Gold Coast Law Association Slams Agents And Calls For Contract Reforms

[Author – Tim ODwyer]

Chief Justice of Queensland Paul de Jersey has warned my State’s lawyers, when they write letters of demand on behalf of clients, to be careful before resorting to any “even arguably threatening conduct”.

Solicitors, not estate agents, should prepare sales contracts. This is the view of the Gold Coast District Law Association which has called for Queensland to be brought into line with the long-established New South Wales practice whereby agents do not prepare or exchange contracts. Queensland Law Society president Megan Mahon agrees that real estate consumers “should be guided by professional legal advice at every stage”.Neven allow an estate agent to handle the contract!

“The (legal) profession here would welcome this move,” writes Association president Ted Skuse in his Association’s newsletter IPSO FACTO which describes “recurring problems with agent-prepared documents”:

  • Unrealistic time frames in contracts;
  • Special conditions imposing duties on buyers and their solicitors to collect agents’ commissions;
  • Special conditions eroding buyers’ rights.

Agents are criticised for commonly setting 14 days or less for buyers to make investigations, secure finance and obtain building/pest inspections. Unrealistic settlement dates also prejudice sellers needing to arrange mortgage releases.

“The result is that in most transactions extensions of time are needed. If the contract is unconditional the party seeking more time is wholly in the power of the other party as to whether such an extension is granted.”

“Short time frames place the parties at risk if extensions of time are not consented to,” explains Mr Skuse, who is also concerned about possible claims against solicitors.

“The pressure on conveyancing solicitors on the Gold Coast is at an unacceptable level,” he writes. Increased claims against conveyancing solicitors corroborates, in the Law Association’s view, the need for an urgent revision of contract timeframes. Periods of 30 days for special conditions and 60 days for settlements are recommended.

In keeping with Law Society submissions, Mr Skuse also calls for “appropriate disclosure” by sellers, and points to existing laws in New South Wales, Victoria and the A.C.T.

Agents’ commission collection clauses have particularly riled his Association which wants these “wholly rejected” by solicitors. These self-serving clauses are inserted in contracts by agents because, according to Mr Skuse, they fail to take reasonable deposits and are reluctant to use their trust accounts for this purpose. Agents should, he says, collect their commissions from the proper parties – the sellers – rather than trying to impose contractual duties on buyers and their solicitors.

These concerns arose within the controversary following my revelation here and in The Courier Mail newspaper that Section 24 of the Legal Profession Act 2007 had, since 1st July, limited the role of estate agents (and resident letting agents) in contract preparation. This Section is intended to protect legal consumers and the public by ensuring legal documents are drafted only by lawyers. But agents are partly exempted if a licensee or employee “only fills in details in a pre-printed contract or other document … and does not give advice about the contract or other document or the details that are filled in.”

Although the Gold Coast District Law Association has welcomed this reform which effectively prevents agents drafting clauses, conditions or annexures, Law Society president Mahon claims there is some debate within the profession over “perceived grey areas”. Nevertheless, Gold Coast solicitor David Nematalla recently asserted publicly that, “while agents can draw up simple contracts, involving little more than filling in the blanks, they will no longer be able to add any additional clauses.” He added that conveyancing solicitors would have to be more involved because drafting and executing contracts would become more time consuming.

Of course the Real Estate Institute of Queensland had belatedly emailed its members that, despite not being consulted on Section 24, it subsequently sought clarification from the government. According to the REIQ, there is “no ban on agents amending contracts”, and they can “still draft forms for everyday business use.”

On the other hand the Re/Max real estate group advised all its Queensland agencies that drafting special conditions and annexures would be in breach of the law, and was “definitely” performing the job of a solicitor.

A Re/Max memo gave these further warnings:

  • Always advise the client or customer to seek legal advice before they sign a contract or appointment to act.
  • Do not draft special conditions and do not attach annexures to a contract without referring the matter to the clients/customers solicitor first.
  • Do not insert standard conditions on a contract without referring the matter to the clients/customers first and having the contract checked before signing.

During an ABC radio discussion on Section 24, three agents phoned in anonymously and agreed that many agents’ contract efforts created problems. Each said it was more sensible for lawyers to prepare contracts.

Meanwhile the publisher of a standard contract has audaciously offered Queensland agents the “added safeguard” of a pre-printed disclaimer whereby contracting parties confirm that the agent provided no legal advice, and that any special conditions or clauses were inserted at their request. I knew this attempt to bypass the law would not take long to emerge from the foxes’ camp.

Finally, just for the record, here is the full text of what I received from the Queensland Law Society President when I asked for an official comment on the role of agents in contract preparation:

“The issues posed by Section 24 are a matter for debate within the legal profession over perceived grey areas. We strongly urge buyers and sellers of real estate seek their own independent legal advice before considering any contract. The sale or purchase of a home is the biggest single investment the large majority of people make and should be guided by professional legal advice at every stage.”

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