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Learner Manual - CPPDSM4008A
Identify legal & ethical requirements of property sales to complete agency
work
LEARNING OUTCOMES
At the completion of this unit students should be able to:
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Developed knowledge of the laws that govern property sales
Understand the listing and selling process for property, including the legislative
requirements
Understand the responsibilities of sales personnel to their Principal
Understand the legal and ethical considerations in relation to conflicts of interest.
MRT Training Pty Ltd is a Registered Training Organisation (RTO # 41529), registered to deliver accredited
training from the Property Services Training Package CPP07 and management programs from the Business
Services Package BSB07.
MRT Training provides the training to obtain:
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Certificate of Registration
Real Estate Agents Licence
Continuing Professional Development *
* Different conditions apply in each jurisdiction for CPD
© This publication is copyright to MRT Training. Apart from fair dealing for the purpose of private study,
research, criticism or review as permitted under the Copyright Act, 1968, no part may be reproduced without
written permission.
Whilst every precaution has been taken to supply complete and accurate information, MRT Training and its
partners assume no responsibility for any liability, loss or damage caused or alleged to be caused directly or
indirectly by the instructions contained in or accompanying this publication. All parties need to make their own
enquiries as to the suitability of the material in relation to their use.
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Introduction
Welcome to the Learner guide for CPPDSM4008A – Identify legal and ethical
requirements of property sales to complete agency work.
This subject is one of the four units of competency from the Property Services Training
Package for Real Estate (CPP07) that forms part of educational requirements set down by the
NSW Fair Trading in order to be able to hold a Certificate of Registration in NSW.
In order to qualify for a Certificate of Registration, candidates must provide a Statement of
Attainment, showing successful completion of the following units of competency.
3 Core Units from CPP40307 Certificate IV in Property Services (Real Estate)
CPPDSM4007 A
CPPDSM4008 A
CPPDSM4080 A
Identify legal and ethical requirements of property management to complete agency work
Identify legal and ethical requirements of property sales to complete agency work
Work in the real estate industry
1 Core unit required from CPP30309 Certificate III in Property Services (Operations)
CPPDSM3019
Communicate with clients as part of agency operations
About this unit of competency
In this module we are going to examine the legislation and rules that govern the sale of
property in New South Wales. This will include a look at the laws that set down how
property transactions are conducted, the role and responsibilities of real estate agents in
the process, and the administration of sales transactions and the documentation that is
required. It will also touch on the laws that are in place to protect the clients and customers
of real estate agents.
At the completion of this unit students should be able to:
• Developed knowledge of the laws that govern property sales
• Understand the listing and selling process for property, including the legislative
requirements
• Understand the responsibilities of sales personnel to their Principal
• Understand the legal and ethical considerations in relation to conflicts of interest
Prerequisites
There are no prerequisites for undertaking this unit. The unit specifies outcomes that are
required by a new entrant to the real estate industry gain basic understanding of the industry
and to work ethically and effectively in a real estate agency.
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About this Learner Manual
This Learner Manual is suitable for a range of learning situations, such as:
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Workplace – based learning
Classroom learning
Blended workplace/classroom learning
Self paced and/or flexible learning.
It is recommended that you read the material and attempt ALL activities, as this will enable you to complete the unit
competently and confidently. Completing the activities will gradually build your skills necessary to gain competency
in this unit. However, your teacher, trainer or assessor may identify certain activities that will suit your particular
learning situation.
Completing activities
Many of the activities throughout this Manual require you to access documents from within a working
agency; to draw on your own experiences in the workplace; or require you to access the internet. Speak to your
trainer/assessor if you are not currently employed in the real estate sector, or do not have access to such
documentation or the internet that you need to complete the activities.
Activities linked to competency
An activity table appears at the end of this Guide. This table identifies how the activities align to each of the
performance criteria for this unit. For most learning situations, trainers and assessors will recommend that learners
work through the Learner Guide and attempt all activities. In some situations, trainers and assessors may prescribe
specific activities, depending on the learner’s current skills and knowledge.
If you feel the need, ask your trainer/assessor to identify which activities you need to complete to suit your
learning situation.
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EMPLOYABILITY SKILLS
Employability skills are generic skills which support your ability to perform effectively in the workplace. They are
also known as transferable skills because the employability skills you learn in one workplace can be applied and
further developed in other workplaces and roles.
Employability skills are:
• Communication
• Teamwork
• Problem solving
• Initiative and enterprise
• Planning and organising
• Self management
• Learning
• Technology
The employability skills covered re listed in the table at the end of each chapter. The table demonstrates which facet
of that skill has been covered, how it has been covered and whether you have achieved competency status and
record any comments. Keep these tables as evidence to show that you have achieved these employability skills.
What to do NOW
We suggest that you follow the following steps in using this Guide.
• Read the material in this Guide and attempt all activities.
• Complete the assignments and case studies that appear at the end of each chapter where applicable.
• Speak to your trainer or assessor about how you will be assessed in this unit.
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1. The Law Covering Property Transactions.
In New South Wales there are several Acts of Parliament that govern the sale of property.
The main Acts are:
1. The Real Property Act 1900 (NSW) sets down the legal framework of the ownership of land, defining the
different types of title and then sets the framework for the transfer of that title
2. Conveyancing (Sale of Land) Act 1919 and Regulations 2005 (NSW)
3. Property, Stock and Business Agents Act 2002 and Regulations 2014 is the main Act
governing the role and responsibilities of Real Estate Agents in NSW
1.1
Ownership of Land (The Land Tenure System)
Understanding of the legislation and how it affects your practice is very important to how you go
about your business. You must be familiar with land title and ownership. Terms like Old System
Title, Torrens Title, Crown Land, Freehold, Fee simple, leasehold are all used when discussing title
to land. Understanding these terms and what they mean is critical to being a successful real estate
agent.
Wikipedia has the following on land tenure, which gives some insight to how the terms we
use today came about.
Land tenure is the name given, particularly in common law systems, to the legal regime
in which land is owned by an individual, who is said to "hold" the land. The sovereign
monarch, known as The Crown, held land in its own right. All private owners are either
its tenants or sub-tenants. The term "tenure" is used to signify the relationship between
tenant and lord, not the relationship between tenant and land.
Historically in the system of feudalism, the lords who received land directly from the Crown were
called tenants in chief. They doled out portions of their land to lesser tenants in exchange for
services, who in turn divided it among even lesser tenants. This process of granting subordinate
tenancies, is known as “subinfeudation”. In this way all individuals, except the monarch,
were said to hold the land "of" someone else.
Historically, it was usual for there to be reciprocal duties between lord and tenant. There were
different kinds of tenure to fit various kinds of duties that a tenant might owe to a Lord. For
instance, a military tenure might be by knight-service, requiring the tenant to supply the Lord with
a number of armed horsemen. The concept of “tenure” has since evolved into other forms, such as
leases and estates.
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1.1.1 Types of Ownership in Land in NSW:
ESTATE IN FEE SIMPLE
A fee simple (or fee simple absolute) is an estate in land. It is the most common way real estate
is owned in common law countries by individuals, and is ordinarily the most complete ownership
interest that can be had in real property
In NSW this is the highest form of private ownership. The estate in fee simple is the highest estate
in the land, and it is the closest the law comes to recognising absolute ownership for all practical
purposes. However, while we refer to a proprietor of an estate in fee simple (who is the owner for
all practical purposes), their ownership is not legally absolute, for absolute legal ownership of all
rests with the Crown. However, for all intents and purposes a person who owns land in ‘fee simple’,
subject to other legislation, can do with it, whatever they wish - sell it, will it or lease it.
LIFE ESTATE
May be created by deed or will. During the term of a life estate the holder is entitled to
occupy and receive the profits from the land, including granting leases over it, with
responsibility for its maintenance and repairs. On the death of the person whose life defines
the duration of the life estate, the estate comes to an end.
LEASEHOLD ESTATE
Is the estate of a holder of a lease. This can be for any period from one day to any number of
years. A lease may be granted for the life of the lessee or for the life of some specified person.
This is known as a lease for life.
TITLE TO LAND
In law, land registration is a system by which the ownership of estates in land is recorded and
registered, usually with government, to provide evidence of ownership title and so facilitate
transactions. There are various forms of title which are discussed below.
OLD SYSTEM TITLE
In the first years of the NSW colony there were no provisions for recording land transactions. In
some cases, brief particulars of a sale were written on the back of a land grant and in many cases
ownership changed without any documentary evidence at all. In 1802, a register was provided
by the Judge Advocate and parties were invited to place their dealings on record. These are the
first recorded registrations forming the first book of the 'Old Register'.
Only brief particulars were recorded and it is often quite impossible to relate these items to any
particular parcel of land. Over a number of years, the system of recording was improved, but it
was a cumbersome system as it only recorded transfers of land or notations to title, such as
mortgages, easements etc.
The main drawback of old title is that when someone wants to sell their land they have to prove
that they had an unbroken chain of title back to the original land grant from the Crown, or for at
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least 30 years. Because of defective recording in the early days of the colony sometimes this
proved difficult so in 1863 the Real Property Act set out a new system of title that was called
Torrens Title.
TORRENS TITLE
The Torrens title system was introduced to NSW with the commencement of the Real
Property Act on 1 January 1863. Since then all land granted by the Crown is subject to the
provisions of that Act.
This system was designed, by Robert Richard Torrens for the South Australian land title registry
when he was appointed Registrar of that state in the 1850's. He based his brilliant, simple system
on the method of insuring shipping used by Lloyds of London. It used a single register for each land
holding and recorded all details and interests affecting that land such as:
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easements
covenants
mortgages
resumptions
caveats, and
subsequent changes in ownership.
The greatest advantage of Torrens title is that it is a single document guaranteed by the State
Government of New South Wales. Prior to the advent of computers, the Torrens Title deed
consisted of a piece of paper which described the land, set out the ownership details of the land
and then there was room to record all dealings with the land as and when it took place. In addition
these dealing were recorded in a central register held in the Department of Lands.
Now there is a computer folio that sets out the present ownership of the land. The end result
is a cheap method of recording land ownership that is guaranteed by the Crown.
It is important to note that there are pockets of Old System title still in existence in NSW today.
However, when a property under old system title is transferred, a process starts to convert
that title to Torrens Title.
This is achieved by the Department of Lands issuing a qualified Title to the land on
transfer, based on the documentation of the Chain of documents provided. If after 7 years there
are no objections to the title, then the title will automatically convert to Torrens Title.
STRATA TITLE
Strata Title is the common method of unit ownership. The Strata Schemes (Freehold
Development) Act makes possible the sub-division of the airspace above the surface of the land,
and the issue of a Certificate of Title to part or parts of a building. This enables the purchaser to
buy the actual space enclosed by the unit and then sell, lease, mortgage or otherwise deal with
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the unit as any other owner of property.
The individual owners in a block of Strata Title units are compelled by law to form an owners’
corporation which controls the general administration and necessary funding of common
property. All unit owners are required to contribute towards the costs associated with the
common property areas (eg. lighting of entrances and hallways, gardening, maintenance).
Facilities, such as lifts, swimming pools and saunas, will increase the contributions markedly.
As a unit owner your involvement can vary from paying the levy and abiding by the rules to
participating in the executive committee of the owners’ corporation.
COMMUNITY TITLE
Community Title is a form of sub-division which allows common property areas to be
incorporated into a land sub-division. On registration of a community style plan, an
association will be established similar to an owners’ corporation under strata schemes’
legislation. People purchasing into such a scheme will receive a Torrens Title for the lot they
own and membership of the association. They will also share ownership of the common
facilities.
COMPANY TITLE
Company Title is where unit owners are actually shareholders in a private company. Buying a
certain number of shares entitles the shareholder to exclusive possession of a particular unit, and
perhaps, space for a car. Shareholders vote to decide company rules governing occupation, such as
rights to lease, sell or transfer shareholdings. You must have the company’s approval to alter in
any way the occupancy of a company title unit.
Because you do not actually gain absolute title to the property but rather hold shares in a
company, lending bodies are more reluctant to lend for this sort of property. Company Title was
a way of giving ownership to airspace in unit blocks prior to the advent of Strata Title. For this
reason there are still units that are sold under Company Title today.
OTHER FORMS OF TITLE
LIMITED TITLE
This is qualified title that has a limitation because the boundaries of the land are unknown. To
remove the limitation the land needs to be surveyed by a qualified surveyor.
NATIVE TITLE
The right of native people to traditional land, they must show an unbroken association with the land.
The land is owned by the particular aboriginal community and not by any one single aboriginal
person.
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1.1.3 Types of Property Ownership
Property can be owned different ways. An individual can own the land outright, but what
happens when two or more people want to have an interest in the land. The Conveyancing Act
allows for the following types of joint ownerships:TENANTS IN COMMON
Where 2 or more people hold land as “tenants in common”, each is regarded as owning a discrete
interest in that land separate from the other owner(s). Tenants in common are said to have an
undivided share and may generally deal with that share as they wish. For example, they may sell
the share or dispose of it in some other way, such as in their will, without the other owner(s)
consent, unless there is a separate co-owners agreement in place. Shares held by tenants in
common need not be equal; eg. it may be 1/3rd for one and 2/3rd for the other or it may be
1/100th for one and 99/100th for the other). Also, there may be more than two people as tenants
in common.
It is advisable that people holding land as tenants in common enter into an agreement that sets
out their obligations for managing the property and restricts the individual rights of disposal of
individual shares without firstly giving the other shareholders the opportunity to acquire their
interest. Failure to do this could result in a third party acquiring their interest, which could
severely disadvantage the other shareholders.
JOINT TENANCY
In Joint Tenancy the interest of each joint tenant is not separate or distinct from the other.
Each is entitled to an undivided interest in the whole property - that is, they each own the
whole. In dealing with third parties joint tenants must act as a single owner.
A good example of property owned under joint tenancy is where a home purchased by a
husband and wife. Each joint tenant has a right shared with other to the whole of the property
but no individual right to an undivided share of the property.
In practical terms this means that if one of the joint tenants predeceases the other (dies),
then title to the property is automatically vested in the other. This is called the right of
survivorship.
Joint tenants must acquire the property at the same time from the same person. Generally,
each joint tenant can only act at the same time as the other one. They must act together.
There are numerous areas that pose potential difficulties for co-owners, particularly in the areas
of wills and divorce. While the question of ownership is not raised every day, it is important that
you can differentiate between the two forms of co-ownership.
COMPANY OWNERSHIP
Companies are able to hold an interest in land just as an individual can. However, the
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company must authorise its directors to purchase property, and then authorise them to sign
the contract on behalf of the company.
1.1.4 Certificates of Title
A Certificate of Title is a copy of the related folio of the Torrens land title register that is issued by
the Registrar General to the registered proprietor, mortgagee or chargee. A current edition of a
Certificate of Title will normally detail title information including the name/s of the owner/s, the
lot/plan numbers and other registered interests on the title such as mortgages, easements and
covenants.
In the First Schedule it sets out the name(s) of the registered proprietors and the form of
ownership if there are two or more owners.
The Second Schedule will set out all dealings that are registered against the land and will
include:- Reservations and conditions in favour of the crown (usually the ownership will exclude
rights to minerals); Easements, covenants, rights of way etc as well as details of any mortgages,
caveats, registered lease or any other dealings.
As well there may be other notations and a list of any dealing that are unregistered. For
example, the Department of Lands has upgraded its Certificates of Title to introduce security
measures to mitigate fraud. A notation will appear on any Certificate if it has not been
upgraded. On the next page is a copy of a title search that shows the information you will find
on a Certificate of Title (also known as the CT).
Handy Hint: - Always check the certificate of title for things that affect the land. These items
are found in the Second Schedule of the certificate
Mortgage
An arrangement where one person (the Mortgagee) lends monies to another person (the Mortgagor)
using the property as security for the loan.
Easements
An easement is a right applying to land. It enables a parcel to have the use of other land in different
ownership, for a specific non-exclusive purpose. Without the easement the use would constitute a
trespass or nuisance. Easements fall into two categories:
• Private easements made between the owners of two or more parcels of land. The land
having the benefit of the easement is called the dominant tenement while the land having
the burden of the easement is the servant tenement.
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Easements in gross are created in favour of the Crown or a public or local authority
constituted by an Act of Parliament. These do not have a dominant tenement and the right
to release, vary or modify them is vested in the creating authority.
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Most easements are created when a plan of sub-division is registered and the lots which have
either the easement or the benefit of the easement will have the nature of the easements and
the description of the easement shown on the title.
Covenants
Is a restriction on title or an agreement or promise that the owner of the land will do or won't do a
particular thing on a parcel of land e.g. only erect brick fences can be erected on the land; or that a
dwelling must be built within a certain time after purchase of the land; or that only certain building
materials can be used, or that any construction must be more than a minimum amount.
The most common forms of a restricted covenant are those placed on land that has been subdivided by developers which restricts the first and future owners of the land. A covenant can only
be lifted by the unanimous consent of all people that the covenant applies
Caveat
A caveat is an instrument recorded on a folio of the Register legally prohibiting the
registration of certain dealings or transactions affecting land or forbidding certain action
pending judicial determination
This means Buyer Beware. It is a warning placed on the Certificate of Title to warn people that
another person other than the owner has some claim or interest in the land. This does not create
a right in favour of the person lodging the caveat but just serves as a way of protecting their
interests. If the caveat was lodged without reasonable cause, the owner could take legal action
against the “caveator” for compensation.
Right of Way or Carriageway
To permit one person to have access over another person’s land. Examples are footpaths,
driveways etc or a person who needs to cross one piece of land to get to another - called right
of way.
Right to Support
Common in semi-detached housing where two building share a common wall with the buildings
subject to separate titles. Commonly called a ‘party wall’, the wall is divided horizontally and
vertically with each separate slice owned separately but still subject to cross easements for support
in favour of each other.
Fencing Easement
Attached to the title requiring the owner to construct and maintain a fence of a particular
standard and to continue upkeep of that fence.
By-laws
With Strata Title the Bylaws of the Owners Corporation are registered on title. These rules must be
abided by all residents and people visiting the residents in these types of dwellings.
Leases
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Any lease that is three years or over is required to be registered on the Certificate of Title.
License
Is a form of agreement between two or more people. Under the Conveyancing Act, a licensor can
give permission to a licensee to use a certain part of their property for a certain reason. For example,
a farmer allows another farmer to come in and use certain paddocks within his farm to grow wheat.
The rules and regulations are negotiated individually however a license does not need to be
registered and when the property is sold the license does not automatically cease.
Below is a copy of a Computer Folio that shows the information contained on a Certificate of
Title.
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2. Legislation relating to listing and selling property
A list of some of the more relevant legislation
• Property Stock and Business Agents Act 2003 (NSW)
• Property, Stock and Business Agents Act Regulations 2014 (NSW)
• Competition & Consumer Act 2010 (Commonwealth)
• Fair Trading Act 1987 (NSW)
• Contracts Review Act 1980 (NSW)
• Privacy Act 1988 & Privacy Amendment (Enhancing Privacy Protection) Act 2012
(Commonwealth)
• Anti-Discrimination Act 1977 (NSW)
• Conveyancing Act 1919 (NSW)
• Crimes Act 1900 (NSW)
Refer to your workbook for CPPDSM4080A for details of what each of the above acts cover.
Here we will look at specific provisions that relate to the listing and sale of land.
2.1
PROPERTY STOCK AND BUSINESS AGENTS ACT 2002 and REGULATIONS
2014
All real estate practice, in New South Wales is regulated by the Property, Stock and Business Agents
Act. It regulates who can act as a real estate agent, limits the activities of employees, and sets
down rules and regulations on how agencies and agents must act. It also sets limits to their
businesses are conducted. It has penalties if agents breach the rules and regulations it contains.
The body that administers the Act is NSW Fair Trading (OFT)
The Act
The Property, Stock and Business Agents Act 2002 provides for severe fines and penalties for
agents who breach the requirements of the Act. Penalties can vary between warnings to desist
from certain activities, to giving undertakings not to engage in certain activities to fines of up to
$11,000 for the individual and $22,000 for a corporation. In addition, the Act allows courts to
impose a gaol sentence for several particular breaches of a very serious nature.
Under the Act, the Director-General of Fair Trading can also issue on-the-spot fines to any
Licensed or Certificated person up to the maximum fines for breaches of the Act and
Regulation, but in particular to agents who breach the Rules of Conduct.
The Act covers all the areas of operations of listing and selling property. They set out the
rules and requirements that agents must follow when selling and listing property. Selling
agents need to be fully aware of the following sections:Part 3 – General conduct of licensees and registered persons
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Division 4 – Conflicts of Interest
Division 5 – Advertisements and representations
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Division 6 – Unjust Conduct by licensees
Part 4 – Agency Agreements
Part 5 – Residential property and rural land sales
Part 6 – Auctions – general
The Regulations
As well as the requirements of the Act, a lot of the detail regarding the implementation of the Act
is contained in the Regulations. So the Regulations must be read in conjunction with the Act.
The following are the sections of the Regulations that apply to listing and selling property:Part 2 – Conduct of Agency Business.
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Section 10 – Provision of financial and investment advice
Section 11 – Specific Rules of Conduct applicable to, & mandatory for, each category
of licence or certificate
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Section 13 – Contents of Agency agreements – sets out the required clauses for each
type of agency agreement.
Part 3 – Auctions
This part sets out the requirements for a Bidders Record, what details etc are required. It also
sets out the format of the Standard Terms and Conditions of an auction sale, and warning
notices that must be on display at each auction.
Part 4 – Trust monies
This part deals with the requirements of the receipting and banking of trust monies.
Anyone who accepts trust monies must be aware of its provisions.
At the end of the Regulations are Schedules of Rules of Conduct for each class of license and
Certificates as well as Schedules specifying the terms that apply to all agency agreements. They
are:
A. RULES OF CONDUCT
Schedule 1 - General conduct rules that apply to all licensees and registered
persons.
Schedule 2 – Rules specific to real estate agents, real estate salespeople and on-site
residential property managers.
• Part 1 – Sales
• Part 2 – Property management
Schedule 3 – Rules specific to stock and station agents and registered persons they employ
• Part 1 – Sales
• Part 2 – Property Management
Schedule 4 – Rules specific to business agents and registered persons they
employ
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Schedule 5 – Rules specific to buyers agents
Schedule 6 – Rules specific to strata, community, residential and other property
managers
Schedule 6A – Rules specific to residential property managers
B. TERMS APPLYING TO AGENCY AGREEMENTS
Schedule 7 – Terms applying to all agency agreements
Schedule 8 – Terms specific to agency agreement for sale of residential property
Schedule 9 – Terms specific to a buyers agent agency agreement
Schedule 10 – Terms specific to agency agreement for sale of rural land
Schedule 11 – Terms specific to agency agreement for sale of business
Schedule 12 – Terms specific to agency agreement for management of
residential property or rural land
Schedule 13 – Terms specific to agency agreement for the leasing of residential
property or rural land
Schedule 14 – Terms specific to agency agreement for the management of
strata or community title land.
C. PENALTY NOTICE OFFENCES
This schedule sets out the on the spot fines that can be applied for breaches of each
section of the act.
2.2 COMPETITION & CONSUMER ACT 2010
The objectives of the Competition & Consumer Act 2010 as set out in the legislation, is to
enhance the welfare of all Australians through the promotion of competition, fair trading and
providing for consumer protection.
The Competition & Consumer Act applies to Real Estate Agents who are incorporated. (ie they
run their business as a company).
The main parts of the Act that relates to real estate agents cover:
• anti-competitive practices
• unconscionable conduct
• Consumer Protection Issues that apply to real estate
agents
In particular
1. Section 18 – Misleading and deceptive conduct
2. Section 30 – False representations about land
3. Section 4 – Representations about the future
4. Section 35 – Bait advertising
5. Section 50 – Harassment and coercion
In summary, the Competition and Consumer Act applies generally to the business
and commercial activities of most corporations. It also applies to sole traders or
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partnerships (ie not companies) whose activities:• Cross state boundaries eg an Agent who operates their business in Sydney but sells
properties in Queensland;
• are conducted by telephone or post; or
• use radio and television in their marketing
2.3 FAIR TRADING ACT 1987 (NSW)
As mentioned above each state and territory has amended their consumer protection laws and
encompassed them in a Fair Trading Act. Each State’s Fair Trading Act mirrors the legislation
contained in the Competition & Consumer Act 2010, and applies equally to individuals as well as
companies.
So, with the operation of both the Federal legislation & that of the States, we have
complementary legislation which covers all Corporations and individuals. The operation of the
complementary legislation means that there is effective protection for all consumers who may
suffer damage or loss as a result of the actions of unfair or fraudulent operators.
