agent is not entitled to both the commission and the expenses. [S55] There is also a more general duty to disclose any benefits to be derived from business, family and other relationships. The effect of non-disclosure is that the agent is liable to conviction [S47]. An agent, a close relative or an associated company cannot obtain an interest in the property, if there is a commission payable. [S49] Agents who breach the legislation are also liable to disciplinary action [S191].
The Act and the Regulation provides a simplified code of the diverse Common and Statute law, which governs agency law. Agents and salespersons [S10] must know and understand the code. There are duties of reasonable skill, care and diligence; not to mislead and deceive; to comply with fiduciary obligations; to act in the client’s best interest; to act in accordance with the client’s instructions; not to disclose confidential information of the client; to avoid a conflict of interest; and agency agreements must comply with the regulations. There are compulsory terms that apply to all agency agreements. There is a power to review agents’ commissions and fees so they are “reasonable”. If an agent or salesperson renders a fraudulent account for expenses or commission they can be convicted of an indictable offence and liable to imprisonment for up to 10 years [S212]. An employee who aids and abets a contravention of the code is liable to the same penalties. [S213] Agents cannot contract out of compliance.
The legislation, does more than restate the law already applicable under Trade Practices legislation (Fair Trading) and the general law, which remains in place. For consumers, it creates new rights. It is easier and quicker to ascertain and access these rights without incurring substantial legal costs. Access is facilitated through the Department of Fair Trading, into the CTTT, which allows parties to represent themselves. On more complex issues, such as claims for damages to the value of property, consumers can still retain a Solicitor. It encourages agents to know and operate under the new code and disclose their secrets. Secret agents remaining out in the cold commit a form of “treason” against honest and ethical agents.