Reforms Will Interfere With Freedom Of Contract

[Author – Tim ODwyer]

Reforms Will Interfere With Freedom Of Contract (And Burden Agents And Sellers)

Queensland, Australia
Real estate or conveyancing reforms did not appear in any political promises during the recent Queensland State election campaign. There were none during the previous election in early 2004.

Below is part of a letter I wrote at that time to the Premier, Peter Beattie, who remains my State’s election-winning leader. Following this excerpt is the reply I received from the Premier’s then Chief of Staff (with my annotated comments).

Nothing has changed, and I doubt if anything will.

“Now, while pre-election promises and policies abound, it may be time for you to bite the bullet and proclaim the following long-overdue reforms in this area:

  • a prohibition on real estate agents’ preparation of real estate contracts;
  • a prohibition on real estate agents and their ilk recommending their mates’ legal, financial, inspection and other services to property buyers and sellers (agents should not be allowed to give buyers or sellers so much as a bus timetable);
  • a prohibition on conveyancing solicitors acting for both parties;
  • mandatory full pre-contract disclosure by sellers to prospective buyers (particularly flood information, details of illegal structures and of approvals and inspections on properties);
  • a fair government-prescribed standard real estate contract to replace the disgraceful REIQ/Law Society document.”

“I refer to your letter of 22 January 2004(addressed to Premier Pete as acting Fair Trading Minister – following the blessed pre-election resignation of the Minister) regarding real estate and conveyancing reform. The Premier has asked me to respond to you on his behalf.

The Premier is aware of your longstanding professional and personal interest in this field and of your many contributions to debate on this topic in the Queensland and indeed national media. (I might frame this sentence – suburban solicitors don’t get this sort of recognition too often.)

The Beattie Government has always been prepared to sit down and listen to reform proposals and to determine whether their adoption would better meet policy objectives than existing settings. (Existing settings? We’re taking about real estate and conveyancing laws and practices, my friend, not the format for someone’s emails!) I am advised you have met with both the Beattie Government’s former Fair Trading Ministers Judy Spence and Merri Rose and have been given an opportunity to press your case.

In shaping the legislative settings regulating the formation of real estate contracts and conveyancing(What a cod-ugly meaningless turn of phrase!), the Beattie Government’s policy objectives have been to keep costs to vendors and buyers as low as possible, while minimising the risks to which they are exposed. (Just send one policy advisor for one day to my office to see the avalanche of risks inherent in the simplest real estate transaction…please.) In particular, new legislation developed by the Beattie Government has required that parties are warned to seek appropriate professional advice before entering into any contract, and are informed about third parties having a beneficial interest in a sale contract. (Only residential buyers, not sellers, get the warning and the disclosure!)

The benefits of further interference with freedom of contract in terms of risk avoidance need to be weighed against the not insubstantial costs of such interference for homebuyers and vendors. (Christ, who wrote this for you? Was it the Real Estate Institute or the Liberal Party?) You would be aware the Premier recently announced a policy to forgo certain state taxes for first homebuyers in an effort to help young Queenslanders make the transition to home ownership. The Government would not therefore lightly embark upon a policy change that would load costs back onto these homebuyers unless it could be shown that the benefits to the few would outweigh the costs to the many. (Let me guess. Jim Hacker?) 

In relation to your specific proposals, I therefore offer the following responses:

1. A prohibition on real estate agents’ preparation of real estate contracts. Buyers are warned in blunt terms not to sign a purchase contract without first obtaining legal advice. They have to acknowledge having read this warning. They then have a five day cooling-off period during which they can withdraw from the contract without any reason. This period would allow them to obtain advice even if they have signed the contract without heeding the warning. Risks to buyers are thus greatly mitigated. (Still no warnings to sellers, sport, and guess who the government has permitted to give the warnings to the chickens?)

Advantages of the existing Queensland system of real estate contracting include speed, certainty and cost, as against contract exchange systems applying in other states. (You clods really don’t want to know about the A.C.T. reforms, do you?)Gazumping, while not entirely absent, is not a defining feature of the Queensland real estate market and this is in large part due to the existing settings.(Who mentioned gazumping?) Individuals are not prevented from undertaking their own conveyancing and thereby saving themselves considerable legal costs. (What’s this got to do with who prepares contracts?)