The New South Wales Fair Trading Act 1987 covers business transactions that take place within
the borders of New South Wales. Unfair trading practices which occur outside NSW are covered
only if the people carrying out these practices ordinarily reside in NSW or if the company is
incorporated or carries out business in NSW.
Like the Competition & Consumer Act, the NSW legislation promotes fair trading by prohibiting
the use of unfair marketing and promotion practices when selling goods and services. These
practices are defined in Part 5 of the Act and include
8. Section 42 - Misleading and Deceptive Conduct
9. Section 43 - Unconscionable conduct
10. Section 44 - False and Misleading representations
11. Section 45 - False representations and misleading or offensive conduct in relation to
land.
12. Section 55 – Harassment and coercion
The Fair Trading Act is administered by NSW Fair Trading, which is part of the NSW
Office of Finance & Services.
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2.4 Contracts Review Act 1980 (NSW)
The Contracts Review Act applies to all consumer contracts whether written, partly written, verbal
or partly verbal entered into in NSW. It does not apply to contracts entered into by a person in the
course of trade, business or profession. So it would include contracts for the sale of land, agency
agreements etc.
Under the Act, Courts may provide relief where they find that the contract, on the face of it, is
unjust, or appears to be unjust because of certain circumstances will be deemed to be unjust.
The Act describes “unjust” as including “unconscionable, harsh or oppressive
conduct”.
The courts can take into account the circumstances of the claimant or the way in which the
contract was made in deciding whether or not a contract is unjust. In other cases the contract may
not be unjust per se, but may be unjust because, in the circumstances, the claimant did not have
the capacity or the opportunity to make an informed or real choice as to whether they should
enter into the contract.
If the court finds that the contract is unjust they may:• Refuse to enforce any or all of the provisions of a contract
• Declare the contract, or any part of it, null and void
• Vary the provisions
• Vary or terminate a land instrument
2.5
Privacy Act 1988 (Commonwealth)
This Act regulates the collection and use of personal data that agents may collect during the listing
and selling process. The 13 Privacy Principles need to be observed when agents are collecting
personal data. Those 13 principles are set out in the notes for CPPDSM4080A – Work in the real
estate industry.
2.6 Do Not Call Register Act 2006 (Commonwealth)
This Act set up the “Don Not Call” Register where private individuals can register their phone
number. It is an offence under the Act to make telemarketing or unsolicited calls to any number on
that register.
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2.7 Conveyancing Act 1919
This Act can be accessed by going to:(http://www.austlii.edu.au/au/legis/nsw/consol_act/ca1919141)
The Conveyancing Act governs the transfer of property in NSW. While most of it is the domain of
solicitors and conveyancers there are several sections that apply directly to real estate agents, or
restricts what agents can do. In particular
• Section 52A – Sets out required documents that must be included in a contract for sale
for residential land
• Section 66Q – Defines the meaning of residential property
• Section 66R – Requires a vendor selling a residential property to have a contract for sale
prepared before offering the property for sale
• Section 66S – Sets down cooling –off provisions for every contract unless the purchaser gives
to the vendor (or the vendor’s solicitor or agent) a certificate that complies with Section 66
W of the Act .
2.8 Crimes Act 1900 (NSW)
The Crimes Act outlines crimes and their penalties. It can be accessed at
http://www.austlii.edu.au/au/legis/nsw/consol_act/ca190082/. Sections that
apply specifically to real estate relates to what are known as “secret
commissions”.
Part 4A of the Act prohibits the following conduct:
1. Receiving or soliciting, as an agent, an inducement or reward for doing or not doing
something in relation to the affairs of their principal.
2. Corruptly giving or offering an agent an inducement or reward for doing or not doing
something in relation to the affairs of the agent’s principal.
3. Use of misleading documents or statements by agents with the intent of defrauding their
principals.
4. Corrupt inducements to a person for giving advice to a third party which induces them
to enter into a contract or appoint the person who gives the inducement to any office.
Penalties for infringement include fines as well as imprisonment for up to 7 years for individuals that
are involved.
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2.9 Consumer Protection Legislation
For real estate agents there are three principal acts that govern consumer protection in the
sale and lease of Property. They are:
• Competition & Consumer Act 2010 (C‘wealth)
• Fair Trading Act 1987 (NSW)
• Property Stock and Business Agents Act 2002 (NSW)
The consumer protection legislation is very relevant in the listing and selling of property. During
discussion agents will make representation to both potential sellers and to potential buyers. In
doing that they need to be careful to ensure that they do not mislead or deceive anyone in the
process. If they do they can have action taken against them, either by the government body
responsible for the legislation, but more importantly by the person who has “suffered a
damage” by the misrepresentation or misleading conduct.
However, Section 54 of the Property, Stock and Business Agents Act places agents in NSW in a
unique position. Under that section not only are agents prohibited in engaging in misleading and
deceptive conduct, they are duty bound to reveal all material facts. The Fair Trading has produced
two guides to help agents understand their obligations in this regard when selling property. The
guides are:• Advertising Guidelines
• Misrepresentation Guidelines
Copies of both of these can be accessed from the Fair Trading’s website.
3. Conduct Standards
As mentioned before the Rules of Conduct in the Regulations sets the standards by which agents
are expected to practice by. The Learner Guide for CPPDSM4080A – Work in the Real Estate
Sector covered the Rules of Conduct for selling agents. In particular agents should know the
Rules that apply to the activity they are undertaking.
Listed below are the rules that apply to each activity in the listing and selling process.
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3.1 Listing a property for sale
Schedule 1
Rule 1 – Know the Act and Regulations
Rule 2 – Comply with the fiduciary obligations arising from being an agent
Rule 3 – Act honestly and fairly with all parties and do not mislead or deceive
Rule 4 – Exercise reasonable skill, care and diligence
Rule 5 – Do not engage in high pressure tactics, harassment or harsh or unconscionable conduct
Rule 6 – Act in your clients best interest at all times, unless it contravenes an Act or Regulation
Rule 7 – Maintain the confidentiality of confidential information unless you are authorised to
disclose, or required to disclose by law.
Rule 8 – An agent can only act as an agent if they have written authority to do so.
Rule 9 – Must act in accordance with instructions unless it is contrary to the Act or
Regulations.
Rule 11 – Refuse any appointment if there is a conflict of interest
Rule 14 – Do not offer an inducement to a person for them to induce a third party to use
your services
Rule 15 – Do not solicit clients through misleading and deceptive activity
Rule 16 – Any agency agreement you submit to a prospective vendor must be fully filled up
before it is given to them to sign.
Rule 17 – If you have a member of the public sign a document you must give them a copy of
the document they signed after they signed it.
Rule 18 – Do not misrepresent to anyone the clauses or meaning of the act. E.g. Do not put
an exclusive selling agency agreement in front of a vendor telling them that the act requires
them to sign it.
Rule 19 – Any Agency agreement an agent uses must comply with the act.
Schedule 2
Rule 1 – An agent must physically inspect a property before they act (sign up an
agency agreement) for anybody
Rule 2 – An agent must prepare a report to the prospective vendor about the
property (covering the items specified in the rule) before entering into an agency
agreement.
Rule 7 – An agent cannot request or receive a referral fee if referring his vendor to a
buyers agent.
Rule 8 - Requires an agent who exchanges a contract for sale to forward a copy of the
exchanged contract to either parties, or their legal representatives within two working
days.
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3.2 Selling a property
Schedule 1
Rule 1 – Know the Act and Regulations
Rule 3 – Act honestly and fairly with all parties and do not mislead or
deceive
Rule 4 – Exercise reasonable skill, care and diligence
Rule 5 – Do not engage in high pressure tactics, harassment or harsh or unconscionable conduct
Rule 7 – Maintain the confidentiality of confidential information unless you are authorised to
disclose, or required to disclose by law.
Rule 12 - Make disclosure to the vendor if you refer the person to a service provider and you
have a business, fiduciary or person relationship with the service provider.
Rule 13 – Do not recommend a conveyancer or solicitor to one party if they act for the
other party in a transaction
Rule 14 – Do not offer an inducement to a person for them to induce a third party to use your
services
Rule 15 – Do not solicit clients through misleading and deceptive activity
Rule 17 – If you have a member of the public sign a document you must give them a copy of the
document they signed after they signed it.
Schedule 2
Rule 3 – The agent must inform the Vendor in writing of any offer to purchase they
receive unless the vendor has given written instructions to the contrary.
Rule 4 – An auction reserve price that has been given to the agent in writing cannot be
varied unless it is done in writing.
Rule 5 – Sets down the information that must be on a trust receipt when an expression of interest
deposit is paid to the agent, and the disclosures the agent must make.
Rule 6 – If an agent lists a property that is under lease, the agent must notify the managing agent in
writing that they have the property for sale.
Rule 8 – Requires an agent to have a written authority to bid on behalf of someone who is on
the phone.
3.3 Buyers Agents
If the agent is acting as a buyers agent the following rules would apply.
Schedule 5
Rule 1 – requires a buyers agent to get a statement from the buyer of their requirements.
Rule 2 – Requires the buyers agent to keep his principal informed of each stage of the
negotiation process except during the course of an auction.
Rule 3 – Requires the buyers agent to use their best endeavours to obtain the best price for
their client.
Rule 4 – Limits the buyers agent to bidding at auction only up to and including the maximum
or agreed price with their client.
Rule 5 – Requires the buyers agent to keep his client fully informed of any other offers he
becomes aware of if the buyer has paid an expression of interest deposit.
Rule 6 – A buyers agent cannot seek or receive a referral fee for referring his client to a selling
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agent.
Ethical practice in real estate means understanding and following the standards that are outlines
by the industry and workplace. Behaving ethically means doing the right thing – not only just for
the vendor, but for buyers and all parties who might be involved in the transaction.
Remember, you have a fiduciary responsibility to act in your client’s best interest (subject to not
breaching the law) but you have a Duty of Care to all those you deal with who are not your client.
Fiduciary Duty:
Wikipedia’s definition:
A fiduciary duty is a legal or ethical relationship of confidence or trust regarding the
management of money or property between two or more parties, most commonly a
fiduciary and a principal. One party, for example a corporate trust company or the trust
department of a bank, holds a fiduciary relation or acts in a fiduciary capacity to another,
such as one whose funds are entrusted to it for investment. In a fiduciary relation one
person, in a position of vulnerability, justifiably reposes confidence, good faith, reliance and
trust in another whose aid, advice or protection is sought in some matter. In such a relation
good conscience requires one to act at all times for the sole benefit and interests of
another, with loyalty to those interests.
3.4 Salesperson’s Responsibility to the Vendor
While salespeople are bound by the Act and in particular to the Rules of Conduct, they are
expected to act in the best interests of their vendor (subject to law) at all times and to avoid any
conflict of interest. In acting for their agency they will be performing a range of services for the
vendor, for which they charge a fee or commission. These fees are negotiated with the vendor
and can be in any form agreed to by the vendor. i.e. they can be a percentage of the final sale
price, with or without an incentive built in, or they could be a flat fee.
In engaging the services of an agent to act on their behalf in the sale of a property, the
vendor could expect the agent to:
• Give an estimate of expected selling price and be able to provide the basis on which
the estimate was made
• Advise on the options the vendor has in regard to the method used, being able to
explain the strengths and weaknesses of each method
• Develop meaningful and effective alternative marketing plans from which the vendor can
choose.
• Organise and attend open for inspections, if they are to be held
• Readily and in a timely fashion convey all offers and interest in the property
• Organise an effective auction campaign if required
• Negotiate with the buyer effectively
• Organise the signing of contracts and their exchange in accordance with the
Conveyancing Act.
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3.5 Salesperson’s Responsibility to the Purchaser
While most sale agents act for the vendor, they have responsibilities to purchasers and
prospective purchaser under common law and legislation.
A purchaser can generally expect an agent to:• Be able to effectively give details of all properties on their books.
• Take down enough details to be able to service the purchaser effectively in
helping them meet their needs.
• Arrange the inspection of property for sale.
• Provide information they require to make a decision that is accurate and not
misleading or deceptive.
•
•
•
•
Convey to them any facts that the agent si aware of that could impact on their
decision to buy
Effectively and in a timely fashion communicate their offers to the vendor.
Organise the necessary paper work if they wish to purchase the property.
Organise the signing of contracts and their exchange in accordance with the
Conveyancing Act.
4 Listing a Property for Sale
A real estate agent is the middle person between the owner of the property and the person
wishing to purchase or lease the property. Because of the position of the agent between
the two parties, it is very important for the agent to understand the role they play and the
responsibilities they have to both parties.
In addition, the agent must be very aware of the requirements of both side in the transaction,
and have effective communication strategies in place so that they can determine the needs of
both sides of the transaction, and so provide both sides with timely and accurate information. As
well the agent must be ever aware of clients and customers concerns and be ready to meet those
concerns without conflict.
We are now going to examine the sales process and the role the agent has in that process.
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4. 1 THE LISTING PROCESS
PROSPECTING FOR LISTINGS
Selling real estate is a never-ending activity of listing, marketing & selling property. Today’s buyer
is tomorrow’s seller. Understanding this simple fact provides agents with the solution to allow
them to become successful in their endeavours, whether they have been in the business for 20
years, or are new and just starting out.
The aim of a proper prospecting plan is to be readily able to replace the listings that are sold with
new ones and so always have a consistent flow of stock to sell. This guarantees a steady and
growing income, no matter what the market. So the goal of all prospecting is to have a sustainable
and consistent listing base.
THE HOME OWNERSHIP CYCLE
In Australia the average home owner changes property about once in every 7 to 10 years. If you
take an average community of 10,000 homes then normally one would expect that about 750 to
1,000 properties would come onto the market in each year.
Of course, this will vary between suburb and suburb, and year to year. For example, an area with a
very high percentage of Investment property or units will see a turnover rate a lot higher than an
area of predominantly houses. In boom times property turns over faster than in times of
recession. However, age demographics can also have an impact. Areas with an aging population will
see a higher rate of turnover as people move out of the city or into nursing homes.
So you need to understand the demographics of the area you work in so that you can start to
prospect for listings with purpose.
CANVASSING FOR LISTINGS
One of the most important duties of a salesperson is to obtain quality listings. How to you find and
maintain quality listings? You need to have a good understanding of your local area and in particular
the area that you will be responsible for – this is called your target or farming area.
You need to build strong relationships with the people, businesses and professionals in your farming
area. Building a strong client base is essential for the successful agency.
First, you must know and understand your market area.
You need to know the demographics of the area you work in. For example:• the ethnic make-up of the area
• age distribution of the population
• type of properties contained in the area
• mainly owner occupied or is it investment properties
• average incomes of the residents
• the turnover rate of property
• average prices and which way are they trending
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All the above information is readily available from public sources such as the
Commonwealth Statistician, local Councils, Australian Property Monitors or RP Data.
Secondly, you need to pick out an area you are going to prospect in that gives a good
distribution of the type of property in your agency area. The prospecting area can be :• A geographically tight area, or
• A street-by-street area spread across the marketing area so there is a good distribution of
Strata and Torrens title property.
Once you have established this the area becomes your own PMA which you are going to
prospect to obtain Listing and future prosperity.
In addition to this prime market area you will have your own circle of contacts and sphere of
influence which will also form part of you farming area. The aim of this primary personal market is
that it is going to be an important source of your listings in the next twelve months.
Within your geographic area you are going to develop the intelligence you need so that you are
aware of everything that is going on within that area. The aim is to become a person’s real estate
agent BEFORE they need an agent.
Therefore, the basic process of building and expanding you client base consists of seven basic
steps.
• Profiling the area you are going to work in
• Setting targets and prospecting plans
• Conducting agency and individual promotional activities
• Prospecting for listings
• Contacting potential clients
• Maintaining you client base
• Creating prospecting reports
IDENTIFY TARGET MARKETS
• How will you set your targets and prospecting plans?
• How many houses are in your farming area?
• What type of properties are there in this area?
• What type of people live there? Eg retirees, first home owners, professionals
• What factors affect the price of properties in your area?
EXPANDING CLIENT BASE
Once you have identified your target markets you can devise a strategy for servicing them. It may be
that you have developed a relationship with a property developer and you have been asked to
market their new properties. How would you go about looking for customers? A developer to
purchase land that you are selling may have approached you. You will need to advise the company
of the type of property that would be suitable for the land and of any restrictions on development by
the environmental plans for the area.
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Whenever you contact new people or find out more information about the properties in your
area you need to update your database.
PROSPECTING METHODS
Prospecting for listings include a number of tried and true methods but you also need to be proactive
and come up with new methods that suit your particular area.
Some of the tried and true methods include
•
Telephone canvassing
•
Door knocking
•
Letter box drops
•
Newspaper advertising
•
Direct mail
•
Private ads
•
Newsletters
•
Other agent’s signs
•
Speaking at functions
•
Editorials
•
Testimonials
•
Sponsorship
•
Everyday opportunities like going to the hairdressers or buying a paper at the
newsagents
All of the above methods have advantages and disadvantages and may not be suitable for your
area.
DEVELOPING A BUSINESS NETWORK
In order to expand your network and to attract new business, you need to be proactive in
establishing partnerships and be experts in building networks.
How do you do it?
One of the most important steps in building business networks is to fully understand what your
business is. You might think that this is easy, but take a moment to think about what your agency
really does and where property management fits in.
Is property management just collecting rents and organising repairs, or does it go further? Does it
encompass property acquisition, building property portfolios both residential and commercial and
income producing properties? You need to be aware of how broad your areas of activity are.
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4.2 Vendor enquiry
Once you have some feedback from your prospecting activities you will need to follow up. If you
have been successful with your prospecting, you may have enquiries from prospective vendors
about the property that they own. If this happens, you will need to handle the inquiry correctly.
Some of the steps you will need to undertake are:
• Find out information about the property and its owners
• View the property to ascertain its condition and look at other properties in the
immediate area, take particular note of any similar properties, especially if they are currently
listed for sale by your own or other agencies
• Gather information about market factors for the area, what are the current
interest rates, is the area affected by unemployment
•
Look at the local planning document and see if there are any significant development
applications affecting the area
•
What is the zoning? Is it affected by bushfire, flooding or the like?
CREATING QUALITY RELATIONSHIPS
Part of the process of dealing with vendor enquiry is creating and maintaining a quality
relationship. Communication is the key to effective and quality transactions with your clients.
Ways to do this include:
• Work with your clients, get their cooperation from the start and don’t allow the relationship
to deteriorate in any way
• Ensure that all agreements are backed up by a letter of confirmation
• Remember a proposal is not an agreement, it is just a proposal of the services you are
offering
•
Your client also has a responsibility to you and this needs to be fully understood.
•
If they have agreed to have their property ready for sale by a certain date, then you need to
remind them of this – you should not accept responsibility for a poor response to the
property if it is the fault of the vendor
•
Show that you are aware of your client’s needs by always sticking to your agreed time
schedules. This may, at times, need adjustment, but at least if you have discussed this with
your client it may prevent conflict and misunderstanding.
Keep your diary current and a part of your daily activities. Get into the habit of referring to
it on a regular basis and transferring any important points to the agency database
•
•
Don’t be afraid to ask for help when you need it. You will enhance your own credibility by
being honest and recommending other professionals or staff if you cannot give the client
100% of your time and energy.
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FOLLOW UP
• Return calls – telephone messages should be responded to the same day or at least early
the next day
•
Show thanks for the lcient’s interest – even if you cannot help them at this time, you should
respond by letter within a week.
•
Referrals, if you have referred a client onto another agent or party, follow up with a
letter of fax stating that you have referred this person.
•
Update and recycle the good stuff and improve the materials that are less
successful. There is nothing worse than sending out materials that are out of date.
Take time to research and update your skills. This is what makes you a leader in the industry
and will keep your clients coming back to you.
Say thank you often, especially to those who made your job easier.
Know your clients, remembering small facts that your client has passed on in
conversation makes them feel valued.
Set goals and work towards them.
•
•
•
•
RESOLVE OUTSTANDING MATTERS
• Be proactive in your dealing with clients to avoid misunderstandings and conflicts.
• Try to ensure that you do everything right the first time, but if for some reason you do
have a problem, deal with it immediately and try not to allow it to happen again.
• Have a clear process for dealing with conflict situations or conflicts of interest, both
internal and external
• Rewards members of your team for their accomplishments and keep in touch with
customers after they transaction has concluded
• Deal with problems as they arise, don’t keep avoiding them. This will almost certainly result
in poor customer relations and probably bad word of mouth
RECORDING ENQUIRY
One of the major complaints that come from clients is that the agency is late or has not followed
up with the information that was required. Mistakes are costly to the agency, especially as our major
offering to the client is service.
A diary is the most important aid you can have!
Apart from being an excellent time management tool, your diary can be used as evidence in a court
of law. There are a number of diary systems that the agency could use:
•
•
A day book that records all enquiry and responses, incoming and outgoing calls and staff
movements
A checklist used to organise and prioritise the workload for the office
Information that should be recorded from a potential vendor could include
• Name
• Address
• Type of property – owner occupied, investment
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•
•
Time frame for selling
Reason for selling
4.3 Listing a Property
Owners when deciding to sell need to decide if they are going to try and sell it themselves, or to use
the services of an agent. If the services of an agent are used, then there are laws governing the
process that both the agent and the owner must abide by.
If an agent is called in by an owner to discuss the sale of their property the agent must be in a
position to be able to advise the owner on the different methods of selling, explaining the strengths
and weaknesses of each method. There are three major methods for the sale of property in NSW.
They are “sale by”:• Private Treaty
• Public Auction
• Expressions of Interest/Tender
Most people are familiar with a private treaty sale. This is where the property is put on the market
with a nominated asking price. The Vendor, after getting advice from the agent is required to set an
asking price at which their property is to be offered.
The main advantages of a private treaty sale are:• Apparent control over the process
• More time in which to consider offers
• The vendor can take into account changing market conditions
• The vendor sets the asking price
• Buyers feel more comfortable when they know what price the vendor
wants.
The main disadvantages of a private treaty sale are:• If the vendor sets the price too high, buyers may be scared away and the
property becomes stale when it does not sell.
•
If the price is set too low, it will sell quickly and the vendor may not have
maximised the price they receive.
Auction is where the vendor offers their property for sale without an asking price. Interested parties
come together and make offers (bid) for the property on the terms and conditions set out in the
vendor’s contract, which an auctioneer controls. Generally, the highest bidder is the purchaser,
subject the bidding reaching or passing the minimum price that the Vendor is willing to accept.
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The main benefits of an auction are:• The vendor sets a time frame for negotiation thus creating urgency
• The vendor only needs to sell if buyers meet or exceed the reserve price
• The vendor knows the interest in the property before making a decision on the
reserve price
• The sale is on the vendors terms and conditions
• If there is competition on the day of the auction, buyers are forced to pay
their maximum
• The sale is unconditional, there is no cooling off period
The main disadvantages of an auction are:• The vendor could feel they are not in control
• Buyers resistance to auction
• Advertising expenditure by the vendor is usually more than for private treaty.
• The result is heavily dependant on the skills of the agent
Sale by tender is where a property is offered for sale without an asking price on the suggested terms
and conditions of the vendor. Tender documents are prepared with all of the relevant details about the
property. Offers are invited by way of tender, and the process allows the interested parties to attach
conditions on their offers. A closing date is set after which all offers will be considered.
The process of tender allows the vendor to choose whether or not to accept any offers made. There is
no requirement for the vendor to sell to the highest bidder. Often the terms of the tender will ask the
potential purchaser their intention for the property and the vendor could make their choice from this
information.
Usually the terms of the tender require submissions to be irrevocable and only needs the
acceptance of the vendor to be enforced as a contract. This would mean that people tendering need
to submit their offers on contract with the required deposit. The agent would bank these deposits
into their trust account, and then refund the deposits to all the unsuccessful tenders.
The main benefit of a tender is that the vendor can pick and choose who they sell to. Tender is
commonly only used for commercial and industrial property, however, there have been cases
where it has been used for unusual or special residential properties.
There are other variations of these three methods and include:
• Offering the property for sale at “offers over” a certain figure, or “offers between” a
range of figures (Private Treaty)
• Express Sale (a cross between private treaty and tender)
• By Negotiation (just another form of private treaty)
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4.4 Selecting the Method of Sale
When deciding the appropriate method of sale consideration should be given to the
following factors:• Likely demand in the area
• Likely competition for the property from other listings
• Common methods of sale used in the area
• The type of property
• Expectations of the vendor
• Reason for the sale
• The time line of the vendor to achieve a sale
• General economic conditions
WHAT IS THE AGENCY AGREEMENT?
