Underquoting reforms set for early 2016.

Victor Dominello, the Minister for Better Regulation, has said that reforms to rules surrounding underquoting would provide “clarity” for agents, vendors and buyers.

NSW Fair Trading defines under-quoting as making “a statement in the course of advertising a residential property for sale that is less than the agent’s true estimated selling price as recorded on the agency agreement”.  Currently penalties for engaging in underquoting are fines of up to $22,000.

Estate Agents Co-operative (EAC) has been working with and provided advice to the Real Estate and Property division of NSW Fair Trading on the new reforms.

The new reforms, which have been introduced to parliament and are expected to commence in early 2016, will see stricter rules for agents in regards to the estimated selling price in their agency agreements.  Agents who do not adhere to this estimated price in advertising will face losing fees and commissions.  Further to this, phrases such as “offers over” or “offers above” or any similar phrase will also be prohibited in advertising.

The proposed underquoting reforms will ensure any estimated price communicated to vendors and prospective buyers represents what an agent actually expects a property to sell for.

Under the proposed reforms, an agent must:

  • Include their true estimate of a property’s likely selling price in the agency agreement (also called the sales agreement).
  • Record the evidence that informed this estimate and provide it to the vendor in writing.
  • Ensure a price range is no greater than 10% of the bottom figure (eg. $500,000-$550,000).
  • Record all price estimates (quotes) provided while a property is marketed.
  • Ensure their price estimate remains realistic by updating it and advising the vendor in a timely manner if they are aware – or should reasonably be aware – of evidence or circumstances that changes it. The agent must advise the vendor of their revised selling price estimate and the evidence on which it is based in writing (eg. email) and amend the agency agreement. They must also update, as soon as feasible or practical, any marketing of the property that reflected the old estimate with the new selling price estimate.

Agents will not be able to:

  • Provide any price estimate less than what they have assessed a property is worth (as recorded in their agency agreement with the vendor). This applies whether the agent is advertising the property or in any communication with prospective buyers about the property’s likely selling price.
  • Advertise vague price information, including any statements such as “offers above” or “offers over” an amount, or “plus” a particular price (eg. $500,000+), which could misrepresent or obscure a property’s estimated value. Also, an agent must never indicate a selling price estimate that does not match the agent’s true estimate.
  • The reforms will introduce stronger penalties to deter underquoting. This includes fining agents up to $22,000 if they breach the new requirements. Agents could also have to forfeit their commission and fees if found guilty of underquoting. These commissions and fee payments will go towards the Property Services Compensation Fund, which supports consumers who have experienced financial loss as a result of property agent misconduct.

Mr Dominello’s office has also made clear that there have been 263 complaints about underquoting in the past two financial years.  With 63 of these complaints being made in March 2015.

In light of a volatile market agents should be reviewing their estimates and any marketing to reflect any change to the price estimate as a result of market or vendor feedback. We welcome the reforms announced by the Minster and feel they will make clear to agents as well as to consumers, the responsibilities when making these estimates.

The new legislation is currently in Parliament and would appear to be held up by opposition to some of the changes. Personally I believe the proposed changes can only assist the industry in being more professional in dealings with consumers both vendors and potential purchasers.

NSW Fair Trading to release data on consumer complaints

Last year NSW Fair Trading received over 40,000 complaints about traders across various industries including retail, motor vehicles, telecommunications, travel and real estate.

Consumers in NSW will soon be able to make more informed choices with Minister for Innovation and Better Regulation Victor Dominello today outlining plans to establish a consumer complaints register using data held by NSW Fair Trading.

“This data is currently under lock and key within the bureaucracy and we want to change that by amending the Fair Trading Act 1987 to give the agency the power to publish its complaints data for the first time,” Mr Dominello said.

“Consumers should have the right to know which traders have high numbers of complaints against them so they can take this into account when purchasing goods and services. We want to create a fairer and more competitive marketplace through open data.”

The proposed register would provide information regarding the number of complaints received about individual traders and is expected to act as an incentive for businesses to improve the way they deal with consumer issues and I believe that this is a good idea.

Open data is a key feature of the NSW Government’s ICT Strategy which encourages public sector agencies, where appropriate, to make high-value datasets available to industry and the community. Later this year this will include the Property Sales Information provide to many third parties including Estate Agents Co-operative.

