Estate Agents – Unqualified Hucksters?

[Author – Tim ODwyer]

Queensland’s estate agents (and their counterparts across the nation) rarely want clients or customers, vendors or purchasers, buyers or sellers to see independent solicitors and to be legally advised before contracts are signed. For obvious reasons. Solicitors who aren’t in cahoots with agent mates tend to be seen as “deal-killers”.

I know it says 'CONTRACT' but it's merely an offer until the vendor signs it.

The recent real estate and conveyancing reforms in the Australian Capital Territory include this commendable legislative restriction on the traditional anti-lawyer wont of agents and their sales people:

“If a prospective party to a proposed contract for the sale of residential property for whom an agent or sales person acts tells the agent or sales person, or it is apparent from the proposed contract, that a lawyer is or will be acting for the party, the agent or sales person must not take part in the exchange of contracts or the making of the contract unless expressly authorised to do so by the party or the lawyer.”

Three years earlier Queensland brought in a statutory Real Estate Agency Practice Code of Conduct which includes this remarkable (but widely ignored and completely unenforced) consumer protection:

“A real estate agent must give a client a genuine opportunity to obtain relevant independent professional advice or representation before the client appoints the agent.

A real estate agent must give a client or customer a genuine opportunity to obtain relevant independent professional advice or representation before signing a contract for the sale or purchase of property.”

Funnily enough when Queensland’s Office of Fair Trading later issued a “Good Business Guide” to help licensed agents comply with the law and ensure their business practices were up-to-date, these Code provisions were explained not as mandatory agents’ obligations but inaccurately as optional consumers’ rights:

“A client or consumer has the right to seek independent advice from a third party before entering into a real estate agreement or contract.”

The Guide warns that agents, who “insist” consumers need not see a solicitor before signing a contract, will breach the Code.

“It is good business practice”, the Guide continues, to involve “a solicitor” at the outset of any transaction. While it is not clear for whom this sole lawyer would work, Fair Trading’s ideal result will be “a business environment of full disclosure where all parties are kept fully informed of all the facts”. Clearly both parties need independent legal advisors.

Then comes a really helpful, agent-friendly observation:

This incidentally also protects the agent’s liability in a transaction!

Even more helpfully the Guide recommends that, if a consumer “declines the right to use a legal adviser”, it would be good business practice (for the agent) to write these words on the Appointment to Act: “client/customer has declined appointment of a solicitor at this stage.” Presumably Fair Trading is referring here to a seller’s signing an agent’s listing agreement. But what is the appropriate “good business practice” if a seller or buyer declines “the right to use a legal adviser” before signing a contract?

Although the Guide neither asks nor answers this critical question, agents are reminded to respect the “rights of clients and customers” and provide “accurate, up-to-date information” so they can make informed decisions. Whatever this means in practice, Fair Trading suggests it is particularly important if the agent’s “client does not have access to legal representation, independent advice or information.” Pity about buyers left in the dark.

Meanwhile Queensland’s Fair Trading Minister is concerned that consumers rely too much on agents: “Property buyers need to educate themselves independently of agents before they make an offer on a property. It’s simply too late to wait until you are negotiating a contract to learn about your rights and responsibilities.”

But wait, there’s more: Fair Trading has produced a booklet (for consumers this time) entitled “How to be Consumerwise”. Despite reminding buyers to follow a statutory warning (which foxy agents provide to chickens) about seeking independent legal advice before signing any contract, this booklet says nothing to sellers about obtaining similar advice before appointing agents or signing contracts.

You can see the Real Estate industry’s paw-prints on a Fair Trading consumer guide giving this flawed advice to sellers:

  • “When a buyer makes an offer that is not acceptable to you, you have at least three options.
  • Change your mind and accept the offer by signing the contract;
  • Reject the offer by not signing the contract;
  • Respond with a counter-offer by altering and signing the contract to suit your terms of sale.
  • If the buyer accepts the counter-offer by initialling the changes, the contract becomes binding.
  • If either party alters a sales contract in any way, ensure all parties signing the contract initial the changes…
  • For more information on buying and selling real estate contact the Office of Fair Trading.”

Nary a word about contacting the Queensland Law Society for a referral to a solicitor, nor anything about agents’ respecting their clients’ “right to seek independent advice”. And no mention whatever of the Code obligation on agents to give sellers “a genuine opportunity to obtain relevant independent professional advice or representation before signing”!

There is an urgent need for uniform, Australia-wide, real estate regulation. By all means let agents make sales (and collect commissions), but the nation’s laws must prohibit unqualified hucksters from any part in the preparation, completion, signing or exchange of real estate contracts.

When solicitors’ professional bodies remain so stunningly silent on this vital issue, they not only betray their conveyancing members, but also fail to ensure the essential role of law and lawyers in consumer protection.

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