Part 4 of the Property, Stock and Business Agents Act 2002 (the Act) deals with agency
agreements, and with the Regulations, sets down all the requirements that agents must follow.
Section 55 of the Act states that an agent cannot claim commission or expenses from any person
unless there is a valid written agency agreement in place that sets out the terms and conditions
under which commission and expenses can be charged.
The Act and Regulations also prescribes the form of specific conditions and other matters that must be
included in the agreement, or followed, to make the agreement enforceable.
Therefore, Agents should be particularly aware that they must take due care and diligence when using
and filling out agency agreements. If an agent fails do it correctly at every point, then the agent loses
their right to claim commission and expenses, as well as exposing themselves to penalties that can be
imposed by the Fair Trading.
We cannot over emphasis this point too much. One small oversight can mean that no commission or
expenses can be claimed, no matter how much work has been done. Even if it is paid to you, the Fair
Trading, a Tribunal or a Court can order that the commission and any expenses you have collected be
refunded if they found that you have not abided by the Act and Regulations.
REQUIREMENTS OF THE ACT
Part 4 of the Act sets out the requirements for Agency Agreements. These are mandatory
requirements, and the omission of any one would invalidate any agency agreement entered into
with a principal. In other words the agent would not be entitled to commission or expenses.
DIVISION 1 – REQUIREMENTS FOR AGENCY AGREEMENTS
Section 55 of the Act requires that for a licensee to be entitled to any commission or expenses then
the following MUST have occurred:
•
The services were performed under an agreement between the Agent and the principal
which has been made in writing, and signed for or on behalf of the principal and the
Licensee.
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•
•
The agency agreement entered into complies with all the requirements of the Act and the
regulations
A copy of the executed agreement entered into is served upon the principal within 48
hours of that person signing it.
THE VENDOR MUST BE GIVEN A CONSUMER GUIDE
Section 56 requires that an approved consumer guide prepared by the Director-General of Fair
Trading, must be given to the prospective vendor no more than 1 month prior to when they signed
the agency agreement.
THE AGENCY AGREEMENT MUST DISCLOSE REBATES, DISCOUNTS AND COMMISSIONS
Section 57 requires the agency agreement to identify all rebates, discounts and commissions
that the agent may receive in respect of any expenses that they recover from the vendor. This
statement must include details of the amount or estimated amount of what the agent may
receive.
This section excludes commercial and industrial agency agreements.
PROHIBITION OF ENTERING INTO AN AGREEMENT WITH SOMEONE ALREADY UNDER AN
EXCLUSIVE OR SOLE AGENCY AGREEMENT
Section 58 prohibits an agent for soliciting or entering into an agency agreement with someone who is
already under a sole or exclusive agreement with another agent. If an agent breaches this section they
will not be entitled to any commission or expenses from the agreement they enter into as a result of
the breach.
DIVISION 2 - COOLING OFF PERIOD FOR RESIDENTIAL OR RURAL PROPERTY AGREEMENTS
“COOLING OFF” PERIOD
Section 59 creates a “cooling off period” for every residential or rural agency agreement that an
agent enters into. The Cooling Off period commences when the last vendor signs the agency
agreement and finishes at 5pm on the next day that is a business day or a Saturday.
A cooling off period can be extended if it is before the end of the initial period. This Section also
allows for the Vendor to waive the cooling off period, but this can only be done if at least one day before
signing the agreement, the agent has given the vendor a fully completed copy of the proposed agency
agreement along with the Consumer Guide, and signs a waiver of the cooling off period in a form
approved by the Director-General.
EFFECT OF RESCISSION
If a vendor rescinds the agency agreement during the Cooling Off period, Section 61 states that
neither party can be held to the agreement, and if the vendor has paid any monies to the agent
they have to be refunded.
NO CONTRACTING OUT
Section 62 states that if any agreement is made that attempts to contract out of the
provisions of this Division then such agreement is null and void.
OTHER REQUIREMENTS IN REGARD TO AGENCY AGREEMENTS
The Regulations prescribe what is to be included in an agency agreement. Schedule 2(2) of the
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Regulations requires agents to complete an inspection report for the principal that includes the
following information and be signed by the agent:(a) the principal’s name & address
(b) the date of preparation of the report
(c) the agent’s name, business address & telephone number
(d) a description of the property, including the address of the property and such other details
as may be necessary to enable the property to be readily identified
(e) a description of any fittings and fixtures that are to be included in the sale of the property
(f) any terms and conditions of sale known to the agent (for example, whether or not vacant
possession is to be given)
(g) the agent’s recommendation as to the most suitable method of sale of the property
(h) the agent’s estimate of the selling price (or price range) for the property
(i) details of any covenants, easements, defects, local government notices or orders
affecting the property that are known to the agent
(j) details of any special instructions about the marketing and showing of the property
(k) the name, business address, telephone number and address for service of the
documents to the Principal’s solicitor
Other Clauses that have to be included in all agency agreement are set out in Schedule 7 & cover the
following:1 Identification of property, business or professional practice
2 Names of parties to agreement
3 Information identifying parties
4 Principal’s authority to enter into agreement
5 Authorisation for licensee to act on behalf of principal
6 Period of duration of the agreement
7 Termination of the agreement
8 Reimbursement of licensee of expenses
9 Remuneration – when and how it is paid
Schedule 8 sets out clauses that must be in an agency agreement for the sale of Residential land.
1 Exclusive agency and sole agency agreements must have the prescribed warning
notices alerting vendors that they are giving rights to the agent to sell the property
2 Warning about other agency agreements
3 Fixed term agency agreements – requires the clause that allows vendors to give a 30
day termination notice if the agency agreement is for more than 30 days
4 Price at which property is to be offered
5 Providing principal with consumer guide
6 Cooling-off period information
7 A sales inspection report to form part of the agreement
Types of agency agreements
There are several different types of agency agreements for the sale of residential property. It is
important that the vendor is aware of the type of agreement prior to signing, because it affects
the rights and obligations of the vendor to the agent
OPEN AGENCY AGREEMENTS
An open agency agreement is where the principal gives the agent the right to introduce buyers to the
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property. Under this type of Agency the vendor still has the right to sell the property themselves, and
also can enter into open agency agreements with other agents, and is only bound to pay commission
if the agent with the agreement causes the sale to happen. In regard to open agencies, agents should
take particular care to document any person they introduce to the property, and the amount of work
they do with the interested buyer, as in many cases more than one agent could deal with the same
buyer. If there is a dispute over who made the effective introduction of the buyer, then the records
kept by the agent with details of the work they have done becomes very important in determining
who will get paid the commission, how much commission or even if the vendor has to pay commission
at all.
SOLE AGENCY AGREEMENTS
A sole agency agreement is where the vendor gives one agent the listing to the exclusion of all
other agents for a set period of time. However, the Vendor retains the right to sell their property
themselves without incurring any liability to pay commission to the agent if they themselves sell
the property.
EXCLUSIVE AGENCY AGREEMENTS
In the case of an exclusive agency, the vendor gives the agent the exclusive right to sell the property
during a set period of time. In other words, they give up the right to sell it themselves and also the
right to allow other agents to sell the property during the agency period. In this case an agent will be
entitled to commission if the property is sold during the agency period.
MULTIPLE LISTING AGREEMENTS
Multiple agency agreement, such as EAC Mutli-List, is where there is an exclusive agency agreement
in place, but it automatically co-joins other agents in the network and allows them to introduce
buyers to the property. The agreement is generally an exclusive agency and the commission is paid
by the vendor to the listing agent but is shared as per the networks rules.
AUCTION AGENCY AGREEMENTS
An auction agency agreement is an exclusive agreement but is specifically framed so that the
property can be submitted to public auction on an agreed date.
FIXED TERM OF THE AGREEMENT
For both exclusive and sole agency agreements there is a fixed term for the agreement. During the
fixed term the agreement cannot be ended unless by mutual consent. The length of the fixed term
is negotiated between the agency and the vendor, there is no maximum or minimum term.
The fixed term will depend on the time frame that the agency believes it will take to sell the
property. In NSW if the fixed term is longer than 90 days then the Property, Stock and Business
Agents Act Regulation Schedule 8 (3) requires a special clause to be put in the agreement that says
that the vendor, at any time at the end of ninety days can give 30 days written notice to end the
agreement. If the fixed term has less than 30 days left, the vendor can give notice to end the
agreement at the end of the fixed term. The fixed term clause does not apply to agreements that
involve the construction by the seller of the property on the land.
It should also be noted that Schedule 7(6) of the Regulations requires the agency agreement to
contain a term indicating the period for which the agreement remains in force or indicating that the
agreement remains in force until terminated.
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IMPORTANT - WARNING
Schedule 8(1) and (2) of the Regulations requires all exclusive and sole agency agreements have
two mandatory warnings. These warnings alert the vendor to the fact that they are signing an
exclusive or sole agreement and that they may have to pay the agency commission even if they, or
another agency introduces the buyer.
The second warning asks if they have already signed an agreement with another agent and again
reminds them that they may be liable for payment of two commissions.
“Important: This is an Exclusive/Sole Agency Agreement. This means that you may have to pay the
Agent Commission even if another agent (or you) sell the property or introduce a buyer who later buys
the property“.
“Warning: Have you signed an agency agreement for the sale of the property with another agent? If you
have, you may have to pay 2 commissions (if this agreement, or the other you have signed is a sole or
exclusive agency agreement”
Filling up an Agreement
There are commercial products offered by a variety or suppliers that have created standard agency
agreements for agents to use. All of these agreements should meet the requirements of the Act. But agents
are cautioned to check the compliance of any agency agreement they use. If they don’t, and it is subsequently found
that the agreement they are using does not comply with the Act, they could find themselves having to
refund any monies they have received under the defective agency agreement.
The REI NSW and EAC have produced standard agency agreements.
Page 1 of the agreement is the Inspection Report that must be completed after the agent has
inspected the property. The rest of the form is the agreement. We will look at each clause in turn.
PARTIES TO THE AGREEMENT
This part includes all the required details of the parties to the agreement. First we put in the owner(s)
i.e. the principal, details. This should be straight forward, however, there are some pitfalls. First is
that all the names of the registered proprietors must be on the agreement. If they are not, or it is
not their legal names, the agency agreement could be null and void.
Most agents will have done a search on their land owners’ data base (e.g. RP Data, APM or Red
Square) and found what names are on the Title at Land Titles Office. If that information is not
available then the agent should ask for the full names of all owners, and fill those details in. Beware of
business names and Company names. If the Vendor is a Company then only authorised directors can
sign the agency agreement.
Secondly, agents need to fill up the details of the Licensee or Agent. The Act requires that the
agreement be in the Licensee’s name, not that of their trading name or the name of an employee.
So, if the Licensee is a Company, the name and license number on the Agency Agreement is the name
of the Licensed Company, not that of the Licensee in charge or a salesperson. If the Licensee is a
partnership then the Agency Agreement must be in the name of all the licensed partners (Companies
included) and include all their license numbers. If the Licensee is a sole trader then the name and
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License number of the sole trader is what is included in the agency agreements.
The Act allows the partnership and the sole trader to delegate the power to sign to other licensed or
certificated persons who work in the business.
Consider these scenarios:
a)
If the Licensee is a Corporation, say Fred Smith Pty Limited, and it trades as XYZ Real
Estate of Smithfield and its licensee in charge is Fred Smith, then whose name and license
number goes on the agency agreement?
b)
If the Licensee is a partnership between Fred Smith and Gloria Smith and trades
as XYZ Real Estate Smithfield then whose name(s) and license number goes on the
Agency Agreement?
c)
d)
If the Licensee is a partnership between Fred Smith Pty Ltd and John Jones and
trades as XYZ Real Estate Smithfield then whose name(s) and license number goes
on the Agency Agreement?
If the Licensee is Fred Smith and he trades as XYZ Real Estate Smithfield then whose
name(s) and license number goes on the Agency
Agreement?
The ABN number of the Licensee must also be included.
Property
This is the street address of the property. If there is no street address, the details need to be such
that the property can be clearly identified e.g. 196 Brightlands Road, Blackheath, Lot 123 and
DP123456 or RMB 12789 Princes Highway, Neville, or Lot 123 Smiths Road, Smithsville.
Inclusions
The vendor should be asked what they are going to include in the sales and this should be listed
down. It should include all goods and chattels that do not form an integral part of the property, e.g
Carpets, Curtains, Blinds, Light-fittings, Stove, TV Antenna, Air-conditioner in Lounge room, Clothes
line, Garden Shed etc etc. If any valuable item is to be excluded this should also be noted. E.g. Main
bedroom curtains excluded from sale.
A lot of agents don’t worry about completing this in detail, putting words like “as per contract”.
This is dangerous as most problems at settlement occur when a purchaser starts disputing what the
vendor has left behind. Also, most contracts issued by solicitors these days do not include any
details of inclusions or exclusions, rather leaving that for the agent to fill in.
Covenants, easements, defects, notices and/or orders should be specified on the contract of sale,
if known.
When filling up the agreement the agent should ask the vendor if they are aware of any of the
above. If the answer is “No”, then the agents should write “None known to the vendor”. The contract
will note any of these items if they are registered on title, but it is important to ask the vendor,
as there may be items that are not on title and could have a negative impact on your opinion of the
likely selling price.
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Vacant Possession/Subject to Tenancy
If there is no tenant the property will be sold vacant possession. If a tenant is in place the agent needs
to ascertain whether or not the tenancy is still under a fixed term. If it is the property will be sold
“Subject to Tenancy”. If the fixed term has expired, then the vendor has a choice whether or not they
sell it with or without the tenant. This issue needs to be discussed with the vendor. If they are selling
the property as “Vacant possession” with a tenant in place, then the vendor has a responsibility to
evict the tenant prior to settlement. If they can’t, the vendor would be in breach of their contract
and the purchaser could rescind it.
A vendor can give 30 Days notice for the tenant to vacate at the exchange of contracts. But if the
tenant does not vacate then there will be a problem.
Agents should also be aware that under the Residential Tenancies Act 2010, tenants, once advised of
the intended sale of their leased property, are only obliged to give 14 days notice to vacate.
Special conditions
The vendor should be asked if they have any other special conditions they want in the contract. If there
are none, then write: “None known at time of listing”.
Price
The Act is now very specific around quoting price to prospective vendors and purchasers:
72A Estimated selling price in agency agreement for sale of residential property
(1) A real estate agent must not enter into an agency agreement with a person for the sale of
residential property unless the agreement includes the agent’s estimate of the likely selling price of
the property.
(2) A real estate agent’s estimate of the likely selling price of a property may be expressed as a price
range, but only if the highest price in the price range exceeds the lowest price by not more than 10
per cent of the lowest price.
(3) A real estate agent must ensure that the estimated selling price of a residential property is, and
remains, a reasonable estimate of the likely selling price of the property.
(4) A real estate agent must ensure that the estimated selling price is revised if it ceases to be a
reasonable estimate of the likely selling price of a property, by:
(a) notifying the other party to the agency agreement, in writing, of the revised estimated selling
price, and
(b) amending the agency agreement.
(5) A real estate agent must, before or when specifying an estimated selling price or revising an
estimated selling price, provide the seller or prospective seller of the property with evidence of the
reasonableness of the estimated selling price.
Recommended method of sale
This is the agent’s recommendation and has nothing to do with the type of agreement being signed. It
may be an exclusive agency agreement being signed to sell the property by private treaty, but the
agent could still recommend that the property goes to public auction.
Agent’s opinion as to current estimate of selling price (or price range)
The agent fills in the price range they have assessed the property may achieve in the current market.
Section 74 of the Act requires an agent to be able to substantiate how they got to the figure given to
the vendor.
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Section 73A states:A real estate agent acting pursuant to an agency agreement for the sale of residential property
or an agent’s employee must not, by a statement made in the course of marketing the property,
represent to a buyer or prospective buyer that the property is likely to be sold for a price that is
less than the estimated selling price for the property.
So, before the agent gives an opinion to the vendor, they need to work out what they believe the
property will likely sell for, and record that and the information they used to arrive at that figure, in
their file. It is always preferable to give a range rather than just one figure, as it indicates that the
recommendation is not exact. How you arrive at, and substantiate, your estimate of selling price will
be discussed in detail at the end of this section.
Principal’s Solicitor
Details of the vendor’s solicitor are added. Sometimes the vendor does not know who to use, and will
provide those details later. If that is the case, the agent should write: “to be advised by the vendor”.
NOTE: if you recommend a solicitor to them and there is a personal, fiduciary OR business
relationship between you and the Solicitor you recommend then you must disclose this on a Section
47 Disclosure form at the time you make the recommendation.
Signature
Once this is filled in it is signed by the agent making the report. This does not need to be the Licensee.
If the Licensee is a company then any authorised employee of the company can sign the agreement.
Generally Companies have a rule that all certificated or Licensed staff can sign an agency agreement on
behalf of the Company. If the Licensee is a sole trader or a partnership there should be written
authorities authorizes people to sign on behalf of the Licensee.
THE AGENCY AGREEMENT
Agency Period
The agreement will have a start date and a finish date. Note that all REI forms have the 90 day clause in
them.
Agent’s Remuneration
This must clearly set out how the remuneration (commission) will be calculated upon a successful sale.
It can be expressed in many different ways, but it must be clear and unambiguous. It could be
expressed as:
• A percentage of the eventual sale price – e.g. 2.75% of the final sale price
• A scale – e.g. 5% for the first $200,000, 3% for the next $100,000 and then 1%
thereafter
• As an incentive – e.g. 2% if the sale price is $300,000 or below; and 4% for the balance
over $300,000
• A flat fee, e.g. $10,500
Keep in mind that it is implied in the Act, agents will negotiate their fees with the client.
The second part of this is that the agent then must work out an example of what the commission
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would be under the fee stated on the agreement, if the fee is expressed in any way other than a flat
fee.
The estimate of the commission payable must be calculated on the basis of a specified estimated
sale or purchase price for the property. Taking the 3 examples above where a percentage has been
expressed, the calculation could be as follows:•
•
•
$9,625.00 at a sale price of $350,000
$13,500.00 at a sale price of $350,000
$8,000.00 at a sale price of $350,000
Inspection
Details on how the agent will show the property are filled in. e.g. In company of agent and at open for
inspections, or by private appointment only – depending on instructions
Promotional Activities
Schedule 7 of the regulations states that if the licensee is to be reimbursed for any expenses the
agency agreement must set out the nature of the services, the amount payable; the fact that the
amount cannot be exceeded without written authority; how the licensee is to be reimbursed and
when.
Details are entered here on how the sale is to be promoted and if the vendor is contributing
any funds towards promotion, how much they are contributing and how and when will it be paid.
There are several options that can be used here. They include:• The vendor agreeing to pay a flat amount towards the marketing. Say $1,000.
Then the agent would fill in $1,000 marketing levy payable at settlement or withdrawal of
agency.
• In some cases the vendor may agree to a specific marketing schedule. If this is the case, then
the schedule would be added to the agreement. If this is done the attachment should have
the names of the vendor and agent and the address of the property and a statement that it
forms part of the agreement. It should also be signed by all parties.
If the vendor has agreed to a sign, then that should be reflected in this section.
Expenses
If the agent is going to seek reimbursement of any other expenses then they must be fully
detailed, showing what the item is, its cost and when it is due and payable. The total amount of
advertising that the vendor is paying would be included here. Other items could include the
obtaining of a 149 Certificate; the cost of a handyman etc.
Payment to principal
Most agency agreements now have a clause that allows the agent to pay monies due to the
principal electronically. If this is the case and the vendor agrees the details are filled in here. Do not
leave this part blank.
Disclosure of Rebates, Discounts or Commissions in respect of Expenses
If the agent is going to receive any payments from a supplier, and the vendor is contributing to the
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expenses then the agent MUST detail this here. For example, some newspapers charge an agent a set
fee and then at the end of the year give a rebate back to the agent depending on their total spend
over the year. Such rebate must be declared. E.g. Rebate from SMH estimated to be 3% ie $5.50.
WHS
Some agreements have a WHS clause where the vendor acknowledges that the property is free of
harm, or discloses any problems. This is there to protect the agent so the vendor should be asked
before filling in this part.
Consumer Guide
The agent needs to fill in this section AFTER they have given the Consumer Guide to the vendor.
Some agents, conscious of the need to have their records verifiable, get the vendor to initial this
section to confirm they have received the Guide.
Cooling Off Period
The Vendor needs to acknowledge if the are waiving the Cooling Off period or not. Remember to
waive the cooling off period they must have had the fully complete agency agreement and the
consumer guide for at least 24 hours.
Signatures
Because of the requirements in the Act, but also the Competition & Consumer Act and the Contracts
Review Act, agents when entering into an agreement with a consumer, should go through the
agreement and explain all the main clauses to the prospective seller before they sign. Failure to do
this could lead to the agreement being challenged at a later time with the vendor simply claiming they
did not understand the agreement when they signed it.
While it is not a requirement of the Act that you do this, it is prudent practice to protect your right to
claim commission and expenses if and when a dispute arises. The vendor and the agent then sign the
agreement and date it, along with any attachments to the agreement.
Instructions to Solicitor
Some standard agency agreements have another page where the vendor can give instructions to
their solicitor. The agent would fill it up and get the vendor to sign. The purpose of this is to speed
up the issue of the Contract for Sale, as the property cannot be advertised or promoted, until a
complete Contract for Sale is received by the agent.
A properly completed exclusive agency agreement is included in your Resources Pack.
Serving a Copy of the Agreement
The Act requires that a copy of the executed Agency Agreement be served on the principal(s)
within 48 hours of it being executed by the principal. There should be a written procedure in place
ensuring that a copy is served within the 48hour period. Service can be by on of the following:
• Delivering it personally to the Vendor
• Leaving at the person’s place of residence, with a person who has apparently reached the
age of 16 years
• Faxing it
• Do not serve it by post, as by the definition used by the NCAT, post takes more than
48 Hours
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Agents should be very conscious of the 48hour rule. In the case Terry Pfeiffer vs Connors [2000] in the
New South Wales Supreme Court a vendor was able to reclaim his full commission plus expenses
because the Agent could not show that they had delivered a copy of the agreement to the vendor
within the 48 hour period. This recovery action was taken some 2 years after the property had settled
and the agent received his income.
Representations as to Selling Price
Division 3 of the Act sets out an agent’s obligations regarding their view of the selling price of a
residential property. The clauses related to the listing of the property are:72A False representation to seller or prospective seller
A real estate agent or employee of a real estate agent must not make false representations to a
seller, or a prospective seller of residential property as to the agent’s or employee’s estimate of the likely
selling price of the property, and must make every effort to ensure those estimates remain reasonable.
73 Advertisements for residential property
A real estate agent must not publish or cause to be published an advertisement in relation to the sale of
residential property a price that is less than the agents estimated selling price for the property; must
not include the phrase “offers above”, “offers over” a specified selling price or price range; and take all
reasonable steps to amend or retract any published advertisements that is less than the revised
estimated selling price.
74 Requirement to substantiate selling price estimates-residential property
The Secretary may by notice in writing to a real estate agent require the agent to provide evidence of
the reasonableness of any estimate of the selling price of residential property made by the agent in a
statement:
• orally or in writing to a seller or prospective seller of the property, or
• in an advertisement in respect of the property that is published or caused to be
published by the agent, or
• orally or in writing to a person as a prospective purchaser of the property.
A real estate agent who fails to comply with a notice under this section within the period for
compliance specified in the notice is guilty of an offence.
N.B. Residential selling agents should be fully conversant with the many Guidelines available from NSW
Fair Trading and the ACCC. Each year, hundreds of agents & agencies are investigated for possible
breaches of these Guidelines. This is one of the largest areas of complaint to NSW Fair Trading regarding the opinions agents provide potential vendors and buyers on price.
4.5 Maintaining Files
Section 104 of the Act requires:104 Licensee to make and keep certain records
(1) A licensee must make the following records:
(a) a record containing full particulars of all transactions by or with the licensee in
connection with his or her business as a licensee,
(b) such other records relating to the licensee’s business as a licensee as may be required by
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the regulations.
(2) A record required by this section must be kept for at least 3 years after it is made. So the Sale file
must include all records created in the listing of the property, and those records must be kept for at
least 3 years.