A tiny proportion of the hundreds of thousands of real estate contracts signed and settled in Queensland each year is subject to complaint or litigation.(Thanks largely to the remedial efforts of conveyancing solicitors, for crissakes!) It is not unreasonable for vendors (or their agents) to provide a contract on the basis of which they are prepared to sell. (And it’s not unreasonable to keep the preparation of legal documents out of the paws of non-lawyers!) 

In summary, it is difficult to see how this proposal accords with the policy objectives outlined above. It amounts to a significant interference in freedom of contract in order to protect a very small number of buyers from the consequences of their failure to heed blunt warnings. (OK, who’s the Lib in your Labor ranks?) 

2. A prohibition on real estate agents recommending their mates’ legal, financial, inspection and other services to property buyers and sellers. The law already requires that any beneficial financial relationship between agents and service providers to whom vendors and buyers are referred be disclosed.(Sorry old son, there is no disclosure to sellers of kickbacks for referrals.)

Real estate agents, being in the business of selling real estate, can be expected to have greater knowledge and a wider sphere of contacts in related fields than do most buyers and sellers. (Come on, who really wrote this? Was it Ray White or Hooker?) Prohibiting them from recommending related service providers would be to put an artificial constraint on their relationships with clients (Listen mullet-head, agents have a fiduciary relationship with their clients!) and customers(Bloody hell, there’s nothing artificial about constraining a representative of one party to a legal agreement from recommending anything to the other party!), adding an annoyance but with little obvious gain. (Integrity is often annoying.)

Again, the benefits to the few do not appear to outweigh the burden to be placed on the many.(Christ, there aren’t that many REIQ members!)

3. A prohibition on conveyancing solicitors acting for both parties.

The Beattie Government would be happy to support this proposal in principal however, we would need to consult with the broader community concerning implementation. (Bless your black bureaucratic heart!) 

4. Mandatory full pre-contract disclosure by sellers to prospective buyers (particularly flood information, details of illegal structures and of approvals and inspections on properties). Here the Government sees some scope for reform (At last a penny is dropping!), although it would change the character of the legislation by for the first time (???) imposing obligations on parties other than agents. (Ask any lawyer how many legislative obligations already are imposed on sellers, you clown!) Because people sell property often for reasons of financial distress, it is not reasonable to impose additional expenses on them as a pre-condition of putting property on the market. (What a crock!!!) Clearly provision of such documents as building inspection reports would be a selling point, much as an RACQ inspection and a safety certificate are for a motor vehicle. But, as with motor vehicles, it is not mandatory to provide such documents. (Who said anything about building inspection reports?) 

It is not difficult to conceive of examples where mandatory disclosure of the sort this proposal contemplates would impose unnecessary costs on parties. (What another crock!) For example, most of this information would be irrelevant to a buyer whose objective was to demolish existing structures in order to build a new dwelling. (Oh dear me!)

There is no reason, however, why vendors should not disclose information they already possess (Christ, I get letters every day from dumb sellers’ solicitors protesting that the illegal structures revealed by my searches were already there when their clients bought the property.) and the Government is prepared to undertake to examine ways this principle might be implemented in legislation. (I won’t hold my breath!)

5. A fair, government-prescribed standard real estate contract to replace the disgraceful REIQ/Law Society document.

As I am advised you are aware, the Office of Fair Trading has been working with the REIQ, the Law Society and other interested parties to draft a new model contract. While this document will offer considerable improvements over the existing(disgraceful?) model contract, it will not be mandatory. (Wimps!) I am not convinced it is possible to cover the almost infinite gamut of contractual terms parties may want to include or exclude in a mandatory document. (Crock number three!!!) Moreover, to do so would be to impose needless burdens on many individuals. (Be friggin honest, and say “many agents”!)

Thank you for your interest in this topic and for your contribution to policy development. (Betcha pulled this sentence straight outta the fob-off file in yer word-processor!)

Yours sincerely”

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