Month: February 2015

Change to NSW Sales Agency Agreements from 1 March 2015

/ David Crombie / Leave a comment

In late 2014 the Property, Stock and Business Agents Regulation 2014 came into effect. There were several changes introduced as part of the update to the regulations and one of the changes introduced was in regards to agency agreements.

Under clause 8, section 3 of the regulations it is stated that on and from 1 March 2015, if the agency agreement includes a term that a commission is payable even if the sale of the property is not completed, the agency agreement must include a warning notice.

The notice must be in the form of:

“WARNING: The term immediately above provides that a commission is payable under this agreement even if the sale of the property is not completed.”

This notice must be included in the agency agreement immediately following the commission term and must be no less prominent than the commission term.

EAC Agency Agreements Warning Clause.Sample clause from the updated EAC Sales Inspection and Exclusive Selling Agency Agreement.

The change applies to agency agreements for the sale of residential (including land) and rural property and Businesses. We have updated our printed and electronic forms to include this change and they are now available for purchase and use on-line.

To ensure compliance I recommend that you check if the agency agreements being used for the sale of the property types outlined above include a term that a commission is payable even if the sale of the property is not completed and if so that the warning notice is also included.

Federal Government proposes charging of fees for foreign investment in residential property

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The Federal Government has released a consultation paper called Strengthening Australia’s Foreign Investment Framework and is seeking views on proposed reforms to our foreign investment framework in relation to residential property and agriculture.

The proposed reforms include the introduction of an application fee where foreign persons will require prior approval to purchase residential real estate. The Government believe that the introduction of the policy will increase the amount of available housing stock. Given recent information in the media I am not sure that there are any real concrete figures on the amount of foreign investment in residential property in Australia.

While most people would think of foreign investors as people who live overseas the paper covers foreign persons who may be temporary residents or non residents.

Foreign persons can apply to purchase vacant residential land for development and newly constructed dwellings in Australia.

Non resident foreign persons are generally prohibited from purchasing established dwellings in Australia. However, reflecting the fact that foreign persons who are temporary residents need a place to live during their time in Australia, temporary residents can apply to purchase one established dwelling to use as a residence while they live in Australia. The purchase of an established dwelling is conditional on the foreign person selling the property when they leave Australia. Temporary residents cannot acquire established dwellings for investment (rental) or holiday purposes.

The proposed fees for foreign investors for residential property are:

  • $5,000 for properties valued under $1 million;
  • $10,000 for properties equal to or greater than $1 million
  • Beyond this the fee would then increase in increments of up to $10,000 for each additional $1 million in property value.

Compliance and enforcement would be managed by the creation of a new area within the Australian Taxation Office and the paper outlines a raft of civil and criminal penalties for both individuals and companies who those breach, or are found to have assisted (read real estate agents) in the breach the foreign investment rules.

The paper will be be reviewed in greater depth by the Practice Support team at Estate Agents Co-operative and a submission made if deemed necessary.

At only 33 pages the paper is an easy read and be viewed at the Australian Government Treasury website.

First Home Buyer Figures Understated

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The Australia Bureau of Statistics (ABS) have released revised First Home Buyer (FHB) figures after an investigation into the accuracy of estimates of loans to first home buyers.

The figures released in November 2014 had put the number of FHB loan commitments at 6,061 but the revised figures now put the number of commitments at 7,627, an increase of 25.8%

“Initially we thought the fall-off in first home buyer loans over the last two years was due to reduced affordability arising from changes in grants, rising house prices, increased investment housing loan activity and general economic conditions,” Ms Hodges said in a statement.

“However, subsequent analysis and follow-up with lenders has confirmed that the drop was partly due to under-reporting by some lenders.” said Ms Hodges.

The ABS is now working with the Australian Prudential Regulation Authority which collects the first home buyer loan data for the ABS to ensure all loans to first home buyers are recorded in the future, regardless of whether they receive a first home owner grant or not. In the meantime, the ABS will adjust first home buyer data for this under-reporting using estimates based on data provided by lenders that reported correctly.

Although the ABS has released revised figures for November 2014 it could well be that the figures released for FHB’s over the past two years has been significantly understated.

The First Home Owner Grant scheme in New South Wales provides a grant of $15,000 and only applies to eligible first home owners who purchase a new home or build their home. This grant will reduce to $10,000 on 1 January 2016.

EAC meets with NSW Fair Trading and Work Cover about Asbestos

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The real estate industry is becoming increasingly aware of the potentially far reaching effects of the “Mr Fluffy” loose fill asbestos issue, with Work Cover identifying 26 NSW Local Government areas currently at risk.

The problem confronting all agents and property managers is that the presence of loose fill insulation containing asbestos is a “Material Fact.”  Currently, affected properties must not be offered for sale or lease and agents have a clear responsibility to enquire from their client whether the property is insulated and if so what type.  . If the answer is “yes” or “not sure” to the presence of loose fill type then the client should obtain an inspection and report from a qualified asbestos assessor.

However, the “Mr Fluffy” issue has become a catalyst for the industry to discuss Asbestos and how agents and property managers are to deal with properties affected by it and what are the correct steps for them to take in enquiring about asbestos in the property.  This is particularly crucial since agent and property manager’s Professional Indemnity Insurance Policy does not cover the risks associated with asbestos related claims.

In January, Work Cover met with Estate Agents Co-operative Ltd, NSW Fair Trading and REINSW to discuss this issue.

During the meeting, discussion was had regarding the need to clearly outline to agents, property managers and consumers the steps that they need to take regarding asbestos in properties.  WorkCover will develop a factsheet regarding Asbestos, to tackle this need.  EAC will provide consultation on the content of this factsheet.

“The protection of agents, property managers, and consumers is paramount in this issue.  And whilst the WorkCover factsheet is necessary, it is very much a first step.  Agents and Property Managers cannot be expected to make a qualified assessment of whether asbestos is present in a property,” said Geoff Hunter, EAC Industry Liaison Officer.

Clear directions are crucial for the real estate industry in the dealing with asbestos.  Whilst the “Mr Fluffy” issue is of a great concern, it has aided in bringing to light how inadequate the procedures, for agents and property managers, in dealing with asbestos are.

The Estate Agents Co-operative will continue to work with Work Cover and NSW Fair Trading to lobby for any and all necessary changes to regulation and policy in order to ensure the protection of agents, property managers and the consumers.