Risk management strategies would require that you keep all records so that you have details of what
you have done in case of a future dispute. Good file note are very important. At this stage a sale file
would have at least the following on the file:• Vendor’s contact details
• Notes you made during the listing presentation
• Features of the property
• Full listing details
• Copy of the signed agency agreement
• Details of marketing
• Advertising copy
• A copy of the contract when received
• Copies of all correspondence
The file would be added to as marketing progresses and would include
• Details of buyers that inspect the property and their comments
• Details of attendees at open houses and feedback from them
• Copies of feedback letters sent to the vendor
• Details of contact and what was discussed with various people.
• Details of activities followed to find a buyer.
One of the biggest problems in real estate is that agents do not keep enough records of what they
do during the marketing and negotiation of a property. If things go wrong the lack of detail on an
agents file will work against them.
In fact, in many cases agents have been fined, not necessarily because they did anything wrong,
but because there was not enough information recorded at the time that could demonstrate just
what the agent did. In this regard, diaries, diary notes and file notes can be very important. Many
agents keep a running log in the back of the file where they can make brief notes as to the
activities they have undertaken during the selling process.
73B Real estate agents to keep record of quotes
(1) A real estate agent who makes a statement in the course of marketing a residential property to a
buyer, prospective buyer, seller or prospective seller that the property is likely to be sold for a
specified price or within a specified price range, must make a written record of the statement in
accordance with subsection (2).
(2) The record of the statement must:
(a) contain the address of the property concerned, the price or price range, the date and time of
the representation and any other information that is prescribed by the regulations for the
purposes of this section, and
(b) be kept at the real estate agent’s principal place of business for at least 3 years.
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4.6 The Importance of Good Communication Techniques
Real estate salespeople are in a unique position when they are listing and selling property.
They are the only person in the transaction that deals with all sides of the transaction. While the
agent in law acts for the Vendor, they deal directly with buyers as well. Being in such a position the
success of the agent depends greatly on the way they communicate with both seller and buyer. The
whole selling and buying process can provide different stresses to different people, so it is
important that agents are aware of this and can react in a positive and purposeful manner.
Building rapport with both sides of the transaction is important to the building of trust. Building
rapport is building a connection with another person by showing empathy and interest in the other
persons need. If people feel more comfortable with an agent they will more readily communicate
with them.
So an agent should always focus on their clients and customers requirements and show a
genuine interest in meeting those needs. This can be achieved by
• Asking open ended questions
• Being able to confirm the requirement with the person, and then
• Explaining to the person how you can help them.
As mentioned before, making good notes recording the details demonstrates that you have the
other person’s interests at heart and that you have a willingness to help them.
As well as dealing with Vendors and Buyers, the agent must also have good communication skills
within the office. Quite often the selling agent will need to liaise with the Property Management
Department if the property is under lease. Also the agent will need to identify any possible
problems that could arise during the sale of the property, and discuss with more experienced staff
on the options available in handling such problems.
Agents do not work in isolation, and so need excellent communication skills in order to be
successful.
5 Selling Property
Contracts for Sale
Now that the agent has listed the property they can prepare how they will market the property.
However, Section 66R of the Conveyancing Act 1900 and Part 5, Division 1 Section 63 of the
Property Stock and Business Agents Act requires that, for a residential property that a full Contract
for Sale is available before the marketing of the property.
AGENT MUST HAVE A COPY FIRST
Section 66R of the Act requires that a vendor cannot offer for sale a residential property in
NSW without first having a complete contract for sale available for prospective purchasers
to view. Further the section allows agents to exchange contracts, if they have permission to
do so.
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Residential land is defined in the Conveyancing Act Section 66Q to mean land that
1. is vacant, and where the construction of a single residence is not prohibited
2. has not more than two places of residence on it or under construction
3. is a strata lot comprising of not more than one place of residence
However, the following land is not residential land if
1. it is used wholly for non-residential purposes
2. it is more than 2.5 hectares in area.
It should be noted here that this definition of residential property only applies to the requirement
that a contract is prepared prior to sale of residential property. The definition of what constitutes
a residential property under the Property, Stock and Business Agents Act 2002 for agency
agreements is different.
Under Section 66R of the Conveyancing Act a vendor indicates that they are going to offer a residential
property for sale by any method, including private treaty, auction, by option or any other method, MUST
prepare a full Contract for Sale (excluding the details of the Purchaser and the Purchase Price) and the
contract must include the documents that are prescribed in the Regulations from time to time.
Section 66R(1) states:
A vendor who, by a written or broadcast advertisement:
a) indicates that residential property is for sale or is to be auctioned at any future time, or
b) offers to sell residential property, or
c) invites an offer to purchase residential property, or
d) offers to grant an option to purchase residential property, or
e) invites an offer to take an option to purchase residential property,
is guilty of an offence unless the required documents are all available for inspection at the
same place by any purchaser.
Section 63 of the Property Stock and Business Agents agent mirrors these requirements, but applies
them to agents.
Originally, Regulations were passed in 1995 that sets out the documents to be included, but these were
repealed and replaced by new regulations in 2005 referred to as The Conveyancing (Sale of Land)
Regulation 2005.
Schedule 1 of those regulations prescribes the following documents must be attached to a
Proposed contract for sale. They are
• A Property Certificate ie a copy of the Certificate of Title or Title search
• A plan of the land issued by the Department of Land, generally the Deposited
• Plan
• If the property relates to land then copies of all deeds, dealings and other
instruments lodged or registered and that are shown on the relevant property
certificate including:o Easements
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o
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•
•
•
Profits à prendre Examples of profit à prendre include rights to:
▪ graze stock
▪ plant and harvest crops
▪ quarry stone, sand or gravel, or
▪ take timber
o Restrictions on the use of the land
o Positive covenants
If the property is a strata lot, a copy of the strata plane that shows the lot and a copy
for the lot and the common property
If the property is a Community Scheme, a copy of the community plan incorporating
the lot, including a copy of the community management statement and any
community development contract and a property certificate for the lot and the
community property.
149 Certificate (unless the land is not within a local government area)
A diagram for the land from a recognised sewerage authority (if available from the
authority in the normal course of its business) indicating the location of the authority’s
sewer in relation to the land.
Agents should note that Part 5 Section 63 of the Property, Stock and Business Agents Act 2002 states:A real estate agent must not offer residential property for sale unless the required documents are all
available for inspection at the real estate agent’s registered office by a prospective purchaser, or agent
for a prospective purchaser at all times at which an offer to purchase the property may be made
(3) A real estate agent is considered to offer residential property for sale when the agent,
expressly or by implication:
a) indicates that residential property is for sale or is to be auctioned at any future time, or
b) offers to sell residential property, or
c) invites an offer to purchase residential property, or
d) indicates that a person may be willing to grant an option to purchase
residential property.
(4) The "required documents" for the purposes of this section are:
a) a copy of the proposed contract for the sale of the property (excluding
particulars of the purchaser and purchase price), and
b) the documents required by section 52A of the Conveyancing Act 1919 to be attached
to the contract before signature by the purchaser, and
c) in the case of an option to purchase residential property-a copy of the proposed
option document (excluding particulars of the purchaser and consideration for
the option).
(5) Without limiting this section, a real estate agent is taken to indicate that residential
property is for sale if the real estate agent does any of the following or causes or permits any
of the following to be done:
a) advertises or promotes the property in any way that, in the circumstances, may
reasonably be taken to indicate that the property is or may be for sale,
b) places a sign on or near the property that, in the circumstances, may reasonably
be taken to indicate that the property is or may be for sale,
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c) advertises or in any way gives notice that the property is to be auctioned at any future
time,
d) places on display particulars or a description of, or a photograph, drawing or other
representation of, the property in or on any premises, vehicle or place where the real
estate agent conducts business as a real estate agent,
e) shows the property to a prospective purchaser or gives the address of the property
to a prospective purchaser
Penalties if an agent breaches any part of this section is $11,000 per offence.
Marketing Property for Sale
CONSUMER PROTECTION CONSIDERATIONS
Most of the representations agents make is in the marketing of property. As mentioned
before agents need to be aware of the Acts that regulate what they say and can’t say in
marketing property, and making representations to prospective buyers when answering
their questions.
NSW Fair Trading has produced two sets of Guidelines to help agents in this regard.
They are:• Advertising Guidelines
• Misrepresentation Guidelines
DIRECTOR-GENERAL’S ADVERTISING GUIDELINES
The Director-General has issued Guidelines for agents to follow. The Guidelines apply to all agents
licensed under the Property, Stock and Business Agents Act 2002. They are intended to assist
agents when publishing photographic advertisements.
Photographs are an influential selling tool in the home property market whether in print or on the
internet. Photographs are used by agents in property advertisements, in addition to descriptive
words and phrases, to help create a picture in the mind of the prospective buyer.
A beautiful photograph of a house, its unique features, its views, and its surrounding local area
can immediately draw in many potential buyers.
It is often said that “a picture is worth a thousand words”. Real estate agents should be mindful
when using photographs in a real estate advertising campaign as visual communication must
ensure the message is not misleading.
Consequently, these guidelines have been developed by the Fair Trading to assist agents in
publishing acceptable photographic advertisements which convey accurate information for the
property buyer and leave that potential buyer with the right impression of the property.
As the real estate industry becomes more competitive more photographs are used to advertise the
sale of a house. Often several photographs of indoor and outdoor settings are used in the one
advertisement which may leave some consumers uncertain or unclear about the pictures they see
in the photographs. For example, where a single photograph in the property section of a local
newspaper featuring a magnificent beach view is used, it may be unclear to consumers whether
this view can be seen from the property being offered for sale or whether the beach is nearby.
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Without any labeling on the photographs themselves consumers will be left with uncertainty
about the image they see.
THE LAW
Section 51 of the Property, Stock and Business Agents Act 2002 forbids a licensee in the course of
carrying on their business from publishing or causing others to publish any statement that:
• is intended or apparently intended by the licensee to promote the sale or lease of any
property, and
• is materially false, misleading or deceptive (whether to the licensee’s knowledge or
not)
A statement is published if it is:
• in any newspaper, periodical publication or other publication, or
• publicly displayed in, on, over or under any building, vehicle or place (land or water),
or in the air in view of persons on any street or public place, or
• in any document sent or delivered to any person or thrown or left at premises
occupied by a person, or
• broadcast by radio or television, or
• circulated on an internet website or by electronic mail.
Penalties apply for breaches of the provision of section 51 of the Property, Stock and Business Agents
Act 2002.
Section 51 of the Property, Stock and Business Agents Act 2002 applies in addition to other
legislation that relates to misleading or deceptive conduct and false representations, including
the Fair Trading Act 1987.
Section 42 of the Fair Trading Act 1987 states that a person shall not, in trade or commerce,
engage in conduct that is misleading or deceptive or is likely to mislead or deceive.
Section 45(1)(b) of the Fair Trading Act 1987 provides that a person shall not, in trade or
commerce, in connection with the sale or possible sale, of an interest in land or in connection with
the promotion of the sale of an interest in land make a false or misleading representation
concerning the nature of the interest in the land, the price payable for the land, the location of the
land, the characteristics of the land, the use to which the land is capable of being put or may
lawfully be put or the existence or availability of facilities associated with the land.
Penalties apply for breaches of section 45 of the Fair Trading Act 1987. The maximum penalty in
the case of a person is 200 penalty units – presently $22,000 and for a company is 1000 penalty
units – presently $110,000.
FALSE, MISLEADING OR DECEPTIVE STATEMENTS
A statement is taken to be false or misleading if it has a reasonable tendency to lead to a belief in
the existence of a state of affairs that does not in fact exist, whether or not the statement
indicates that the state of affairs does exist.
Misleading or deceptive conduct is a concept that has been broadly interpreted judicially. Conduct
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is misleading or deceptive if it is likely to lead a reasonable or ordinary member of the class of
persons to whom it is directed into error. Misleading conduct can include acts of silence or
omission. Conduct can be misleading even if the agent does not actually make any
representations. It is not relevant whether the agent actually intended to mislead anyone to
establish liability. What is relevant is the overall impression created by the conduct and its actual
or likely effect on reasonable or ordinary members of the target audience (prospective buyers).
Any type of conduct related to the photographic advertising of real estate that could give a
consumer the wrong impression may potentially breach the Property, Stock and Business Agents
Act 2002 and the Fair Trading Act 1987.
Agents must ensure that any claims made about any property or land characteristics in any
photographic representations and advertising are accurate and could not give prospective buyers
the wrong impression. Statements made in conjunction with photographs of the views and
facilities available in a local area must not be false or misleading.
Examples of undesirable photographic property advertisements which currently appear in
newspapers, real estate publications and on the internet include:
•
•
•
•
•
•
a photograph of a water view or scenery, placed next to a photograph of a
house, makes it difficult to ascertain whether the water view or scenery Can be
seen from the house or whether the photograph is a ‘location shot’
a photograph of a beach scene with the wording ‘minutes to this’ typed above
the photograph does not give a clear indication of the distance from the property
to the beach shown in the photograph
a photograph of a park or a beach with the wording “opposite home” where, in fact, this
view cannot be seen from the property
a photograph of a house placed next to a photograph of a beach with the
wording “stroll to beach” printed underneath the photograph does not give a
clear indication of the distance from the property to the beach
a photograph of the beach with the wording “90 seconds walk to the waters
edge, not actual view” printed at the bottom needs more clarification
a photograph on the internet of a beach with the wording “100 metres to the beach”
printed at the bottom of the photograph needs more clarification.
The photographs and wordings in the above examples are likely to mislead, give the wrong
representation or be unclear to any person relying on the photographs to give them an image of
the property being offered for sale.
The ‘touching up’ of photographs that appear on internet websites which promote the sale of real
estate is also of concern.
Photographs of properties which have been touched up to hide undesirable characteristics or
enhance other features could mislead consumers. Accordingly, agents must ensure that
photographs are not used in a manner that may lead to implied representations that are false or
involve misleading or deceptive conduct. Real estate agents must not:
• modify or allow to be modified photographs of properties so that the images
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no longer truthfully and fairly represent that property
• change the appearance of a property by digitally removing or adding features, but
adjusting the lighting slightly to compensate for poor lighting on an overcast day may
be acceptable or
• zoom in on a photograph of a view which can be seen from the property to make that
view appear closer.
The modifications to photographs described in the above examples are likely to be misleading
or deceptive.
THE USE OF LABELLING TO CLARIFY MEANING
Accurate labeling of photographs used in property advertisements could eliminate any doubt in a
consumer’s mind about what they actually see in a photograph.
Some examples of acceptable practices in photographic advertisements which Fair Trading suggests
agents use are:
• a photograph of a water view which has been taken on the property being offered
for sale does not require any labeling
• a photograph of a water view which has not been taken on the property being
offered for sale, but is within the immediate area, should have printed on the
photograph “location shot”
• a photograph of a parkland or bushland which has been taken on the
property being offered for sale does not require any labeling
• a photograph of a parkland or bushland view which has not been taken on the
property being offered for sale, but is within the immediate area should have
printed on the photograph “location shot”
Note: The term “location shot” should only refer to photographs of facilities and services within
the immediate surrounding area of the property being offered for sale, such as a park,
playground, beach, shopping village, café scene or other facility. Generally, the scene in the
photograph labeled as a “location shot” cannot be seen from the property being offered for
sale, and was not taken on the property itself. Therefore, the most accurate description to
print on the photograph would be a “location shot”.
It is suggested that any photographs taken on the property itself to be used in real estate
advertising do not require labeling. Accordingly, only photographs not taken on the property
itself, but within the immediate surrounding area, will require the labeling ‗location shot‘.
Photographs of the property (outside and inside) that is being offered for sale which are for illustration
purposes must not be misleading. The touching up of photographs would be considered misleading.
Further, the ACCC Guidelines advise that vague statements about the location of land are likely to be
misleading under the Competition & Consumer Act 2010. Only factual information about the location of
land or property should be used.
The following examples show what wording would also be acceptable to use in the description
of a property to supplement the photograph/s:
• ‘2 kms to the beach’ would be preferable to ‘close to beach’; and
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• ‘village shops 3 km’ is preferable to ‘within walking distance of shops’
All efforts should be made by agents and their employees to provide an accurate picture or
impression in the consumer’s mind of the features of the property being offered for sale.
Agents cannot avoid liability simply by claiming that the buyer or consumer should have made
reasonable enquiries and checked the information provided. Agents are responsible for their
words and actions in their dealings with their clients.
Director-General’s MISREPRESENTATION GUIDELINES
These Guidelines were issued to explain to agents the whole concept of Misrepresentation and how
agents can breach the law.
They are very comprehensive and a careful reading of them will insure that agents fully understand
the issue of Misrepresentation, and how they should conduct themselves to insure that they do not
breach any of the Cats that cover the issue. The Guidelines are as follows:Guidelines have been issued by the Director-General for Fair Trading to assist licensees and
certificate holders in relation to misrepresentation offences under the Property, Stock and
Business Agents Act 2002.
PURPOSE
These Guidelines apply to all agents required to be licensed under the Property, Stock and
Business Agents Act 2002.
They are intended to assist licensees and certificate holders better understand their legal
obligations not to misrepresent the characteristics of properties offered for sale. The guidelines
are not exhaustive nor intended to constitute legal advice. They are provided to clarify the types of
statements or actions which could be interpreted as a misrepresentation or concealment of
material facts, and the circumstances in which they might arise. Because they are intended as a
guide only, they cannot describe all the potential circumstances which may need to be considered.
The most effective guide for those working in the property services industry is provided through:
• knowing and understanding the relevant legislative requirements and
• being honest (not misrepresenting facts through misleading or deceptive behaviour)
and open (not concealing facts which could potentially have an impact on pivotal
decisions taken by parties to a property transaction).
Agents are obliged to take responsibility for what they say and do (or don’t say & do) in their
dealings with clients and customers. Agents and certificate holders should not regard themselves
solely as a channel for the passing of information between the seller and the buyer.
When information about a property has been provided to an agent verbally, a reasonable
attempt should be made to check its accuracy. (This is particularly so if the agent may then
adopt, recite or present that information as their own, or may be regarded as having done so.)
For example, if a vendor verbally advises an agent that the area of a block of land is one hectare
without documentary proof, the agent should seek some verification of this information, e.g.
from Contract of Sale documents, before advertising the block’s size.
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A disclaimer may not be enough to avoid responsibility for advertised information if this
information is misrepresented by the agent or is later found to be misleading.
Much of the information necessary for vendors and purchasers to make informed decisions
will be provided to them by solicitors, financial advisors, conveyancers, surveyors, and/or
through the building or pest inspections they commission. However, licensees and certificate
holders are sources of key information for parties involved in property transactions who
would reasonably rely on the representations made. This information must be based on facts
which can reasonably be checked by an agent. This does not mean that agents are expected
to do the work of specialist advisors such as solicitors or surveyors.
Licensees and certificate holders must not do or say anything that could mislead any parties
involved in a property transaction. Statements or actions are considered to be misleading if they
would lead a client or customer to believe in the existence of a state of affairs that in fact did not
exist.
PREDICTIONS
Section 41 of the Fair Trading Act provides that when a person makes a representation about any
future matter without having reasonable grounds to do so, the representation shall be taken to be
misleading. In a property services context, predictions about trends in property values or potential
returns on development / investments which are untrue or cannot be substantiated constitute
misleading conduct.
Sections 72-76 of the Property, Stock and Business Agents Act specifically cover representations
as to selling price of residential property. Further information about this can be found by reading
the Guidelines for Understanding Selling Price Estimates. An agent may be able to substantiate
information about property markets which have a regular, cyclical pattern. However, some
markets are particularly volatile and even experts cannot make predictions with any certainty. If
clients require an estimate of future trends in these types of markets they should be made aware
of the unpredictability of that market before comparing past and future trends.
CONCEALMENT AND SILENCE
Misrepresentation can be about what is not said as well as what is said. There is no stand alone
duty of disclosure, but silence can be misleading in certain contexts, and this should be avoided.
There is a need to consider the background of other facts against which the silence occurs. Agents
need to consider whether silence in that context can lead reasonable people to believe that a
particular state of affairs exists where it does not.
Remaining silent or only telling half the story where there is a reasonable expectation of
disclosure means you are breaking the law.
Licensees and certificate holders must be open and honest with clients and customers. If
information is known to the agent they must not conceal or suppress information about a property
if there is a reasonable expectation that the information will be of concern to a buyer or seller and
is not readily apparent.
Also, where information provided in an original statement subsequently changes and that change
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renders the original statement incorrect, the change must be conveyed to the relevant parties.
If a potential buyer asks a question about a property and the agent knows the answer, there is a
responsibility to answer the question frankly and fully. If the agent does not know the answer s/he
should undertake to obtain the information from the vendor or refer the person back to his or her
conveyancer or relevant expert, depending on the nature of the query.
INTENTION TO MISLEAD NOT RELEVANT
The intention of an agent or certificate holder in relation to misrepresentation is not relevant
under the Property, Stock and Business Agents Act 2002. What is relevant is the impression a client
or customer might gain and whether this would be likely to mislead them.
Section 52 (1) of the Act states that it is an offence against the Act if in the course of performing
functions as a licensee or registered person, another person is induced to enter into any contract
or arrangement through:
• a statement, representation or promise which is false, misleading or deceptive (whether to the
knowledge of the person or not) or by
• concealing a material fact (whether intended or not).
A defense exists, however, when the agent/certificate holder “did not know, and no reasonable
cause to suspect” that his/her statement , representation, or promise was false, misleading or
deceptive [section 52(3)].
WHAT IS A MATERIAL FACT?
Legislative provisions relating to misrepresentation by concealment are based on false & misleading
representations involving a “material fact”.
A material fact is a fact that would be important to a reasonable person in deciding whether or
not to proceed with a particular transaction.
A recent Administrative Decisions Tribunal appeal decision pointed out that a fact can be 'material'
in two ways:
1. It can become “material” because in the particular circumstances it is known by
the agent to be material to the particular consumer, even though agents and
consumers may not typically regard the matter as material”.
2. The other way in which it may become “material” is by the application of the
objective standards which has regard to what a reasonably informed consumer with
a fair minded understanding of the real estate market, including the role of the real
estate agent, would regard as material.
Material facts are inherently related to issues of market value. They are facts which:
a) may be sufficiently significant or relevant to influence decisions on whether to buy, sell
or rent; and/or
b) what market value would apply to buying, selling or renting.
Apart from individual circumstances where an agent understands that a particular issue is “material” to
an individual, for the purposes of generally understanding the requirements of the law, agents
should concern themselves with considering issues which are sensitive for a significant proportion of the
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population.
While an agent will not always know the intangible factors that bear on a decision to purchase, that is not
what is required by section [52]. The question is an objective one to be viewed in all the circumstances. This
will necessarily involve a question of reasonableness, providing protection for agents from a purchaser
seeking to rely on the provision for whimsical or unreasonable claims of materiality.
The Administrative Decisions Tribunal Appeal Panel pointed out the role of agents, as professionals in the
real estate market, having market knowledge to assess whether particular aspects of a property are going
to have an effect on its market value, and therefore whether it is “material” to the market. Accordingly, the
Tribunal further ruled that indications which would be relevant to determining whether something is a
material fact could include:
• the agent’s treatment of the fact
• whether the fact is able to be independently ascertained
• whether the fact is likely to impact on price
• the reaction of other purchasers to the fact
• whether the fact results in the property being in a rare or unusual category or position.
Purchasers still need to take reasonable steps to inform themselves about a property. However, as the
Tribunal Appeals decision points out, requiring a purchaser to raise all relevant issues in order to have
them answered would be to subvert the intention of the section. The emphasis of Section 52, as highlighted in
the same Administrative Decisions Tribunal appeal decision, is on the agent informing the purchaser of
matters which could not be revealed through undertaking usual enquiries.
“Usual inquiries” may include a physical inspection of the property, professional building or pest
inspections, searches conducted by the purchaser’s solicitor or conveyancer.
Some ‘material facts’ about a property which may not be readily apparent could include:
• whether a property is Roads and Maritime Services affected
• whether the property has a current DA approval – this might be a positive selling
point for some
• if an agent had shown a property in the past that had water damage at the time, even
if it was not there later, the agent should disclose it to other potential buyers
• aspects of the recent history of use or activity in a dwelling
• crown land affecting vehicular access to a property
• aspects of the neighborhood surrounding the property which may not be
immediately apparent upon inspection
• potential psychological stigma attached to a property which is likely to be shared by a
significant proportion of the population, for example, property which has been the
scene of a serious crime during the current occupation. While such circumstances may
not represent a physical barrier to the use of the property, they may significantly affect
the extent to which occupants would be comfortable using the property.