The proposed register would provide information regarding the number of complaints received about individual traders and is expected to act as an incentive for businesses to improve the way they deal with consumer issues.

The Minister will establish a stakeholder roundtable to consider what form the complaints register will take, how regularly it will be published and how the information can be best utilised by consumers, traders and the media.

CHOICE, the Australian Retailers Association and the Business Council of Australia are among the industry groups which will be invited to participate in the roundtable.

Mr Dominello said a Bill would be introduced in the new Parliament which would create a statutory power for NSW Fair Trading to publish its complaints information.

 

NSW Government vows to crackdown on under quoting – Politics at it’s best!

I am sure that many of you like myself saw the reports in the media on the weekend with the NSW Premier Mike Baird and the Minister for Fair Trading Matthew Mason Cox vowing to crack down on agents that under quote if re-elected at the NSW election being held on 28 March 2015. This was also confirmed in this article on the Liberal Party website.

If we look at the Property, Stock and Business Agents Act 2002 (the Act) in this regard:
Section 72 of the Act prohibits an agent from making false representations with respect to the agent’s true estimate of the selling price of a property to either a seller or prospective seller of residential property.

Section 73 of the Act prohibits an agent, by any statement made in the course of marketing a property pursuant to an agency agreement for the sale of a residential property, falsely understating the estimated selling price of the property.

Section 75 of the Act extends the provisions of sections 72 and 73 to ‘estimated price range’ in the same way as it applies to ‘estimated price’.

The maximum penalty for a breach of the provisions is $22,000. It is interesting to note that there have been no fines issued or prosecution of agents for this practice in recent years.

EAC has been in discussions with Fair Trading Officers with regard to, what appears to be, an increase in the incidence of “under quoting” by some agents and the impact of significant price escalation driven by unprecedented consumer demand. This market activity and selling price increases has made the task of estimating future selling prices extremely difficult.

The comments made by both the Premier and the Minister fail to recognise the existing legislative requirements and the impact on consumer expectations of the agents if properly enforced. The greater majority of agents understand their responsibilities. For the few that don’t the law is already in place.

With the election looming I believe that the attack on estate agents was a “knee jerk” reaction and was purely for political gain (read votes) and not in the best interests of consumers or agents. The reality is that many well researched and well prepared estimates of selling prices by agents are often overtaken by buyer competition and market forces, factors outside the agents control and not readily predicted.

EAC enjoys a healthy working relationship with NSW Fair Trading and will continue to work with them to ensure that the interests of the industry and consumers are protected.

EAC Chairman Dale Whittaker is also disappointed with the approach that the government took on the weekend and he believes that the approach that NSW Fair Trading should be taking is to raise the entry level standards for the industry and through quality ongoing training.

Change to NSW Sales Agency Agreements from 1 March 2015

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.

EAC meets with NSW Fair Trading and Work Cover about Asbestos

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.

NSW Fair Trading starts a new Tenancy Dispute Service

OFT-logo

NSW Fair Trading has started a tenancy dispute service. The free voluntary service is said to provide a convenient alternative to having residential tenancy matters heard by the Consumer, Trader and Tenancy Tribunal (CTTT).

The service starts on 1 December 2013 and NSW tenants, landlords and property managers can use the service to resolve selected residential tenancy disputes.

According to Fair Trading the service can be used to assist in resolving disputes to do with:

  • repairs and maintenance
  • non-urgent health and safety issues
  • alterations and additions
  • access to the premises including inspections
  • non-compliance with the tenancy agreement
  • water saving devices and smoke alarms
  • provisions of correct notices
  • ending a tenancy
  • breaking a lease, and
  • condition reports.

If the parties cannot agree to a resolution to a dispute, either party may lodge a claim with the CTTT.  All other residential tenancy matters not dealt with by Fair Trading will continue to be heard by the CTTT.

For more information about the free dispute resolution service, go to the Residential tenancy dispute page on the Fair Trading website or contact the Fair Trading hotline on 13 32 20.

NSW Fair Trading Announces New Trust Account Audit Rules

Amendments to the Property, Stock and Business Agents Act 2002, will commence from 1 July 2013. These amendments will change the way licensees fulfil their responsibilities in relation to the auditing of trust accounts.

Currently, licensees who have held or received trust money during their audit year are required to have their trust accounts audited and lodge the audit returns with NSW Fair Trading whether the audit was qualified or not.