In terms of a property which is to be put on the market, attention should be given to material facts
which relate to the period during which the seller was the owner. Agents must conduct a physical
inspection of the premises which are to be marketed for sale and obtain all relevant information
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necessary to complete the sales inspection report, as required by clauses 1 and 2 of the Rules of
Conduct set out in Schedule 2 of the Property, Stock and Business Agents Regulation 2014.
Agents should discuss with sellers any market sensitive matters that are likely to be the subject of
statements or representations by the agent in the course of marketing the property. During this
process, it is important for the agent to gather information on aspects of the property which are
sensitive to the market which will assist him/her in accurately and honestly representing the
property.
Having gathered the relevant information necessary to market and promote a property, the
agent must then ensure that this information is provided to potential purchasers.
AT WHAT POINT SHOULD A MATERIAL FACT BE DISCLOSED?
Agents need to use their judgment in assessing individual circumstances as to when to discuss
material facts. Timing may depend on the nature of the material fact. Facts of a non-sensitive
nature such as the area of the land on which the property stands, would be provided as part of
the standard marketing campaign.
Disclosure of more sensitive information may be more appropriately revealed when there are
indications that a person is seriously considering purchasing the property.
DIFFERENCE BETWEEN PERSONAL INFORMATION AND MATERIAL FACTS When marketing or
managing a property transaction it is important to remember that there is a difference between
personal information and material facts. Material facts relate to the property, personal
information relates to the individual parties involved in a property transaction.
As an example, an agent may inform a potential buyer that a serious crime had taken place at a
property during the current ownership. The agent provides this information because s/he
judged the crime to be a material fact. If the agent then goes on to discuss the parties involved
in the crime, s/he is providing personal information.
SELLING PRICE, PRICE RANGE AND METHOD OF SALE
Information provided to a property seller in relation to for example, the estimated selling price
(or price range) must be an honest appraisal based on a soundly researched assessment of the
market.
Section 72 of the Property, Stock and Business Agents Act makes it an offence for an agent or agent’s
employee to make a false representation to a seller or prospective seller of residential property as to
the agent’s or employee’s true estimate of a property’s selling price.
The same requirements apply to advice about method of sale – relevant factors such as the
current state of the property market and demand for the type of property to be marketed will
need to be researched and discussed openly with the seller / potential seller.
UNDERSTATING SELLING PRICE ESTIMATES
Section 73 of the Property, Stock and Business Agents Act states that during the marketing of a
property for sale an agent must not falsely understate his/her true estimate of the selling price
of that property. This understatement could be in the form of written or verbal advice to a
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prospective purchaser or in an advertisement which the agent published or caused to be
published.
Marketing Options
When deciding how a property should be marketed the agent needs to consider:• The budget available for marketing
• The target buyer group(s)
• The time span of the marketing campaign
There are various outlets in which advertising can be placed and they include:
NEWSPAPER ADVERTISING
Just what newspapers are advertised in will depend a lot on the target market group. Whether it is
just local newspaper advertising, or combined with State or nationwide dailies, or advertised in
international papers will depend a lot on what type of buyer the agent is trying to attract. Also the
frequency of the advertising also needs to be decided, and whether the advertisements are just
going to include copy and or pictures as well. A lot will have to do with the budget and the method
of sale. Generally, a property that is going to auction will have a more aggressive marketing
campaign than a private treaty sale because of the limited time frame for promotion.
BROCHURES
Brochures these days are an integral part of any marketing campaign. However, the style, size
and the distribution of the brochure will have to be decided upon. A brochure allows a lot more
information to be included than a newspaper advertisement.
SIGNBOARDS
For sale signs are an important and effective way to promote a property at least cost. Traditionally
anything up to 30% of inquiry for a property is generated by a signboard. These day photo sign
boards can be very effective as they can show a part of the property that is not readily apparent
from the street. As well other key information can be added to attract people to inspect the
property. In NSW sign board erected within the grounds of a vendor’s home that is for sale do not
need a Development Application from council.
However, signs on public property do, and in some council areas a DA may be required if the ‘for
sale’ sign is over a certain size.
INTERNET
The internet is fast becoming the major form of advertising real estate. It is so popular with buyers
that many agents advertise on more than one site. The internet enables agent to put a lot more
information about the property at least cost into the public domain. Many photos showing the
features of the property can be added at no extra cost. It also is a convenient way for buyers to look
for property they won’t, without the help of the agent. However, that can be a draw back as it
reduces the effectiveness of agents in introducing people to property. People can exclude a
property from their list because of what they see on the internet and the way they searched for it.
EDITORIALS
Many newspapers will print editorial material if the details of the property are provided to them.
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Writing editorials and submitting them to newspapers is an important function of a selling agent.
However, be aware if the agent causes an editorial to be printed, they can be held responsible for
what appears in it.
DIRECT MARKETING
An important function of an agent is to consult their data base of buyers to see if they already have
someone on their books that could be interested in the property.
OPEN FOR INSPECTIONS
Having a for sale property open for inspection at a set time each week is an efficient and cheap
form of promotion and marketing. It allows people to attend the property without making an
appointment. It is a very efficient use of time for the agent as they can show a large number of
people the property simultaneously. When conducting open for Inspections the agent needs to be
aware of security considerations. They are in charge of the vendor’s property during the inspection
and need to act accordingly. They should not allow anyone into the property without first obtaining
their details and contact numbers. Because of this they need to be aware of the Privacy Act, their
company privacy policy, and have a sign on display telling people why they are collecting the
information and what it will be used for, and giving details of where people can inspect the
information on them that has been collected.
MARKETING PLANS
When developing marketing plans it is a good idea to give a vendor choice, so preparing
more than one plan for the same property is advisable.
Set out below is an example of advertising alternatives including notes of explanation for the
vendor.
Advertising Alternatives
Attached are three examples of advertising schedules. They have been drawn up to indicate
advertising that can be undertaken and its relative cost. Although the combinations are endless
these three alternatives give a guide, and can be varied to suit individual requirements. Please
feel free to discuss your requirements with our trained who can show you examples of each type
of advertisement.
In each schedule we have been very careful to give cost effective examples. The idea of all advertising is
to attract people to the property, not to tell them everything about it.
OPTION 1 - STANDARD OPTION
This schedule allows for advertising in the form of lineage advertisements in the Sydney Morning
Herald, display advertisements in the local paper, and with the direct auction costs and a
brochure. While cheaper campaigns could be undertaken we find that they do not reach the
target market adequately and have a detrimental effect on inquiry.
OPTION 2 - MID OPTION
This alternative seeks to cover the target market larger advertisements allowing for more
information and photos to give a better view of the property In addition the property will be
featured in the Southern Property Review and on its own brochure which will be letterboxed
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throughout the area.
OPTION 3 - PREMIUM OPTION
This option is the same as the second but allows for display advertising in the Wentworth Courier and a
display advertisement in the Sydney Morning Herald.
Other
Other advertising avenues can be used: for example the foreign language newspapers &
other suburban papers. Other advertising or special requirements should be discussed with
your representative.
Conclusion
All costs quoted are net of any rebates or volume discounts given to us by the various media
sources. In general, we receive discounts of between 5 and 20% which are passed onto you. If the
property is sold before auction you only pay the agreed costs for the advertisements that actually
appeared.
We at XXX Real Estate take great care with our advertising schedules to ensure value for money.
All advertising schedules are prepared with the target market in mind. We constantly monitor the
source of all buyer inquiry and adjust our schedules accordingly. We can also arrange advertising in
other suburban newspapers and foreign language newspapers if required. Please feel free to
consult us as our staff are fully trained to advise you as to the best and cheapest way to reach the
target market for your property.
Three alternative advertising Schedules are submitted for your consideration.
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EXAMPLE OF MARKETING & ACTIVITIES PROGRAM- OPTION NO 1
On Listing Property:
Arrange contract with Solicitor
Write Advertisements and Brochure
Write editorial and submit to all papers
Arrange for all salespeople to inspect property
Take photos and prepare window display
Order and erect Auction Board 3x4
Book Auction
List property on Internet
WEEK 1 & 2
Letterbox 200 advance marketing circulars to neighbours
Phone all prospective buyers and advise property on market
Letterbox colour cards
First Auction Advertisement – Local Paper (Colour)
Conduct Saturday/Thursday ―Open House‖
Follow up attendees of Open House
Verbal and written report on Feedback to Vendor
Review Advertisements in light of response
WEEK 3
Second Auction Advertisement – Local Paper(Colour)
-1/2 page Sthn Review
- SMH 10 lines
Second Doorknock - invitation to Open House
Conduct Saturday/Thursday ―Open House‖
Follow up attendees of Open Houses by phone
Verbal and written report on Feedback to Vendor
WEEK 4
Third Auction Advertisement – Local Paper (Colour)
Conduct Saturday/Thursday ―Open House‖
Follow up attendees of Open Houses by phone
Verbal and written report on Feedback to Vendor
Auction Week
Auctioneer to inspect property
Follow up all attendees of Open Houses and arrange further
inspections where necessary
Auction Day Advertisement
Full briefing with Vendor and discuss strategy
AUCTION DAY
Auctioneer‘s Expenses (on Site)
Photography
Final briefing with Vendor before Auction
Attend Auction
Sign contracts and take 10% deposit
Alter Auction Board
Total including GST
No Charge
No Charge
No Charge
No Charge
No Charge
$160.00
$ 30.00
No charge
No Charge
No Charge
No Charge
$150.10
No Charge
No Charge
No Charge
No Charge
$150.10
$185.00
$99.70
No Charge
No Charge
No Charge
No Charge
$150.10
No Charge
No Charge
No Charge
No Charge
No Charge
$77.55
No Charge
$440.00
$138.50
No Charge
No Charge
No Charge
No Charge
$1,581.55*
*$1,430 if paid prior to auction
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EXAMPLE OF MARKETING & ACTIVITIES PROGRAM- OPTION NO 2
On Listing Property:
Arrange contract with Solicitor
Write Advertisements and Brochure
Write editorial and submit to all papers
Arrange for all salespeople to inspect property
Take photos and prepare window display
Order Colour brochures, 1000 copies
Order and erect Auction Board 6x4
Book Auction
List property on Internet - 3 sites
No Charge
No Charge
No Charge
No Charge
No Charge
$285.00
$231.00
$ 30.00
$80.00
WEEK 1 & 2
Letterbox 200 advance marketing circulars to neighbours
Phone all prospective buyers and advise property on market
Letterbox colour cards
1st & 2nd Auction Advertisement – Local Paper (Colour)
Chinese Herald
Conduct Saturday/Wednesday Open House
Follow up attendees of Open House
Verbal and written report on Feedback to Vendor
Review Advertisements in light of response
No Charge
No Charge
No Charge
$240.00 ea
$60.00 ea
No Charge
No Charge
No Charge
No Charge
WEEK 3
3rd Auction Advertisement – Local Paper(Colour)
Sydney Morning Herald
Chinese Herald
Second Doorknock - invitation to Open House
Conduct Saturday/Thursday Open House
Follow up attendees of Open Houses by phone
Verbal and written report on Feedback to Vendor
$240.00
$115.60
$60.00
No Charge
No Charge
No Charge
No Charge
WEEK 4
4th Auction Advertisement – Local Paper (Colour)
Sydney Morning Herald
Chinese Herald
Conduct Saturday/Thursday Open House
Follow up attendees of Open Houses by phone
Verbal and written report on Feedback to Vendor
$120.00
$115.60
$60.00
No Charge
No Charge
No Charge
Auction Week
Auctioneer to inspect property
Follow up all attendees of Open Houses and arrange further
inspections where necessary
Auction Day Advertisement
Full briefing with Vendor and discuss strategy
No Charge
No Charge
$60.00
No Charge
AUCTION DAY
Auction expenses & Room hire
Photography
Final briefing with Vendor before Auction
Attend Auction
Sign contracts and take 10% deposit
Alter Auction Board
$440.00
TOTAL including GST
$2,575.70*
$138.50
No Charge
No Charge
No Charge
No Charge
* $2,325.00 if paid prior to auction
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EXAMPLE OF AUCTION MARKETING & ACTIVITIES PROGRAM- OPTION 3
On Listing Property:
Arrange contract with Solicitor
No Charge
Write Advertisements and Brochure
No Charge
Write editorial and submit to all papers
No Charge
Arrange for all salespeople to inspect property
No Charge
Take photos and prepare window display
No Charge
Magazine and run ons
$450.00
Order and erect Auction Board 6x4
$209.00
Book Auction
$ 30.00
List property on Internet
No charge
WEEK 1 & 2
Letterbox 200 advance marketing circulars to neighbours
No Charge
Phone all prospective buyers and advise property on market
No Charge
Letterbox colour cards
No Charge
First Auction Advertisement – Local paper (Colour 2 photos)
$225.15
SMH 15 lines plus open list
$121.75
Chinese Herald -1/2 page
$195.25
Conduct Saturday/Thursday ―Open House‖
No Charge
5Follow up attendees of Open House
No Charge
Verbal and written report on Feedback to Vendor
No Charge
Review Advertisements in light of response
No Charge
WEEK 3
Second Auction Advertisement - St George Leader(Colour 2 photos)
$225.15
Sydney Morning Herald
$121.75
Chinese Herald
$195.25
Wentworth Courier display colour
$343.50
Second Doorknock - invitation to Open House
No Charge
Conduct Saturday/Thursday ―Open House‖
No Charge
Follow up attendees of Open Houses by phone
No Charge
Verbal and written report on Feedback to Vendor
No Charge
WEEK 4
Third Auction Advertisement - St George Leader (Colour 2 photos))
$225.15
Sydney Morning Herald
$121.75
Chinese Herald
$195.25
Wentworth Courier display colour
$343.50
Conduct Saturday/Thursday ―Open House‖
No Charge
Follow up attendees of Open Houses by phone
No Charge
Verbal and written report on Feedback to Vendor
No Charge
Auction Week
Auctioneer to inspect property
No Charge
Follow up all attendees of Open Houses and arrange further
inspections where necessary
No Charge
Auction Day Advertisement
$77.55
Full briefing with Vendor and discuss strategy
No Charge
AUCTION DAY
Auctioneer‘s Expenses (on site)
$192.50
Photography
$138.50
Final briefing with Vendor before Auction
No Charge
Attend Auction
No Charge
Sign contracts and take 10% deposit
No Charge
Alter Auction Board
No Charge
TOTAL including GST
$3,659.35*
$3,300 if paid prior to auction
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Gathering Information and Communicating it to the Vendor.
Throughout the marketing of the property it is important to keep the vendor fully informed as to
what interest the marketing has generated. This is especially so when the vendor has contributed
towards the marketing as they want to see value for money. It is good practice for the agent to
regularly keep the vendor informed of what exactly is going on. Not to do so could lead to a break
down in the relationship, which could lead to a ‘no sale’.
It is good practice to talk to the vendor at least bi-weekly. If it is an auction campaign daily contact
may be more appropriate. Such personal contact should be followed up and confirmed in writing at
least weekly. Such practices in communication keep the vendor fully aware of progress and what
you are doing to get the property sold. It will go a long way to them accepting what the market is
saying about their property.
The information you pass onto the vendor will not only include the numbers of people that enquire
about the property, but also details of inspections and the feedback you receive from prospects
once you call them back. In the weekly written report to the vendor, there should be enough
information so the vendor can evaluate their position on price. For example, when discussions were
had with the vendor during the listing process, the vendor was given a lot of information about the
factors that affect prices buyers may pay for the property, such as details of recent sales, details of
properties on the market that had not sold, level of buyer activity, the type of market conditions
that existed, and economic conditions in general. If any of this information changes during the
marketing of the property, then this information should be conveyed to the vendor in the weekly
reports. Many agents give details of buyer feedback but fail to keep the vendor up to date on what
has sold in the area and the new listings that are coming onto the market. Passing on such
information keeps the vendor up to date with verifiable information that they can use to make
conscious decisions about their own property. Just giving opinions on what the agent thinks is not
enough.
Conflicts of Interest
Under Rule 11 of the Rules of Conduct an agent must not accept an appointment, or to continue to act,
as a agent if by doing so would place the agent’s interest in conflict with the client’s interest. During the
selling process an agent has to be always aware that conflicts of interest can arise many ways and at any
time. The legislation makes us aware of some of those conflicts and provides means of negating the
conflict. Some other conflicts that do arise are not always readily apparent, but the consequences of not
dealing with them correctly can be very costly to the agent.
We will examine the following conflicts of interest:• Referrals
• Seeking an interest in a property for sale with the agency
• Providing Financial Advice
• Secret commissions
REFERRALS
Quite often while marketing a property for sale a purchaser will be found that does not have ready
access to the advice they need. As the agent works for the vendor the agent must be very careful if they
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refer prospective purchaser to a service provider and there is some sort of relationship between the
agent and the service provider. It has always been good practice that is an agent is going to give the
name of a service provider to a purchaser that they give 3 or 4 names so that the person may make a
choice based on their own enquiries. However, if there is some relationship between the agent and any
service provider that they recommend then there is a potential conflict of interest and it must be
declared.
In NSW, Section 47 of the Property, Stock and Business Agents Act states:Duty of disclosure to client and prospective buyer of land
1) A buyer’s or seller’s agent, acting on the sale or purchase of land must disclose the following to
the person for whom the agent is acting (the client) and (in addition, in the case of the seller’s
agent) any prospective buyer of the land:
• any relationship, and the nature of the relationship (whether personal or commercial), the
agent has with anyone to whom the agent refers the client or a prospective buyer for
professional services associated with the sale or purchase,
• whether the agent derives or expects to derive any consideration, whether
monetary or otherwise, from a person to whom the agent has referred the client
or a prospective buyer and, if so, the amount or value of the consideration,
• the amount, value or nature of any benefit of which the agent is aware that a person to
whom the agent has referred the client or a prospective buyer has received, receives, or
expects to receive in connection with the sale, or for promoting the sale, or for providing a
service in connection with the sale, of the land.
Note: The following are examples of relationships for the purposes of subsection (1)(a):
(a) a family relationship,
(b) a business relationship, other than a casual business relationship,
(c) a fiduciary relationship,
(d) a relationship in which 1 person is accustomed, or obliged, to act in
accordance with the directions, instructions, or wishes of the other.
The following are examples for the purposes of subsection (1)(c) of persons who may receive a
benefit:
(a) seller,
(b) finance broker,
(c) financial adviser
(d) financier,
(e) property valuer,
(f) Australian legal practitioner,
(g) real estate agent.
(2) Disclosure to a person is effective for the purposes of subsection (1) only if:
(a) it is given to the person in a form approved by the Director-General, and
(b) it is acknowledged by the person in writing on the form, and
(c) it is given and acknowledged at the time the agent refers the client or prospective
buyer to a person for professional services associated with the sale or purchase of land
and before a contract for the sale of the residential
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property is entered into.
(3) In this section:
benefit means monetary or other benefit.
buyer’s agent means:
(a) a real estate agent acting for a buyer of land, or
(b) a real estate salesperson acting for that real estate agent.
prospective buyer means a person who there are reasonable grounds to believe is a
potential or likely buyer of land (whether or not the person has made an offer to buy
the land).
seller’s agent means:
(a) a real estate agent acting for the vendor of land, or
(b) a real estate salesperson acting for that real estate agent. Rule 12 of the
Rules of Conduct applying to all licensees and Registered persons states:2 Referral to service provider
(1) An agent who refers a principal or prospect to a service provider must not falsely represent
to the principal or prospect that the service provider is independent of the agent.
(2) A service provider is considered to be independent of an agent if:
(a) the agent receives no rebate, discount, commission or benefit for referring a client or
customer to the service provider, and
(b) the agent does not have a personal or commercial relationship with the service provider.
(3) The following are examples of a personal or commercial relationship:
(a) a family relationship,
(b) a business relationship,
(c) a fiduciary relationship,
(d) a relationship in which one person is accustomed, or obliged, to act in accordance with the
directions, instructions or wishes of the other person.
(4) If the service provider is not independent of the agent, the agent must disclose to the principal
or prospect:
(a) the nature of any relationship, whether personal or commercial, the agent has with
the service provider, and
(b) the nature and value of any rebate, discount, commission or benefit the agent may
receive, or expects to receive, by referring the client or customer to the service provider.
The effect of this is that if the agent refers a purchaser to a solicitor, conveyancer, financial
advisor, mortgage broker, bank, any financial institution, pest of building inspector, real estate
agent or anyone else that could provide a service of advice to the purchaser then they need to
consider if they is a possible conflict of interest. This section of the Act says there is a conflict if
i. the agent receives any form of payment for the referral
ii. the agent receives a benefit for the referral (e.g. a lower interest rate on a loan or free
conveyancing
iii. there is any business relationships between the agent and the person they are
referring them to
iv. the agent is related someway to the person they are referring them to. e.g wife,
brother, nephew, de facto, someone in a long term relationship.
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v. there is a fiduciary relationship ie that is the person has a relationship that would cause
them to act in the interests of the person they are referring the person to. An example
would be if the agent was a director of a Community Bank and they referred the buyer to
the community Bank for a loan, there would be a conflict of Interest. As a Director of the
bank they would have a legal duty to act in the best interests of the bank which would
override their duty to the Vendor or even the purchaser.
vi. The agent has may have a relationship with the purchaser which means they would favor
the service provider ahead of others.
The Act requires that if there is relationship that falls under the gambit of Section 47 then a
declaration of that relationship MUST be made on the form approved by the Director-General for
that purpose, and this form is commonly referred to as a Section 47 Certificate.
It should be noted here that this is a prescribed form, and should not be changed in any fashion or
added to. The form must be completed at the time the referral is made, and given to the client (in
the case of a selling agent this will be the vendor of the property being sold), and the client must
sign an acknowledgement of the declaration.
SEEKING AN INTEREST IN A PROPERTY FOR SALE WITH THE AGENCY
Section 49 covers the situation where an agent or a member of an agent’s family wishes to
purchase property that is listed with the agency where the agent works.
Section 49 states:
Restrictions on licensee obtaining beneficial interest in property
(1) A real estate agent who is retained by a person (the client) as an agent for the sale of property
must not obtain or be in any way concerned in obtaining a beneficial interest in the property.
Maximum penalty: 200 penalty units or imprisonment for 2 years, or both.
(2) A real estate salesperson employed by the real estate agent must not obtain or be in any way
concerned in obtaining a beneficial interest in the property.
Maximum penalty: 200 penalty units or imprisonment for 2 years, or both.
(3) A person does not contravene this section by obtaining a beneficial interest in property if:
(a) before the person obtains the interest, the client consents in writing in a form approved by
the Director-General to the person obtaining the interest, and
(b) the person acts fairly and reasonably in relation to the obtaining of the interest, and
(c) no commission or other reward is payable to the person in relation to the transaction by which
the interest is obtained, unless the client consents in writing in a form approved by the DirectorGeneral to the commission or other reward being paid.
(4) Without limiting this section, a person is considered to obtain a beneficial interest in property
if:
(a) the person or a close relative of the person obtains a beneficial interest in the property, or
(b) a corporation having not less than 100 members and of which the person or a close relative of
the person is a member, or a subsidiary of such a corporation, obtains a beneficial interest in the
property, or
(c) a corporation of which the person or a close relative of the person is an executive officer
obtains a beneficial interest in the property, or
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(d) the trustee of a discretionary trust of which the person or a close relative of the person is a
beneficiary obtains a beneficial interest in the property, or
(e) a member of a firm or partnership of which the person or a close relative of the person is also a
member obtains a beneficial interest in the property, or
(f) the person or a close relative of the person has, directly or indirectly, a right to participate in the
income or profits of a business carried on for profit or gain and another person carrying on that business
obtains a beneficial interest in the property.
(5) Without limiting this section, each of the following is considered to constitute the obtaining of a
beneficial interest in property:
(a) purchasing property,
(b) obtaining an option to purchase property,
(c) being granted a general power of appointment in respect of property.
(6) In this section:
close relative of a person means:
(a) a spouse of the person, or
(b) an existing or former de facto partner, or
(c) a child, grandchild, sibling, parent or grandparent of the person, whether derived through
paragraph (a) or (b) or otherwise, or
(d) any other person who has a relationship with the person that is prescribed by the regulations
as constituting the relationship of close relative for the purposes of this section.
property includes an interest in property.
While it is not illegal for an agent or member of staff to purchase a property that is listed on the
agency’s books, if the situation arises, there is a conflict of interest. The conflict is dissipated if
the vendor is fully aware of the situation. This is overcome by filling in what is known as a Section
49 Form and getting the vendor tp sign an acknowledgement prior to any offer being made on the
property. This form is a prescribed form, and as with the Section 47 form, the format should not
be changed. It should be noted here that Section 49 states that the person buying the property
should not receive any commission or payment relating to the sale unless the vendor has
specifically agreed to it.
Remember the penalties for breaching this section of the Act is not only heavy fines but could also
involve goal sentence of up to 2 years. If you are unsure then disclose.
PROVIDING FINANCIAL ADVICE
Section 48 of the Act states:
Financial and investment advice by real estate agents
(1) The regulations may make provision for or with respect to requiring a real estate agent who
provides financial or investment advice to a person in connection with the sale or purchase of land
to provide to the person specified information or warnings.
(2) A real estate agent who fails to comply with a requirement of the regulations under this
section is guilty of an offence.
Maximum penalty: 200 penalty units.
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Part 2 Section 10 states:Provision of financial and investment advice
(1) This clause applies to financial or investment advice that:
(a) is intended to influence the person to whom the advice is given in making a decision in relation
to a particular financial or investment decision in connection with the sale or purchase of land, or
(b) could reasonably be regarded as being intended to have such an influence.
(2) A real estate agent who provides financial or investment advice to which this clause applies to a
person in connection with the sale or purchase of land must provide the following warnings and
information to the person for the purposes of section 46 of the Act:
(a) a warning that the advice is general advice and that its preparation has not taken into account
the individual circumstances of the person or the person’s objectives, financial situation or needs,
(b) in the case of advice provided in connection with the purchase of land, a warning that an
intending purchaser should assess the suitability of any investment in the property in light of their
own needs and circumstances, which they can do themselves or by consulting an appropriately
licensed financial adviser,
(c) information that discloses the existence and nature of any conflict of interest the agent may
have in connection with the provision of the advice (for example, entitlement to commission or
referral fees).
Financial advice could consist of making statements like:
“a great addition to your private super fund”
“valuable contribution to your property portfolio”
Making comments about the best types of loans to access
If as an agent you are going to give financial advice on a regular basis it would be good risk management
to obtain a Financial Advisors License.
SECRET COMMISSIONS
Part 4A of the Crimes Act prohibits the following conduct:
1. Receiving or soliciting, as an agent, an inducement or reward for doing or not doing something
in relation to the affairs of their principal.
2. Corruptly giving or offering an agent an inducement or reward for doing or not doing in relation
to the affairs of the agent’s principal.
3. Use of misleading documents or statements by agents with the intent of defrauding their
principals.
4. Corrupt inducements to a person for giving advice to a third party which induces them to
enter into a contract or appoint the person who gives the inducement to any office.
So, if in the course of selling a property an agent is offered a gift or any other consideration,
promised or given, by a third person to the agent in return for the agent to act in someone else’s
interest, or not in the best interest of the vendor they would be breaching this section of the
Crimes Act. This is generally referred to as a “secret commission”and is strictly illegal.
Examples of Secret Commissions would include:• Accepting a payment or gift to get the vendor to accept a lower offer than normal
negotiations may achieve
• Accepting a payment or gift to give one purchaser a preferred position in the negotiating process
• A purchaser promising the agent the listing for their house if they are successful in
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gaining a property on the agency books
• Doing anything that may advantage the buyer and there is a promise of a reward.
It must be remembered that the offence occurs when the agent does not repudiate the offer of
the secret commission at the time it is offered. If they do not do that the person who offered the
secret commission would be under the wrong impression and that is the offence.
In all cases the offer of the commission should be declared to the vendor and also the fact that it
was not accepted.
The penalties for not handling a secret commission correctly is up to 7 years goal under the
Crimes Act and then the possibility of cancellation of your license or Certificate for up to 10
years because the Director-General now finds that you are not a “fit & proper person”.
As well, the vendor has some remedies as well. They can:• Rescind the contract for sale
• Claim the secret commission from the agency
• Refuse to pay commission and expenses, and if any paid seek a refund of them
• Sue the salesperson for damages,
• Cancel the agency agreement.
Dealing with difficulties
A salesperson’s role when selling property is to market and then to negotiate a successful sale of
the property. Throughout the process it is important to respect the rights of both parties.
Negotiating, involving a real estate sale, puts the agent in a very responsible role, and both parties
rely on the agent undertaking their duties correctly. An effective agent must keep both parties fully
informed, and act fairly and honestly at all times. In many cases the agent may not please one party
or the other, but handling the situation openly and honestly, being transparent and passing on
relevant information quickly and effectively, ensuring both parties understand what is going on,
should keep both parties happy.
If conflict arises the agent must act quickly to determine what the problem is, resolve the problem,
being prepared to listen and then act on the complaint. Failure to do so could and most probably
will lead to an official complaint to the Fair Trading. If the agent finds the complaint beyond their
handling or expertise, they should immediately refer the problem to a more senior and experienced
person in the agency to handle it. Not doing anything ensures the problem become larger than it
should be and at worst could lead the agent and the agent getting a bad name.
6 Negotiating the Sale
Once a successful buyer has been found and the terms and conditions of the sale negotiated
the agent still needs to complete the paper work.
In a private treaty sale, the agent will negotiate the sale price, the inclusions and other special
conditions of the sale. Once both parties agree, the agent will undertake the paperwork, which can vary
depending on who is going to exchange contacts.
With a property going to auction, the process is different again. We will now look at each of these
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processes in turn.
Private Treaty Sale
During the negotiation, which can extend over a period of time offers will be made to the agent to
purchase the property. Because of the requirements of the Property, Stock and Business Agents Act,
agents should always confirm with the prospective buyer that they have made an offer, and
establish all the terms and conditions of the offer. For example the offer may be subject to certain
conditions, such as a pest and building inspection, other people selling the property, different
settlement terms in the contract, or a requirement that the vendor does certain things and these are
documented in the contract. Once the agent has determined that an offer is made and the terms
and conditions of the offer they need to pass the offer onto the vendor as soon as possible.
Schedule 2 of the Rules of Conduct applying to sales agents Clause 3 states:3 Principal to be informed of an offer
(1) The agent must, unless the principal has instructed to the contrary in writing, inform the
principal of all offers of purchase as soon as practicable after receiving the offer up until exchange
of contracts has taken place.
(2) If the agent is not going to inform the principal of an offer, the agent must inform the person
who made the offer that the offer will not be submitted to the principal.
(3) The agent may inform the principal of an offer orally or in writing and must identify the party
by whom the offer is made. If the principal is informed orally, the agent must confirm the
information in writing.
(4) This clause does not apply to bids made in the course of an auction.
So the agent must convey all offers to purchase to the vendor in writing as soon as the offer is
received. It is good practice that the submitted offer includes all the terms and conditions of the
purchaser.
It should be noted here that the vendor can instruct the agent to only submit offers if they meet
certain requirements such as,
• Being over a certain amount
• That they are in writing from the purchaser, or
• They are on contract.
If the vendor has given such instructions in writing to the agent, the agent must inform the
buyer of those instructions if a buyer makes an offer and it is not being passed onto the vendor.
Once negotiations are concluded and agreement is reached between the parties, sales letters will
be prepared and arrangements made to exchange contracts. Generally at this stage a deposit will
be sought from the successful buyer, which could be for 3 different reasons. They are:1. The buyer is going to exchange contracts and pays the full 10% deposit
2. The buyer is going to exchange with a “cooling off period” and will initially pay .025% of
the purchase price on exchange
3. The buyer will have his solicitor exchange contracts and pays a nominal deposit in
good faith to demonstrate his interest. This type of deposit is known as an
Expression of Interest deposit.
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Part 4 Section 25 of the property Stock and Business Agents Act requires that when a sales deposit
is paid to the agent a trust receipt must be prepared in accordance with that clause. It goes on to
set out all the information that must be shown on the receipt and includes the following:
(a) the date of issue
(b) the number of the receipt in numerical sequence
(c) the name of the licensee and the words “Trust Account”
(d) the name of the person from whom the payment was received
(e) the name and ledger reference number of the person on whose behalf the payment
was made
(f) particulars sufficient to identify the transaction in respect of which the money
was paid,
(g) the amount of money received and whether (or the extent to which) it was paid in
cash or by cheque, by electronic funds transfer or otherwise.
The Act is specific and any sales trust receipt must include all the above information. Nowhere does
the Act or Regulations allow for interim receipts to be issued. If a holding, or Expression of interest
deposit is going to be paid, the agent needs to be aware of the requirements of Schedule 3(5) of
the Rules of Conduct which state:4. Information to be given when expression of interest deposit paid
(1) When an agent issues a receipt for an expression of interest deposit made prior to exchange of
contracts, the agent must inform the person who paid the deposit that the principal has no
obligation to sell the property or the purchaser to buy the property and the deposit is refundable if
a contract for the sale of the property is not entered into. The information must be provided in
writing and may be provided on the receipt.
(2) The agent must promptly inform the principal when an expression of interest deposit has
been paid.
(3) The agent must promptly inform the person who paid the deposit when the agent becomes
aware of any subsequent offers to purchase the property received from any other person. The
agent must also advise the person who paid the deposit that they have the right to make further
offers up until exchange of contracts has taken place.
Sale by Auction
The rules governing a sale by auction vary to that of private treaty. Although the period of
marketing will be very similar to that of a private Treaty sale there are a couple of differences. As
there is no asking price on the property agents will be asked more often than not for their opinion
on what they think the property will sell for. Agents need to be very careful in what they say.
Division 3 of the Act is very specific and states:72 False representation to seller or prospective seller
A real estate agent or employee of a realestate agent must not make a false representation to a
seller of residential property as to the agent’s or employee’s true estimate of the selling price of
the property.
Maximum penalty: 200 penalty units.
73 False representation to prospective buyer
(1) A real estate agent acting pursuant to an agency agreement for the sale of residential property
or the employee of such an agent must not, by a statement made in the course of marketing the
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property, falsely understate the estimated selling price of the property.
Maximum penalty: 200 penalty units.
(2) An agent or employee is considered to falsely understate the estimated selling price of
residential property if the agent or employee states as his or her estimate of that selling price a
price that is less than his or her true estimate of that selling price.
(3) A statement is considered to be made in the course of marketing residential property if
the statement is made:
(a) in an advertisement in respect of the property that is published or caused to be published by
the agent, or
(b) to a person (orally or in writing) as a prospective purchaser of the property.
(4) A statement in the agency agreement of the agent’s estimate of the selling price of residential property
is evidence for the purposes of this section. Agents accused of misleading potential purchasers in terms of
the eventual selling price can receive penalties both under the Property, Stock and Business Agents Act
and the Competition & Consumer Act. Care should be taken to not breach.
It should be noted that during the course of marketing the property agents may come across
information that leads them to change their opinion of the likely selling price. If they do change their
opinion they should record on file that they have and the reasons for it, as well as notifying the
vendor that their opinion has changed. This could be done in the weekly written report to the
vendor. Agents are cautioned that putting a expected price range in an auction advertisement is
very bad practice and makes it very easy for authorities to take action against the agent.
The main difference between a Private Treaty Sale and an Auction sale is that at auction all the
negotiation is done out in the open, as the bidding is done in public. There are special
requirements for a property going to auction as to how the auction is conducted.
There are general provisions regarding auction in the Act and they include:Part 6 Auctions—General
77 Prescribed auction conditions
(1) The regulations may prescribe conditions that are to be applicable to or in respect of the sale by
auction of land or livestock.
(2) The regulations may make provision for or with respect to requiring the notification at
a sale by auction of land or livestock of any conditions that are applicable to the sale.
78 Collusive practices at auction sales
(1) A person must not, in relation to the sale by auction of any land or livestock, by a collusive
practice induce or attempt to induce any other person:
(a) to abstain from bidding generally, or
(b) to abstain from bidding for any particular lot, or
(c) to bid to a limited extent only, or
(d) to do any other act or thing that might in any way prevent or tend to prevent
free and open competition.
Maximum penalty:
(a) 500 penalty units in the case of a corporation, or
(b) 250 penalty units in any other case.
(2) A person must not as a result of a collusive practice, at a sale by auction of any land or
livestock:
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(a) abstain or agree to abstain from bidding generally, or
(b) abstain or agree to abstain from bidding for any particular lot, or
(c) bid or agree to bid to a limited extent only, or
(d) do or agree to do any other act or thing that might in any way prevent or tend to
prevent free and open competition.
Maximum penalty:
(a) 500 penalty units in the case of a corporation, or
(b) 250 penalty units in any other case.
(3) An auctioneer must not sell by auction any land or livestock unless notice is given prior to the
auction, in such manner and in such terms as may be prescribed by the regulations, of the material
parts of this section.
Maximum penalty: 20 penalty units.
(4) In this section:
collusive practice means a promise, express or implied, made by a person that if the person is
the successful bidder at auction for land or livestock:
(a) the person will give the person to whom the promise is made the right to elect to take over as
purchaser through the auctioneer all or any of the land or livestock at the auction price, or
(b) the ownership of all or any of the land or livestock will be determined by tossing a coin or the
drawing of lots or any other method.
79 False entry in auction record
(1) An auctioneer and an employee of an auctioneer must not knowingly enter in any record kept
or required to be kept by the auctioneer as the purchaser of any land or livestock sold by auction
any name other than the name of the actual successful bidder for the land or livestock.
Maximum penalty for a first offence: In the case of a corporation, 50 penalty units or, in the case of
an individual, 20 penalty units.
Maximum penalty for a second or subsequent offence: In the case of a corporation,
100 penalty units or, in the case of an individual, 50 penalty units.
(2) Any auctioneer who employs any person, being a person who enters, in any record required to
be kept by the auctioneer, as the purchaser of any land or livestock sold by auction any name other
than the name of the actual successful bidder for the land or livestock, is guilty of an offence unless
the auctioneer establishes that the auctioneer did not know that a name other than the name of the
actual successful bidder was entered.
Maximum penalty for a first offence: In the case of a corporation, 50 penalty units or, in the case of
an individual, 20 penalty units.
Maximum penalty for a second or subsequent offence: In the case of a corporation,
100 penalty units or, in the case of an individual, 50 penalty units.
(3) If the actual successful bidder at a sale by auction of any land or livestock, as soon as practicable
after the auctioneer conducting the sale has indicated the actual successful bidder but not in any
case later than the day of the sale, informs the auctioneer that the bidder bid on behalf of another
person and informs the auctioneer of the name of that person, the auctioneer or employee is not
guilty of an offence under this section by reason of the name of that other person being entered in
a record as purchaser of the land or livestock.
80 Misrepresentation as to quality etc
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An auctioneer must not knowingly misrepresent, or cause or permit to be misrepresented, the
value, composition, structure, character or quality, or the origin of manufacture, of any land or
livestock put up for sale at a sale by auction conducted by the auctioneer.
Maximum penalty: 50 penalty units.
81 Restrictions on bidding by or on behalf of seller or auctioneer of livestock
(1) A sale by auction of livestock may be notified in the conditions of sale to be subject to the right by
the seller or by any person on behalf of the seller or auctioneer to make 1 bid or such other number of
bids as may be prescribed by the regulations.
(2) At a sale by auction of livestock:
(a) the seller or any person on behalf of the seller or auctioneer must not bid unless the
right to bid has been notified in the conditions of sale, and
(b) the seller or any person on behalf of the seller or auctioneer must not make more than
the number of bids notified in the conditions of sale, and
(c) the auctioneer must not take from the seller or any person on behalf of the seller or
auctioneer any bid knowing that the bid is in contravention of this section.
Maximum penalty: 50 penalty units.
82 Contracting out of prescribed terms and conditions of auction sales
(1) Any provision in, or applying to, an agreement for the sale of property by auction and
purporting to exclude, modify or restrict (otherwise than in accordance with this or any other Act)
the operation of any conditions prescribed as being applicable to or in respect of the sale by
auction of that property or property of that class or description is void.
(2) A person must not notify or cause to be notified in the conditions of sale by auction of any
property any provision purporting to exclude, modify or restrict any conditions prescribed as
applicable to or in respect of the sale by auction of that property or property of that class or
description.
Maximum penalty: 50 penalty units.
(3) In this section:
property means land or livestock.
83 Successful bidder at auction to supply information
(1) The actual successful bidder at a sale by auction of any land or livestock must, as soon as
practicable after the auctioneer conducting the sale has indicated the actual successful bidder but
not in any case later than the day of the sale, supply to the auctioneer or an employee of the
auctioneer:
(a) the bidder’s name if the bidder bids on his or her own behalf, or
(b) the name of the person on whose behalf the bidder bid if the bidder bid on behalf of
another person.
Maximum penalty: 20 penalty units.
(1) An auctioneer must not sell by auction any land or livestock unless notice is given, in such
manner and in such terms as may be prescribed by the regulations, of the material parts of
this section.
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BIDDERS REGISTER
Division 2 of the Property, Stock and Business Agents Act sets out requirements relating to
bidding at an auction for residential property. Bidding at an auction for residential property
requires Register of Bidders to be created.
67 Bids may only be taken from registered bidders
(1) The auctioneer at a sale by auction of residential property or rural land must not take a bid
from a person unless:
(a) the relevant details of the person have been entered before the bid is taken in a Bidders
Record made in respect of the auction in accordance with section 68, and the auctioneer is
in possession of that record when the bid is taken, and
(b) the person is identified at the auction by the person displaying an identifying number
allocated to the person for the purposes of the auction and recorded in the Bidders Record
as the identifying number allocated to the person.
Maximum penalty: 100 penalty units.
(2) An auctioneer who refuses to take a bid from a person because of this section does not
incur a liability to any person as a result of that refusal.
(3) The taking of a bid in contravention of this section does not affect the validity of the bid (or its
taking or acceptance) and the bid (and its taking or acceptance) are as valid for all purposes as if
this section had not been enacted.
68 Bidders Record
(1) Before residential property or rural land is offered for sale by auction, a record (the Bidders
Record) must be made of the persons who will be entitled to bid at the auction and there must
be entered in the Bidders Record in respect of each of those persons:
(a) the relevant details of the person, and
(b) the identifying number allocated to the person for the purposes of identifying
the person at the auction, and
(c) such other information as the regulations may require.
(2) The relevant details of a person are:
(a) the person’s name , address & the number or other identifier of proof of identity for that
person, and
(b) in addition, in the case of a person bidding on behalf of another person, the name and
address of that other person and the number or other identifier of proof of identity for that
other person.
(3) A real estate agent or stock and station agent engaged to act in respect of the sale of
residential property or rural land by auction must make the Bidders Record required by this
section for the auction unless some other agent engaged to act in respect of the sale or acting for
or on behalf of the auctioneer has made the Bidders Record for the auction.
(4) An agent is to keep a Bidders Record made by the agent for at least 3 years and is to keep all the
Bidders Records made by the agent together, in the form of a Register of Bidders Records.
(5) The regulations may make provision for or with respect to:
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(a) conferring an entitlement on a seller of residential property to inspect the Bidders Record for
the sale of the property, and
(b) the manner and form in which a Bidders Record is to be made and kept, and
(c) requiring other information to be included in the Bidders Record.
Maximum penalty: 100 penalty units.
69 Details to be established by proof of identity
(1) An agent must not enter a person’s name and address in the Bidder Record unless
both the person’s name and their address details are established by the production to
the agent of:
(a) one or more proofs of identity for the person, and
(b) in the case of the details of a person on whose behalf another person is to bid, a letter
of authority to bid on the person’s behalf specifying the person’s name and address and
the number or other identifier of one or more proofs of identity for that person.
Maximum penalty: 100 penalty units.
Note. Both name and address must be established by proof of identity but need not be
established by the same proof of identity. For example, an Australian passport could be used to
establish a person’s name and another proof of identity allowed by subsection (2) used to
establish the person’s address.
(2) The only proof of identity that may be used for a person for the purposes of an entry in a
Bidders Record is:
(a) a motor vehicle driver’s licence issued in Australia that displays a photograph of the
person, or
(b) an Australian passport, or
(c) such other proof of identity as may be prescribed by the regulations.
(3) An agent must not enter the relevant details of a person in a Bidders Record if the agent knows
or has reasonable cause to suspect that the details are false in a material particular.
Maximum penalty: 100 penalty units.
70 Confidentiality of Bidders Record
(1) An agent who makes a Bidders Record, and any auctioneer to whom the contents of a Bidders
Record are disclosed under this Division, must not:
(a) divulge any information that the Bidders Record contains except as authorised
or required by this Division, and
(b) must not use the Bidders Record or the information that it contains for any purpose not
authorised by this Division.
Maximum penalty: 100 penalty units.
(2) This section does not prevent the divulging of information to an authorised officer in
accordance with a requirement imposed by or under this Act.
71 Approved consumer education guide for bidders at auctions
(1) The Director-General may from time to time approve a consumer education guide for
prospective bidders at an auction of residential property or rural land.
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(2) A real estate agent or stock and station agent engaged to act in respect of the sale by auction
of residential property or rural land must take all reasonable steps to ensure that a person who
bids at the auction has been provided before the auction with a copy of the consumer education
guide currently approved under this section. Maximum penalty: 40 penalty units.
The Regulations further quantify the agent’s responsibilities as to the Bidder’s Register in Part 3 (15),
(16) and (17) which state:15 Making the Bidders Record
(1) The Bidders Record for an auction of property that is made and kept for the purposes of
section 68 of the Act must:
(a) be in the English language, and
(b) record the date and place of the auction, and
(c) record the address of the property, and
(d) record the name and licence number of the auctioneer conducting the auction,
and
(e) record the name of the owner of the property at the time of the auction, and
(f) record the name and licence number of the selling agent for the auction, and
(g) if the property is sold at the auction, indicate which of the persons named in the
Bidders Record is the successful bidder and the sale price, and
(h) if the property is not sold at the auction, record the highest bid accepted, and the vendor bid
(if any), at the auction.
Note. A Bidder’s Record made by a licensee is one of the licesee’s records for the purposes
of Part (8) Records of the Act and is to be kept by the licensee. There are no restrictions on the
technology that can be used to make and keep a Bidders Record. A Bidders Record can be made
and kept on paper or by electronic means.
(2) If a person who is registering to bid on behalf of another person will be bidding for the other
person as a buyer’s agent:
(a) the Bidders Record must also record the agent’s licence number, and
(b) the Bidder’s Record may record the address of the agent’s registered office as the agent’s
address.
(3) If a person is registering to bid on behalf of a body corporate:
(a) there is an exemption from the requirement under section 68 (2) of the Act that the
relevant details of the person bidding include the number or other identifier of proof of
identity of the body corporate as referred to in section 68 (2) (b) of the Act, and
(b) there is an exemption from the requirement under section 69 (1) (b) of the Act that the
letter of authority to bid on behalf of a body corporate specify the number or other identifier of
proof of identity for the body corporate if the letter of authority specifies the Australian
Business Number of the body corporate.
(4) If a person who is registering to bid on behalf of another person will be bidding for the other
person under a power of attorney, there is an exemption from the requirement under section 68 (2)
of the Act that the relevant details of the person bidding include details of the other person as
specified in section 68 (2) (b) of the Act.
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(5) If a person who is registering to bid on behalf of another person will be bidding in the capacity
of a buyer’s agent there is an exemption from Section 69 (1) (b) of the Act if details of the person
on whose behalf the agent is to bid are established by the production of a copy of the agency
agreement pursuant to which the agent will be bidding.
(6) An entry in a Bidders Record may only be made by the agent who makes the Bidders Record or
by an employee of that agent acting on behalf of the agent. An agent who makes a Bidders Record
must not permit a person to make an entry in the Bidders Record unless the person is authorised
by this subclause to make the entry.
Maximum penalty: 40 penalty units in the case of a corporation or 20 penalty units in any other
case.
(7) If more than one property is to be offered for sale at an auction sale, a single Bidders Record may
be made so as to apply to more than one (or all) of the properties to be offered so that the required
details of a person who will be entitled to bid at the auction of any of the properties concerned need
only be entered in the Bidders Record once, but without otherwise affecting the requirement for the
separate recording in respect of each of those properties of the details required by subclauses (1)
and (2).
Note. When an auction involves a number of properties and a number of different licensees,
subclause (7) gives the licensees concerned the option of each making their own Bidders Record for
the properties they are auctioning or relying on a single Bidders Record made by or on behalf of the
auctioneer for all of the properties to be auctioned.
16 Keeping the Bidders Record
(1) A licensee who acts on the sale of property that is offered for sale by auction must make and
keep as part of the records that the licensee is required to make by section 104 of the Act in respect
of the sale a record of the name, business address and licence number of the licensee who made
the Bidders Record for the auction.
Note. The licensee who makes a Bidders Record is responsible for keeping it.