Licensees who did not hold or receive trust money during their audit year are required to lodge a statutory declaration with Fair Trading to that effect.

New Laws
The amendments provide a new framework for how licensees handle their trust account auditing responsibilities under the Act, commencing from the 2012/2013 audit year.

The changes include:

  • While all licensees who held or received trust money during their audit year will still need to have their trust accounts audited, only those audits which are qualified by the auditor are required to be lodged by the auditor and licensee with Fair Trading.
  • The term ‘qualified’ is now defined in the amendments to the Act.
  • The list of persons who are qualified to audit trust accounts under the Act is extended to include authorised audit companies, members of a Professional Accounting Body as defined under the ASIC Regulation 2001 (ie. CPA Australia, Institute of Chartered Accountants in Australia and National Institute of Accountants) holding a Public Practising Certificate with one or more of those bodies.
  • A requirement on the auditor to forward a copy of the trust account audit (if qualified) to Fair Trading within 14 days after providing the report to the licensee.  A maximum penalty of 50 penalty units ($5,500) is provided for a breach of this requirement.
  • Licensees who did not hold or receive trust money during the audit year will no longer lodge a statutory declaration to that effect.  Instead, licensees will be required to note whether or not they did so when they next re-apply for their licence.
  • Licensees are now required to hold a copy of their trust account audit (whether qualified or not) at their registered place of business, for at least 3 years, and make it available to Fair Trading inspectors for examination if required.

Click here to view the New Trust Account Audit Rules in detail on the NSW Fair Trading website.

Professional Indemnity Insurance – Mandatory For All Licensees

The Property, Stock and Business Agents Amendment (Professional Indemnity Insurance) Regulation 2012 was published on 14th December 2012.

This long anticipated legislation requires that all licensees must be insured under a policy of Professional Indemnity Insurance in force in respect to the licensee or the licensee’s employer.

All policies must be for a minimum cover of $1M for any one claim and not less than $3M in the aggregate for all claims during the period of insurance and provide cover for specified types of liabilities.

This new regulation commences on 1 January 2013 but will not take effect until 1 July 2013 in order to provide sufficient time for licensees to obtain suitable coverage. Licensees who hold an existing policy, issued before 1 January 2013, will have until 1 January 2014, or to the expiry date of that policy to ensure their existing policy complies with the regulation.

For enquiries as to how this applies to your business operations please call Geoff Hunter, EAC Industry Liaison Officer on 1300 137 161 or Bruce McCluskey, OAMPS Insurance Brokers on (02) 42268700.

Fair Trading releases new videos for real estate agents

NSW Fair Trading has released 3 new short videos on the Fair Trading YouTube channel.

The videos provide important tips on what to consider when buying or selling a home and the requirements of pricing real estate. The new videos are:

The DOS and DON’TS of pricing real estate  – In this video Fair Trading gives tips to real estate agents about pricing residential property.

Do your homework when buying or building a home – Research is the key to buying the right home. In this video Fair Trading provides important tips about things to consider when buying a home. Make sure that your research includes a Red Square Neighbourhood Report from an EAC Member.

Do your homework when selling a home – Making the process easier, This video outlines important information to help make selling your home as stress free as possible. Make sure that your research includes a Red Square Comparative Market Analysis Report from an EAC Member.

NSW Fair Trading welcomes your feedback and would like to hear your ideas on topics for future real estate videos. Email your feedback and ideas to: property@services.nsw.gov.au.

To view the whole range of Fair Trading videos on offer visit the Fair Trading YouTube channel.

EAC & NSW Fair Trading Partner to Provide Real Estate Fact Sheets

This week NSW Fair Trading announced the partnership with EAC to supply fact sheets pertaining to Agency Agreements, Bidders Guides as well as New Tenant Checklists.

This partnership sees NSW Fair Trading ceasing to supply their real estate fact sheets in print form, which bulk copies can now be purchased through EAC. Click here for details.

NSW Fair Trading will however continue to provide online access to fact sheets for consumers to download and print from the NSW Fair Trading Website. These forms will be also available to order in selected community languages.

EAC also offer a wide range of real estate forms that cover residential, rural, commercial, business and retail requirements for real estate professionals. Click here to view the benefits of EAC printed real estate forms.