(2) A licensee who keeps a Bidders Record in electronic form must also keep as part of the licensee’s
records with respect to auction sales to which the Bidder’s Record relates, a record of such details as
will enable the Bidders Record to be located and accessed in the electronic records of the licensee.
17 Proof of identity for Bidders Record
(1) Any of the following forms of proof of identity may be used for a person for the purposes of
an entry in a Bidders Record:
(a) a card or document that is issued by the government or a statutory authority of New
South Wales, the Commonwealth, another State or a Territory, or by an authorised
deposit-taking institution, and shows the name and address of the person,
(b) a combination of cards or documents:
(i) that show the name and address of the person, and
(ii) one of which is issued by the government or a statutory authority of New South
Wales, the Commonwealth, another State or a Territory, or by an authorised
deposit-taking institution,
(c) a card or document that is issued by the government or a statutory authority of New
South Wales, the Commonwealth, another State or a Territory, or by an authorised
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deposit-taking institution and that shows the name of the person, together with a
statutory declaration by the person as to the person’s address
(d) a passport issued by another country that shows the person’s name, together with:
(i) a card or document that is issued by an organisation or person other than the
person concerned and that shows the person’s address, or
(ii) a statutory declaration by the person as to the person’s address
(e) a motor vehicle driver’s licence issued in another country that shows the person’s name,
together with:
(i) a card or document that is issued by an organisation or person other than the
person concerned and that shows the person’s address, or
(ii) a statutory declaration by the person as to the person’s address
(2) If the relevant details of a person are entered in the Bidders Record for an auction of property
before the day of the auction or otherwise than at the place the auction is held, the person must
not be provided with the identifying number allocated for the purposes of identification at the
auction unless the person’s identity is established by means of proof of identity that may be used for
the purposes of any entry in the Bidders Record under section 69 of the Act.
(3) An agent or employee of an agent who provides an identifying number to a person in
contravention of subclause (2) is guilty of an offence.
Maximum penalty: 20 penalty units.
The other requirements for an auction are:66 Prevention of dummy bidding
(1) At a sale by auction of residential property or rural land:
(a) the seller must not make a bid, and
(b) a person must not make a bid on behalf of the seller unless the person is the
auctioneer and makes only one bid on behalf of the seller, and
(c) a person must not procure another person to make a bid on behalf of the seller in
contravention of this section.
Maximum penalty:
(a) 500 penalty units in the case of a corporation, or
(b) 250 penalty units in any other case.
(2) For the purposes of this section, a bid can be found to have been made on behalf of a seller
even though it is not made at the request of, or with the knowledge of, the seller.
(3) Without limiting what constitutes the making of a bid on behalf of the seller, a bid made with
the dominant purpose of benefiting the seller in making the bid constitutes the making of a bid on
behalf of the seller.
(4) An auctioneer must not sell by auction any residential property or rural land unless notice is
given prior to the auction, in such manner and in such terms as may be prescribed by the
regulations, of the material parts of this section.
Maximum penalty: 20 penalty units.
(5) This section does not apply to the making of a bid by or on behalf of a seller in either of the
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following cases so long as the requirements of subsection (6) for bids by or on behalf of a seller as
co-owner or as executor or administrator are complied with:
(a) the seller is a co-owner of the land (whether as a joint tenant or tenant in Common)
and the bid was made to enable the seller to purchase the interest of another co-owner in
the land,
(b) the seller is the executor or administrator of the estate of a deceased owner of
the land.
(6) The requirements for bids by or on behalf of a seller as co-owner or as executor or administrator
are as follows:
(a) the conditions under which the auction is conducted must permit the making of bids
by or on behalf of a seller to purchase the interest of another co-owner in the land or to
purchase as executor or administrator,
(b) the auctioneer must have announced at the auction, before the start of bidding, that bids to
purchase the interest of a co-owner in the land or to purchase as executor or administrator may
be made by or on behalf of the seller.
66A Offences by auctioneers
(1) At a sale by auction of residential property or rural land, the auctioneer:
(a) must not acknowledge the making of a bid if the bid was not made, and
(b) must not accept a bid if the auctioneer knows that the bid was made by or on behalf of
the seller in contravention of section 66, and
(c) must not make more than one bid on behalf of the seller.
Maximum penalty: 250 penalty units.
(2) An auctioneer at a sale by auction of residential property or rural land must not make a bid
on behalf of the seller unless:
(a) the conditions under which the auction is conducted permit the making of one bid by
the auctioneer on behalf of the seller, and
(b) the auctioneer announced at the auction, before the start of bidding, that the
auctioneer is permitted to make one bid on behalf of the seller, and
(c) immediately before, or in the process of, making the bid, the auctioneer announces that the
bid is made on behalf of the seller or announces “vendor bid”
Maximum penalty: 250 penalty units.
(3) Merely announcing the name of the person on whose behalf a bid is made (without stating that
the person is the seller) is not sufficient to constitute announcing that the bid is made on behalf of
the seller.
The regulations then stipulate:9 Notification of auction conditions
(1) A stock and station agent or real estate agent who offers land or livestock for sale by auction
must notify the conditions of the sale by means of a notice that:
(a) sets out the conditions of the sale clearly and legibly written or printed in the English
language, and
(b) is exhibited in a conspicuous position so as to be clearly visible to, and available for
inspection by, any person attending the auction before and during the auction.
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(2) If a stock and station agent or real estate agent conducts an auction sale of land or livestock
comprising more than one lot, or a stock and station salesperson conducts an auction sale of livestock
comprising more than one lot, and one or more of the conditions of sale for any one or more of those
lots are different from the conditions of sale for all or most of the other lots, the agent or salesperson
concerned may notify the different conditions by reciting those conditions aloud in a clear and precise
manner immediately before offering that lot for sale.
Maximum penalty: 40 penalty units in the case of a corporation or 20 penalty units in any other
case.
The Regulations also prescribe the Terms and Conditions of an auction sale which are:18
Conditions of sale by auction
(1) The following conditions are prescribed as applicable to and in respect of the sale by auction of
land or livestock:
(a) The principal’s reserve price must be given in writing to the auctioneer before the
before the auction commences.
(b) A bid for the seller cannot be made unless the auctioneer has, before the
commencement of the auction, announced clearly and precisely the number of bids that
may be made by or on behalf of the seller.
(c) The highest bidder is the purchaser, subject to any reserve price.
(d) In the event of a disputed bid, the auctioneer is the sole arbitrator and the auctioneer’s
decision is final
(e) The auctioneer may refuse to accept any bid that, in the auctioneer’s opinion, is not in the
best interests of the seller.
(f) A bidder is taken to be a principal unless, before bidding, the bidder has given to the
auctioneer a copy of a written authority to bid for or on behalf of another person.
(g) A bid cannot be made or accepted after the fall of the hammer.
(h) As soon as practicable after the fall of the hammer the purchaser is to sign the
agreement (if any) for sale.
(2) The following conditions, in addition to those prescribed by subclause (1), are prescribed as
applicable to and in respect of the sale by auction of residential property or rural land:
(a) All bidders must be registered in the Bidders Record and display an identifying
number when making a bid.
(b) Subject to subclause (2A), the auctioneer may make only one vendor bid at an auction
for the sale of residential property or rural land and no other vendor bid may be made by
the auctioneer or any other person.
(c) Immediately before making a vendor bid the auctioneer must announce that the bid
is made on behalf of the seller or announce “vendor bid”.
(2A) The following conditions, in addition to those prescribed by subclauses (1) and (2), are prescribed
as applicable to and in respect of the sale by auction of co-owned residential property or rural land or
the sale of such land by a seller as executor or administrator:
(a) More than one vendor bid may be made to purchase the interest of a co- owner.
(b) A bid by or on behalf of an executor or administrator may be made to purchase in
that capacity.
(c) Before the commencement of the auction, the auctioneer must announce that bids to
purchase the interest of another co-owner or to purchase as executor or administrator
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may be made by or on behalf of the seller.
(d) Before the commencement of the auction, the auctioneer must announce the bidder
registration number of any co-owner, executor or administrator or any person registered to bid
on behalf of any co-owner, executor or administrator.
(3) The following condition, in addition to those prescribed by subclause (1), is prescribed
as applicable to and in respect of the sale by auction of livestock:
The purchaser of livestock must pay the stock and station agent who conducted the auction (or
under whose immediate and direct supervision the auction was conducted) or the vendor the full
amount of the purchase price:
(a) if that amount can reasonably be determined immediately after the fall of the
hammer—before the close of the next business day following the auction, or
(b) if that amount cannot reasonably be determined immediately after the fall of the
hammer—before the close of the next business day following determination of that
amount, unless some other time for payment is specified in a written agreement
(c) between the purchaser and the agent or the purchaser and the vendor made
before the fall of the hammer.
20
Warnings about bidder’s obligations
(1) The notice required to be given by section 78 (3) of the Act is to be in the following
form:
Penalty for collusive practices
It is an offence against the Property, Stock and Business Agents Act 2002 for a person to do any of
the following as a result of a collusive practice, or to induce or attempt to induce another person by
a collusive practice to do any of the following:
(a) to abstain from bidding, or
(b) to bid to a limited extent only, or
(c) to do any other act or thing that might prevent free and open competition.
Severe penalties may be imposed on persons convicted of collusive practices.
(2) The notice required to be given by section 83 (2) of the Act is to be in the following
form:
Successful bidders
The actual successful bidder at an auction sale must give to the auctioneer or an employee of
the auctioneer:
(a) the bidder’s name or
(b) the name of the person on whose behalf the successful bid was made.
Penalty for dummy bidding
It is an offence against the Property, Stock and Business Agents Act 2002 for a person to do any of
the following:
(a) make a bid as the seller,
(b) make a bid on behalf of the seller (unless the person is the auctioneer),
(c) procure another person to make a bid on behalf of the seller.
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Any bid made with the dominant purpose of benefiting the seller constitutes a bid made on
behalf of the seller.
A bid may be found to be a bid made on behalf of the seller even though the seller did not:
(a) request the bid, or
(b) have any knowledge of the bid.
Severe penalties may be imposed on persons convicted of dummy bidding.
(3) Each notice must:
(a) have its contents clearly and legibly written or printed in the English language, and
(b) be exhibited in a conspicuous position so as to be clearly visible to, and available for
inspection by, any person attending the auction before and during the auction.
Note. A notice under this clause may be combined with the notice of auction conditions.
One last provision is the providing of the Bidders Guide to people registering to bid for an auction
of residential or rural property.
71 Approved consumer education guide for bidders at auctions
(1) The Director-General may from time to time approve a consumer education guide for
prospective bidders at an auction of residential property or rural land.
(2) A real estate agent or stock and station agent engaged to act in respect of the sale by auction
of residential property or rural land must take all reasonable steps to ensure that a person who
bids at the auction has been provided before the auction with a copy of the consumer education
guide currently approved under this section. Maximum penalty: 40 penalty units.
If a property is passed in at an auction. That is it is not sold under the hammer the Act prescribe that:76A Marketing statements about vendor bids when property passed in
(1) When residential property or rural land is passed in at auction and the last bid accepted at the
auction was a vendor bid, a real estate agent or stock and station agent, or an employee of such an
agent, must not, by a statement made in the course of marketing the residential property or rural
land, indicate the amount of the last bid accepted at the auction unless the statement also clearly
indicates that the bid was a vendor bid.
Maximum penalty: 200 penalty units.
(2) A statement is considered to be made by a person in the course of marketing residential
property or rural land if the statement is made:
(a) in an advertisement in respect of the property or land that is published or caused to
be published by the person, or
(b) to a person (orally or in writing) as a prospective purchaser of the property or land.
(3) It is a offence to a prosecution for a contravention of this section if the defendant satisfies the
court that the defendant did not know and had no reasonable cause to suspect that the bid
concerned was a vendor bid.
(4) Residential property or rural land is passed in at auction if the auction is stopped without the
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property or land being sold at the auction.
(5) In this section:
Vendor bid means a bid made by the auctioneer on behalf of the seller.
The Paperwork for a Sale
Some of the steps you will need to follow are:
• Sales advice to solicitor or conveyancer
• Letter to purchaser and vendor
• Prepare for exchange of contract
• Inform parties of deposit amount
• Sales advice to solicitor or conveyancer
The importance of the sales advice is mainly to identify the property, the vendor and purchaser and
the sale price/ this will give the solicitor all the details they need to ensure that the contracts are
correctly prepared and any additional information that can affect the sale is apparent. These may
include extended settlement dates, work to be done on the property, any inclusions not already
listed in the contract that may have been negotiated at the time of the sale. Other areas may relate
to the deposit, pest and building inspections and who is going to organise it.
SALES ADVICE
In most agencies the paperwork starts will the filling out of a Sales Advice. Such document would
include the following:
Address of Property:
Agency Details: including Name License Number, ABN, Address, contact details, name of
responsible agent
Vendor’s Details: including Name, address and contact details
Vendor’s Solicitor/Conveyancer Details: including Name, Address, DX no, contact details
Purchaser’s Details: including Name, address and contact details
Purchaser’s Solicitor/Conveyancer Details: including Name, Address, DX no, contact details
Purchase Price:
Inclusions:
Exclusions:
Deposit Paid: Always 10% unless the Vendor’s solicitor has authorised otherwise
Details of type of deposit: eg full 10%; Expression of Interest; .025% deposit
Balance of 10% Due:
When Due:
Exchange Date: (if undertaken by agent)
Cooling Off Period: YES/NO
Agent’s Agreed Commission Fee:
Agreed Expenses to be paid on Settlement: Any
Special Conditions:
As can be seen the purpose of the Sales Advice is to record all the pertinent particulars that relate
to the sale. It is a summary of the transaction as agreed at that stage. If the Vendor’s Solicitor is
going to prepare the Contract of Sale it has everything needed to perform that task. If the agent is
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attending to the exchange then this will record all the information that they need to transfer to the
front page of the contract.
The Conveyancing Act allows agents to exchange contracts if they have specific permission to do so.
However, if the purchaser does not have the benefit of independent legal advice then the purchaser
has a Cooling Off period after the exchange of contracts, which is 5 working days. Part 5 Section 64
of the Property, Stock and Business Agents Act states:64 Contracts for sale of residential property
(1) A real estate agent may do any of the following:
(a) fill up a proposed contract for the sale of residential property, by inserting details of the
purchaser’s name, address and description, the name and address of the Australian legal
practitioner acting for the purchaser, the purchase price and the date,
(b) insert in or delete from a contract for the sale of residential property any description of
any furnishings or chattels to be included in the sale of the property,
(c) participate in the exchange or making of contracts for the sale of residential property.
(2) If a prospective party to a proposed contract for the sale of residential property for whom a
real estate agent acts in relation to the exchange or making of the contract notifies the real
estate agent, or it is apparent from the proposed contract, that an Australian legal practitioner
is or will be acting for the party, the real estate agent may not participate in the exchange or
making of the contract unless expressly authorised to do so by the party or the Australian legal
practitioner. A contract is not invalid merely because of the failure of a real estate agent to
comply with this subsection.
(3) A real estate agent who exercises any function pursuant to this section on behalf of any person
who is a party or a prospective party to any contract or proposed contract is liable to compensate
that person for any loss, damage or expense suffered or incurred by that person as a result of any
negligent act or omission, or any unauthorised action, of the real estate agent in the exercise of
that function.
(4) A real estate agent may not charge a fee for anything authorised to be done under this section.
(5) This section does not affect the existence or nature of any other functions or
responsibilities of licensees that exist or may exist apart from this section.
(6) In this section: Australian legal practitioner includes a licensee under the Conveyancers Licensing Act
2003.
Careful reading of this section clearly identifies that if an agent is going to exchange contracts
they are limited in just what they do. There is only certain details that they can add to the
contract, and the section does not give them permission to change or add anything else.
Agents should also be mindful that under this section they (the agent) are totally liable to any person
who suffers loss or damage as a result of their actions if they:• Act outside their authority
• They commit any unlawful act in the exchange or
• They are negligent or omit what they should do
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So if agents participate in the exchange they should be diligent and careful in what they do.
A purchaser can waive the Cooling Off period given under the Conveyancing Act, but this can only
be done if a Certificate issued under 66W of the Act is completed by a Solicitor, Barrister,
conveyancer or any person authorised under the Act. This Certificate certifies that the purchaser
has had the contract explained to them and that they have had the benefit of independent legal
advice.
It should be noted here that Schedule 1 (13) states:13 Licensee not to recommend engagement of services of solicitor or licensed conveyancer
acting for other party
(1) An agent must not recommend that a principal or prospect engage the services of a solicitor or
licensed conveyancer, or firm of solicitors or licensed conveyancers, if the agent knows that the
solicitor or licensed conveyancer, or the firm of solicitors or licensed conveyancers, acts or will be
acting for the other party to the agreement concerned.
(2) Subclause (1) does not prevent an agent recommending that a principal or prospect engage
the services of a solicitor or licensed conveyancer if no other solicitor or licensed conveyancer is
available (for example, in a remote location).
(3) If no other solicitor or licensed conveyancer is available, the agent must, in recommending their
engagement, advise the principal or prospect that the solicitor or licensed conveyancer is or will be
acting for the other party.
The Conveyancing Act also limits what an agent can fill in. The Standard Form of Contract prepared
by the REI NSW and the NSW Law Society clearly marks the areas an agent can complete on the
contract. That is, they can fill in anything that appears within the black box on page one of the
contract.
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SAMPLE 66W Certificate
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FRONT PAGE OF A STANDARD CONTRACT FOR SALE
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Covering letters are sent to the Vendor’s Solicitor/conveyancer and to the Purchaser’s
Solicitor/Conveyancer that a sale has been made and including a copy of the Sales Advice.
Those letters would reflect if the Solicitors are to exchange contracts, or if the Agent had already
exchanged contracts. As well letters confirming details of the sale and the circumstances would
be sent to both the Vendor and the Purchaser.
Agents should be aware that if they have exchanged contracts then Schedule 2 Clause 9 on the
Rules of Conduct require them to:9. Agent participating in exchange of contracts for residential property
If an agent participates in the exchange or making of a contract for the sale of residential
property, the agent must serve a copy of the contract within 2 business days on:
(a) each party to the contract, unless paragraph (b) requires the agent to serve a copy of the
contract on a solicitor or conveyancer acting for the party, or
(b) the solicitor or conveyancer acting for a party to the contract if the party has notified the
agent, or it is apparent from the contract, that a solicitor or conveyancer is acting for the party.
The Actual Exchange of Contracts
For an agent to exchange contracts they must have written procedure to do so. There are standard
forms for obtaining this permission and the format of the form varies depending on the
circumstances. Copies of the forms are included in the Resource Kit. However, one has to be filled
out before the agent can exchange contracts.
The process of exchanging contracts is a very important one. Care should be taken that the following
procedure is followed carefully, otherwise it could be held that contracts have not been exchanged.
1. Obtain both copies of the contract. They can be the original copy and the counterpart
prepared by the Solicitor, or they can be photocopies of the contract.
2. Before proceeding further check the contracts page by page to ensure they are
identical.
3. Check that all documents that should be appended are actually there. The list of
appended documents are set out on page 2 of the standard form of contract.
4. Have the purchaser write their name and other details, and their solicitor details on a separate
piece of paper and then copy their details to both copies of the contract. Ensure the details are
the same on both copies.
5. Check the list of contents with the vendor and add any contents not on the contract. Do not
write outside the heavy black box.
6. Enter the purchase price, the deposit (10%) and the balance owed on both copies. Do not vary
the deposit amount from 10% unless authorised to do so by the Vendor’s solicitor.
7. Do not alter any clauses or add any clauses without the Vendor’s Solicitor/Conveyancer permission.
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This includes the settlement term on the front page.
8. Have both the purchaser and the vendor sign one contract each on the front page.
Tradition is that the vendor signs the original contract and the purchaser the copy. It is prudent
practice to have each party initial every page of the contract and any alterations made to the
contract as presented to the vendor’s solicitor/conveyancer. This includes the changes to the
inclusions and exclusions and the purchase price. Some agents have both parties sign and initial
both contracts.
9. If the contracts have been out of your possession after you have checked them under
Clause 2 above, then check again that they are identical.
10. Have both parties sign the relevant “Authority to Exchange”
11. Advise both parties that you now intend to exchange contracts. If a “cooling off period” will exist,,
reiterate this. If the contract is being exchanged with a 66W Certificate then advise both parties that
there is no cooling off period. Then physically exchange contracts.
12. Date the contracts and then advise both parties that contracts have been exchanged.
If one or both parties are not present at the exchange then call them at let them know you have
exchanged the contracts. NOTE: The exchange of contracts is not completed until you have advised
both parties what you have done.
13. Make arrangements to send the contracts to the respective solicitor/conveyancer ASAP but no
later then 2 days. If either party are taking the contracts then have them sign a receipt
acknowledging they will take the contract to their solicitor/conveyancer ASAP.
Once all this has been done the contracts have been formally exchanged.
7 Completing the Sale
A salesperson’s work does not finish when they have negotiated the paperwork exchanged
contracts or sent the Sales Letters out. There are a number of other duties that have to be
performed between the date of the contract and when the property finally settles and the vendor
receives their money and pays the commission to the agent. It should be noted here that the agent
only receives the commission agreed when the property finally settles. If the sale falls over, for any
reason, other that the default of the Vendor, then the agent has no claim for payment of their
commission.
7.1 Requirements between Negotiation and Settlement. If the agent does not exchange contracts
then they need to monitor the situation closely to short circuit any problems that could arise that
may delay the exchange. So, the agent needs to be ready to co-ordinate such things as pest and
building inspection if the purchaser wants to get them done. If a Cooling Off period contract has
exchanged all this will happen within the first 5 days. The agent should stay in touch with the
purchaser to ensure a smooth passage and be ready to solve problems if they arise that could
impact on the sale. If the purchaser has only paid .025% deposit the agent must be ready to collect
the balance of the deposit by the fifth working day unless the cooling off period is extended. The
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time between negotiating the sale, or the first 5 days after a Cooling Off period exchange re critical
and much can go wrong. The selling agent must keep in contact with both sides to keep the deal on
track.
Once the exchange becomes hard, i.e. the cooling off period has expired and the purchaser has not
withdrawn, the agent’s duties lessen until close to the settlement time. All contracts have a
settlement date which, while normally 42 days, can be any reasonable period that the parties to
the contract agree to.
As settlement gets closer the agent needs to be ready to do several things. The first is to arrange a
final inspection if the purchaser wants one. The purchaser needs to make the request and if they do
so the vendor is only obliged to allow them inspect the property once. So the final inspection
should ideally be done as close as possible to settlement time. As well the agent needs to ensure
that all keys etc are available to hand over to the purchaser after settlement.
The authorisation for this hand over MUST come from the Vendor or the Vendor’s Solicitor (ideally,
the Solicitor). At no stage should an agent release the keys on instructions from the purchaser or the
purchaser’s solicitor.
The conveyancer will handle the settlement of the properties. The next duty to the agent is to
account to the vendor for the deposit monies held once both sides have confirmed that the
property has settled and the agent receives the “Order On The Agent”. This is issued by the
purchaser’s solicitor and is sent to the agent by the Vendor’s Solicitor, usually with instructions on
how to account for the deposit monies held.
NOTE: During exchange and settlement there may be occasions where the parties agree to certain
things like giving the purchaser access to the property, or releasing part or all of the deposit
monies. Such instructions to the agent should always be in writing from the vendor’s solicitor,
except where the release of deposit monies are concerned, then the authority must come from the
purchaser or their legal representative.
Agents should be very careful between exchange and settlement as both parties have an interest in
the deposit monies, but the property is still the vendors until settlement. If the purchaser gains
access or possession before settlement then they have legal obligations, and the agent should be
very careful that they only allow access or possession after receiving the proper authorisations.
Once the Order On The Agent is received the agent will need to prepare a statement for the
vendor, setting out an itemised account of their charges and a statement on how the deposit
monies are dealt with.
Agents should keep in mind that they cannot begin recovery action to recover expenses or
commission until 28 days after a statement of account has been given, and the client can have
the fees reviewed irrespective of what was agreed in the agency agreement.
36 Review of commission and fees
(1) An action or other proceedings cannot be commenced by a licensee for the recovery of
remuneration or any sum as reimbursement for expenses until the expiration of 28 days after a
statement of claim has been served personally or by post on the person to be charged with the
remuneration or expenses.
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(2) The statement of claim must be in writing, set out the amount claimed and contain
details of the services performed by the licensee in respect of which the remuneration or
expenses are claimed.
(3) If money has been paid to or is or has been retained by a licensee (out of money received by or
paid to the licensee) in respect of any transaction by or with the licensee as a licensee and has been
so paid or retained as remuneration or as reimbursement for expenses in connection with the
transaction, the person paying the money or the person who would be entitled to the money had
the money not been retained, may require the licensee to furnish the person with an itemised
account of the transaction in accordance with the regulations.
(4) A person who is served with a statement of claim under this section or is provided with an
itemised account of a transaction as provided by this section may apply to the Tribunal for the
determination of a consumer claim within the meaning of Consumer Claims Act 1998 in relation to:
(a) the entitlement of the licensee to the whole or any part of the amount specified in the
statement of claim or the itemised account, or
(b) whether the whole or any part of the amount is reasonable, or both.
(5) For the purpose of the application of the Consumer Claims Act 1998 to that person, a
reference in that Act to a consumer is taken to include a reference to that person.
(6) The Tribunal has jurisdiction to hear and determine any such consumer claim despite:
(a) the terms or conditions of any agreement or contract entered into between the licensee and the
applicant, and
(b) the amount being more or less than the maximum amount (if any) of remuneration to
which a licensee is entitled under this Act.
(7) This section does not limit the Consumer Claims Act 1998.
(8) In this section:
expenses means expenses or charges incurred in connection with services performed by a licensee
in his or her capacity as a licensee.
remuneration means remuneration by way of commission, fee, gain or reward for services
performed by a licensee in his or her capacity as a licensee.
Tribunal means the Tribunal under the Consumer Claims Act 1998.
Once the sale is completed the file can be closed, but all material created during the sales process
must be kept for a minimum of 3 years.
104 Licensee to make and keep certain records
(1) A licensee must make the following records:
(a) a record containing full particulars of all transactions by or with the licensee in connection with
his or her business as a licensee,
(b) such other records relating to the licensee’s business as a licensee as may be required by the
regulations.
(2) A record required by this section must be kept for at least 3 years after it is made.
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The record must be kept:
(a) by the licensee at the licensee’s registered office (while the licensee remains a licensee) or
(b) if the licensee ceases to be a licensee, by the former licensee in his or her possession, custody
or control unless the former licensee authorises some other person to have possession, custody or
control of the record, or
(c) by any other person who obtains possession, custody or control of the record whether as a
result of being the personal representative of a deceased licensee or by transfer of the business of
the licensee or otherwise.
(4) The regulations may make provision for the manner and form in which a record required by
this section is to be kept.
(5) An entry in a record made under this section and kept at the registered office of a licensee is
presumed, unless the contrary is proved, to have been made by or with the authority of the
licensee.
(6) A person who contravenes a provision of this section is guilty of an offence. Maximum
penalty: 50 penalty units.
The Regulations state:Part 5 Records
35 Records and book entries to be in English language
A licensee must ensure that all written records required to be made or produced by the licensee,
and all entries in books of account required to be kept by the licensee, by the provisions of the Act
and this Regulation, are in the English language. Maximum penalty: 40 penalty units in the case of a
corporation or 20 penalty units in any other case.
Note. There are no restrictions on the technology that can be used to make and keep
records. Records can be made and kept on paper or by electronic means.
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Assessment Section - CPPDSM4008A
Identify legal & ethical requirements of property sales to complete agency
work
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Assessment Information for Course Participants
To be assessed as competent in this unit you must be able to demonstrate your underpinning knowledge and
your ability to perform the tasks that relate to the learning outcomes (elements and performance criteria)
specified for this unit. This assessment allows you to demonstrate your competence through one or more of the
following assessment methods:

Knowledge based assessment questions

Case Studies and / or

Projects
The unit descriptor for this unit (which includes the elements and performance criteria, required skills, knowledge
and understanding, range statements and evidence guide) has been included on the following pages for your
information. The knowledge based questions and, case study and project activities (where applicable) in this
assessment have been mapped to the performance criteria.
However, please note that in addition to successful completion of these assessment tasks, other assessment
methods may be used to determine your competency. These may include practical demonstrations, role plays or
third party/supervisor reports.
If you have extensive and current experience in the requirements of this unit, you may be eligible to apply for
Recognition of Prior Learning as an alternative method of assessment. If you believe that this applies to you,
please ask your trainer or assessor about applying for Recognition of Prior Learning.
Notes for Course Participants:
Assessments are to be completed and returned or handed to your assessor / trainer by the agreed date.
You are completing a formal qualification so the standard of your work should reflect the quality of work you
would want to achieve in the workplace. Your work should be neat, tidy and organised.
Where you have used external materials or resources to support your assessment work (eg: published authors or
the internet) remember that you should reference the work correctly.
Should you have any difficulty with any part of your assessment you should immediately contact your assessor /
trainer for assistance and advice.
Real Estate is a highly regulated industry sector and workers in the industry are expected to be able to
understand and interpret the appropriate legislation.
Where required you should identify the legislation that relates to your answer. You should make reference to
the appropriate Section or Paragraph of the relevant Act or Regulation that applies in your State or Territory.
Assessments:
1. Focus on the application of knowledge, skill and understanding of the performance criteria required in the
workplace and cover all aspects of workplace performance over a period of time
2. Involve the evaluation of sufficient evidence to enable judgments to be made about whether competency has
been attained over a period of time
3. Provide for feedback to the applicant about the outcomes of the assessment process and guidance on future
options
4. Are equitable for all persons, taking account of cultural and linguistic needs
5. Are valid, reliable, fair and flexible; and provide for reassessment on appeal
6. Will be conducted by an authorised assessor
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Participant Declaration & Signature – CPPDSM4008A
Participant’s Name:
Address:
Tel:
Mob:
E-mail:
Principal/employer’s Name:
E-mail:
1. I have read, understood & familiarised myself with the contents and assessment criteria for this unit
of competence, as detailed on following pages

2. The work in the attached assessments is my own. I acknowledge and understand that copying the
work of others’ is plagiarism and will result in re-assessment

3. I have kept a copy of these assessments

4. I understand the appeal process set out in the Handbook, if I’m not happy with the assessment
outcome

Participant’s signature:
Date:
Participant’s comments:
Distance courses:
Return your completed Assessment:
For Trainer support/contact:
By mail to:
MRT
Suite 319, 410 Elizabeth Street
Surry Hills NSW 2010
by email to:
[email protected]
Ph: 1300 115 144
Email: [email protected]
Assessment Outcome
Part A – Knowledge Based Assessment
 Competent
 Not yet Competent
Part B – Forms Task
 Competent
 Not yet Competent
Part C – Project
 Competent
 Not yet Competent
 Assessor Comments / Feedback / Recommendations:
Assessor:
The Course Participant is Competent
in this assignment.
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Signature:
Date:
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CPPDSM4008A – Identify legal and ethical requirements of property sales to complete agency
work
Unit descriptor
Competency field
Unit sector
This unit of competency specifies the outcomes required to meet the core legal and
ethical requirements associated with property sales. This includes awareness of the
legislation relating to property sales, the role and responsibility of agency personnel
in property sales, the administration of sales transactions and the completion of
sales documentation.
The unit may form part of the licensing requirements for persons engaged in real
estate activities in those States and Territories where these are regulated activities.
The required outcomes described in this unit of competency contain applicable
facets of employability skills. The Employability Skills Summary of the qualification
in which this unit of competency is packaged, will assist in identifying employability
skills requirements.
Nil
This unit of competency supports the work of licensed real estate agents and real
estate representatives involved in property sales. It addresses the requirements for
licensed real estate agents and real estate representatives to be able to identify
and explain relevant legislation, roles, responsibility and documentation.
Real estate
Property development, sales and management
ELEMENT
PERFORMANCE CRITERIA
Elements describe the essential
outcomes of a unit of
competency.
Performance criteria describe the required performance needed to demonstrate achievement
of the element. Where bold italicised text is used, further information is detailed in the
required skills and knowledge and/or the range statement. Assessment of performance is to
be consistent with the evidence guide.
1 Develop knowledge of
property sales
1.1
Employability skills
Prerequisite units
Application of the unit
1.2
1.3
1.4
1.5
1.6
2 Develop knowledge of
sales process
2.1
2.2
2.3
2.4
2.5
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Types and characteristics of land tenure systems are identified in line with
legislation
Legislation regulating the sale of properties is identified in line with agency
practice
Information provided on the Certificate of Title is checked for accuracy against
the agency agreement
Types of property ownership are identified in line with legislation
Legal requirements relating to the sale of property are identified and
interpreted in line with legislation and agency requirements
Requirements of ethical and conduct standards and consumer protection and
privacy legislation in relation to the sale of property are identified in line with
legislative requirements and agency practice
Need for demonstrating effective communication strategies in establishing
rapport with clients, determining client needs, providing accurate advice,
addressing client concerns and dealing with conflict is identified in line with
agency practice
Listing opportunities are identified and assessed in the context of legislative
requirements and agency practice
Methods of selling property are identified and assessed in the context of
legislative requirements and agency practice
Sale authority agreements are identified, completed and stored in line with
legislative requirements and agency practice
Strategies for marketing property are identified and assessed in the context of
legislative requirements and agency practice
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2.6
2.7
2.8
2.9
3 Identify roles and
responsibilities of sales
personnel
3.1
3.2
3.3
3.4
3.5
Purpose and terms of statutory statements required to be prepared by sellers
for the sale of property and businesses are identified and interpreted in the
context of legislative requirements and agency practice
Contractual documents relating to the sale of property are identified,
interpreted, completed and stored in line with legislative requirements and
agency practice
Process for settling the sale of property is identified in the context of legislative
requirements and agency practice
Processes for receipt, recording, banking and release of deposit moneys are
identified in the context of legislative requirements and agency practice
Relationship between salesperson and agency principal is identified in the
context of legislative requirements and agency practice
Roles and responsibilities of agent in sale of property including general
disclosure requirements are identified, interpreted and assessed in the context
of legislative requirements and agency practice
Restrictions on agents purchasing property and sanctions for violations of
restrictions are identified, interpreted and complied with in line with legislative
requirements and agency practice
Controls and sanctions on secret commissions are identified in the context of
legislative requirements and agency practice
Entitlements and commissions for agents are identified and calculated in the
context of legislative requirements and agency practice
REQUIRED SKILLS AND KNOWLEDGE
This section describes the essential skills and knowledge and their level, required for this unit.
Required skills:
• ability to communicate with and relate to a range of people from diverse social, economic and cultural
backgrounds and with varying physical and mental abilities
• analytical skills to interpret documents such as legislation, regulations, contracts, contract notes, sale
authority documents and Certificates of Title
• computing skills to access agency and resource databases, use standard software packages, send and receive
emails, access the internet and web pages, and complete and lodge standard documents online
• decision making and problem solving skills to analyse situations and make decisions associated with the sale of
property
• literacy skills to access and interpret a variety of texts, including contracts; prepare general information and
papers; prepare formal and informal letters, reports and applications; and complete prescribed forms
• negotiation skills required for interacting with sellers and buyers
• numeracy skills to calculate and interpret data, such as deposits, entitlements and commissions
• planning, organising and scheduling skills to undertake work-related tasks, such as preparing correspondence,
organising deposits and arranging property inspections
• research skills to identify and locate documents and information relating to the sale of property
• risk management skills to identify risks associated with discussing sale and purchase options with sellers and
buyers
• self-management skills to organise own work, deliver quality customer service and effectively manage
competing demands
• teamwork skills to work effectively in and promote communication between sales, property management and
administrative teams in an agency environment
•
verbal communication skills required for face-to-face communication with real estate sellers and buyers
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Required knowledge and understanding:
• consumer protection, fair trading and trade
• agent entitlements and commissions
practices
• contract law in the real estate industry, including
• employment and industrial relations
agent liability for breach of contract and negligence
• financial services
• ethical and conduct standards relevant to licensed
• OHS
real estate agents and real estate representatives
• privacy
• key principles of consumer protection and privacy
• property sales
legislation
• risk and risk management strategies
• key principles and terminology of property law
• roles and responsibilities of estate agency
• legislative limitations on agency practice
personnel in relation to the sale of property
• offences and penalties under legislation
• sales process, including ways of obtaining listings,
• relevant federal, and state or territory legislation
methods of selling property, strategies for
and local government regulations relating to:
marketing property, and the process for settling
• anti-discrimination and equal employment
the sale of property
opportunity
• trust funds and legislative controls on trust funds
Critical aspects for
A person who demonstrates competency in this unit must be able to provide evidence of:
assessment and
•
ability to communicate effectively and accurately with clients
evidence required to
•
application and knowledge of ethical and conduct standards and key principles of
demonstrate
consumer protection and privacy in relation to the sale of property
competency in this
•
application and knowledge of the sales process, including ways of obtaining listings,
unit
methods of selling property, strategies for marketing property, and the process for
settling the sale of property
•
application and knowledge of accurately completing statutory and agency sales
documentation, including authorities and contracts
•
application and knowledge of the legislation and regulatory framework relevant to
the sale of property
•
application and knowledge of the role and responsibilities of the agent in the sale of
property, including the legislative restrictions on agents purchasing property and the
controls and sanctions associated with secret commissions
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A. QUESTION SHEET
Please read and complete the following questions by the date set by your assessor. You are required to answer all questions in
this Participant Assessment Booklet unless otherwise instructed by your assessor. If a question asks for a specific number of
responses, you must provide all the required responses. Use the space provide as a guide for the required length of each
response. If you require more space please attach a separate sheet of paper outlining your response and the appropriate
question number to this assessment.
Your responses should aim to demonstrate that you have the required knowledge and skills to respond to the questions. Your
responses will be used as part of the overall evidence requirements of the unit.
(N.B. you may need to access the Fair Trading website to confirm your responses to some of these questions)
1. What is the term that describes the absolute form of ownership of land?
The term that describes the absolute form of ownership of land is known as Fee in Simple.
2. Explain the term Torrens Title
Torrens title is a land registration and land transfer system, in which a state creates and maintains
a register of land holdings, which serves as the conclusive evidence of title of the person recorded
on the register as the proprietor, and of all other interests recorded on the register.
3. What is Strata Title?
Strata title is a form of ownership devised for multi-level apartment blocks and horizontal
subdivisions with shared areas.
4. What information do you find on a certificate of title?
Certificate of title provides information on which land is owned by whom, as well as it
highlights the mortgager ie the Bank who lends the money.
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5. List the various types of property ownership?
Sole Ownership, Joint Tenancy, Joint Tenancy with Right of Survivorship, Tenancy in Common,
and Community Property are the types of property ownership.
6. What Act of Parliament governs the sale of land in NSW?
Property, Stock and Business Agents Act 2002 governs the sale of land in NSW.
7. What strategies can a selling agent use to canvas for property listings?
Doorknocking, Calling, Advertisements, Brochures, Posts, Signage, Referrals, Email etc are
some of the strategies which a selling agent can utilise to canvas for property listings.
8. In NSW what are the 3 most common methods for selling property?
The three most common methods for selling property includes:
1. Private Treaty
2. Auction
3. Tender
9. What is a selling agency agreement?
Selling agency agreement in where a real estate agent is given the exclusive right to represent
the seller and find a buyer for the property.
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10. List the 4 types of selling agency agreements used in NSW for the sale of residential property?
1. Exclusive Agency Agreement
2. Open Agency Agreement
3. Sole Agency Agreement
4. Multi Listing Agency Agreement
11. When can an agent claim commission from a vendor?
The agent can claim commission from vendor after the settlement.
12. List 3 common mistakes that are made when completing a Selling Agency Agreement?
Three common mistakes made includes wrong date, wrong address, and wrong date.
13. What is required to have a valid contract for the sale of residential property?
Valid contract for the sale of residential property requires: Contract of Sale v. 2005, Special
Conditions, Title Search, S149 Certificate S10.7, Sewage Diagram, Strata Plan/ Deposited Plan/
Community Plan.
14. What must an agent have before they begin marketing a property for sale?
The agent must have Contract of Sale before they begin marketing a property for sale.
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15. If an agent receives deposit monies for the sale of a property, what must they do with the monies
they receive?
16. If an agent is to exchange a contract for sale, what must they have before they undertake the
exchange of contracts?
The agents must have Authority to Exchange before they undertake the exchange of contracts.
17. When is the exchange of contracts complete?
It is completed when both the parties sign, exchange contract with 66W Certificate or 5 days
cooling off period. Moreover, 10 per cent should be transferred to Agency trust account
before cooling off ends, to ensure the legislation for exchange of contracts to be completed.
18. How is an agent’s selling commission calculated?
It is calculated by contract price times the percentage.
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19. When the sale of a property is completed (i.e settled), what does the agent need to have before
they account to the principal for the deposit monies they hold?
When the sale of a property is completed (i.e settled), the agents need to have Order on the
Agents before they account to the principal for the deposit monies they hold.
20. What does an agent need to do if they become aware that they have a conflict of interest with a
vendor?
The agent must inform the vendor if they become aware that they have a conflict of interest
with a vendor.
21. Give an example of a conflict of interest that could arise during the marketing of a property
Uncle of Agent representing the vendor wants to buy the property. In this case, the vendor
must be informed by the Agent that the other party is Agent's relative.
22. What is a Section 47 Certificate? When would an agent need to complete one?
Section 47 certificate show if any land tax is owing on a property. If there is an ongoing
relationship between the agent and any service provider that they recommend, then there is
conflict of interest and it must be declared by the agent through the Section 47 Certificate.
23. What is a Section 49 Certificate? When would an agent complete one?
Section 49 states that the person buying the property should not receive any commission or payment
relating to the sale unless the vendor has specifically agreed to it. The Agent must complete one
in the event that there is a conflict of interest for buying from the vendor, and through Section 49
agent can inform the vendor and overcome the situation.
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24. What is a secret commission? Give an example of a secret commission and outline what an agent
should do if offered one?
Secret Commission occurs where an agent dishonestly accepts money or other benefits (payment of
money is not a requirement of the offence) from a third party in return for agreeing to depart from a
duty he owes to his principal. For instance agent is approached by a party with an offer of secret
commission to do something in favour of that person. The Agent must decline the offer.
25. Provide definitions for the following
a. Conflict of interest.
A conflict of interest is a situation in which a person or organization is involved in multiple interests,
financial or otherwise, and serving one interest could involve working against another.
b. Duties of disclosure
It is the legal responsibility of a seller,broker,or agent to tell a potential buyer about a defect in the
premises.
c. Cooling off (vendor)
Cooling-off period that applies to vendors is the one-day period granted when they sign an
agency agreement.
d. Cooling off (purchaser)
Cooling-off period exists when buying a home or an investment property, during which buyer can
back out of the contract within a period of five days.
e. False & misleading advertising
This advertising is the use of false, misleading, or unproven information to advertise properties to
buyers and grab their attention.
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B. Forms Task
You will be required to complete the following Forms. Please follow the instructions carefully and
complete each part of the form. You should aim to demonstrate that you have the required knowledge
and skills to complete the forms to a fully compliant standard, using the following information. Any
additional information should be assumed. Your responses will be used as part of the overall evidence
requirements of the unit.
You can use the samples linked here, or one from an agency where you work.
Please complete and return one (1) each of the following forms.
1. Sales Inspection & Exclusive Selling Agreement
2. Sales Inspection Report & Auction Exclusive Selling Agency Agreement & Continuing Agency
Owners:
Address:
Agent:
Michelle Johns and Peter Johns
3 Bayview Crescent, Manly, NSW 2095
Blue Moon Real Estate
53 Highbrow Avenue, Manly, NSW 2095
ABN: 12 345 678 910. Licence No: 114 222
Solicitors:
Bach & Mark Solicitors, 14 Duffy Road, Queenscliff, NSW 2096
Property
A three bedroom 1960’s single storey property. Brick with a timber frame
Details:
addition in 1993. There are no covenants affecting the property, but there
is a sewerage easement across the back yard, which would prevent installing a pool
Inclusions: The vendors will be leaving all fixed floor coverings and light fittings, TV antenna, built in
aquarium between the lounge and dining rooms
Exclusions: Spa on the back deck, and the metal garden shed
Marketing: Mr and Mrs Johns have agreed to invest $3995 towards marketing costs, and have signed
a marketing plan & schedule, including a sign board
Open homes on Saturday’s only before 1.30pm; No inspections on Mondays, Tuesdays or
Thursdays
Settlement: Date to be agreed with purchaser prior to exchange of contracts
Prices:
Agents estimate: $820,000 - $880,000. Initial listing price: $850,000
Fees:
Agency fees 2.0% incl GST
Agency:
Agency period commences on 24 October, 2016 for 90 days
Agency agreement signed on 23 October, 2016
Scheduled auction date is 26 November, 2016
Other
Your office receives a 5% rebate from the local newspaper company
Details:
Star News. You estimate that the advertising for this property will be $800
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C – Role Plays
Instructions for
participants
A Role-play is an assessment activity in which participants act out an
imaginary scenario that closely mirrors a situation that could occur on
the job but is not necessarily frequent or common.
Role-plays aim to assesses the skills, knowledge, and behaviour that your
assessor must observe and record to assist in assessing your overall
competence in the unit. You are required to perform and complete each
of the scenarios described to you by your Assessor. Your Assessor may
participate or observe you completing tasks and may ask you to complete
certain activities, demonstrate a particular skill, or explain a specific point
to show further knowledge. You are required to complete all related
tasks to the required standard as explained by your assessor.
If this assessment activity has been completed in one of the other Unit
Assessment Sections, it does not need to be undertaken again. Your
assessor will transfer the results of that assessment to this assessment.
Instructions to
assessor
Use the Role-Play/Scenario Checklist to document the skills, knowledge
or behaviours demonstrated by the participant in performing tasks
related to the specific unit of competency. Each point on the document
must be observed and any skills or knowledge demonstrated by the
participant must be to the AQF level required. All of these observations
can be made during the role-play in either a real or simulated
environment. If you have not been able to observe a particular point you
may request the participant show you a particular skill or explain a
specific point to demonstrate knowledge.
You should debrief the role-play and explain that it has concluded before
recording your notes.
It is important to remember that the notes made by the Assessor during
the role-play form important evidence and should be retained as part of
the participant’s assessment records. Provide feedback to participants
once the role-play checklist is completed and discuss any notes recorded
and the outcome of the role-play.
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1. Role Play Task 1
You are the member of staff on reception in ABC Realty. A passer-by is looking at properties on
display in the window, and then enters the agency. Greet the person, demonstrating how you could
quickly adopt a ‘friendly’ approach with that person, and establish their needs, in order to direct
their enquiry to the appropriate person.
Satisfactory
Tasks performed
Notes on observation
Y
N
1
Rapport is established
☐
☐
2
Client needs identified
☐
☐
3
Professional approach
☐
☐
4
Effective communication
strategies used
☐
☐
5
Agency services promoted
☐
☐
Summary of demonstration and observed skills
Version 4 – August, 2018
© MRT Training RTO 41529
Validation date 09/01/16
CPPDSM4008A
Approved
T Rowe
Review
July, 2019
108
2. Role Play Task 2
You are the staff member on telephone reception at ABC Realty. A call comes in from an angry
landlord demanding to speak to the senior Property Manager immediately. You are the only member
of staff in the agency at that particular time.
You need to get the landlord’s details, the issue to be resolved, property address, and a strategy for
calming the landlord.
Satisfactory
Tasks performed
Notes on observation
Y
N
1
Demonstrate professional
phone manner
☐
☐
2
Secure landlord details and
access relevant property
details from database
☐
☐
3
Minimise client frustration by
active listening strategies
☐
☐
4
Mutual acceptable outcome is
arrived at
☐
☐
Summary of demonstration and observed skills
Version 4 – August, 2018
© MRT Training RTO 41529
Validation date 09/01/16
CPPDSM4008A
Approved
T Rowe
Review
July, 2019
109
3. Role Play Task 3
You are the sales assistant for ABC Realty. A phone call is received at reception and put through to
you to assist with an enquiry on a property listed with the agency. Take that call, and assist the caller
by noting the contact details (first); establishing a rapport with the caller; confirming the details of
the property they are enquiring about; and providing details of the next “open for inspection” times
for that property.
Satisfactory
Tasks performed
Notes on observation
Y
N
1
Effective communication
strategies used
☐
☐
2
Rapport is established
☐
☐
3
Client needs identified
☐
☐
4
Professional approach
☐
☐
5
Requested information is
provided
☐
☐
Summary of demonstration and observed skills
Version 4 – August, 2018
© MRT Training RTO 41529
Validation date 09/01/16
CPPDSM4008A
Approved
T Rowe
Review
July, 2019
110
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