Improvements to the laws regulating property agents started on 15 August 2016.
To help home buyers access pre-purchase property inspection reports more cheaply and easily, real estate agents now need to record details about certain reports. This includes pre-purchase building and pest inspection reports, and strata and community scheme reports.
When the prospective buyer requests a contract of sale for the residential property, an agent will need to inform the buyer about the reports they have recorded. Buyers may then opt to access an already available report, and negotiate a reduced cost, instead of commissioning their own report.
Other measures affecting property agents’ responsibilities from 15 August include:
These changes are the result of the Property, Stock and Business Agents Amendment Regulation 2016.
Agents are only be required to make a record of certain details about the following reports, if they are aware of them or can reasonably find out about them:
Details to be recorded include the contact information for the author of the report and whether the report is available for repurchase.
Property owners do not have to tell the agent selling their home whether any pre-purchase reports have already been prepared or completed for the property up for sale. The owner does not have to obtain any such reports.
The maximum penalties that apply to agents who do not comply with the record making and disclosure requirements for these reports is $4,400 for a corporation, or $2,200 in any other case.
For more about how this reform will work, home buyers, vendors and agents can refer to our Frequently asked questions – Pre-purchase property reports web page.
To understand their responsibilities, agents should refer to our Pre-purchase property inspection reports web page.
An exemption applies to a real estate agent doing commercial property agency work on behalf of:
Where these circumstances apply, the agent will be exempt from the operation of all the Property, Stock and Business Agents Act 2002 (the Act).
The exemption removes red tape and the costs of complying with the Act when doing certain commercial property agency work.
Large property owners tend to rely on their experience in property transactions. They can access legal and other advisory services. This allows them to negotiate their own agreement with their agent, and provisions in the contract for the sale of their property. As a result, they do not want or need the protections of the Act.
A property company that is selling shopping centres for its affiliate (eg. a related company that owns the shopping centres) will typically have a comprehensive management agreement that they have negotiated. This protects the rights of both the agent and the affiliate, making the protections under the Act unnecessary in this context.
Prospective buyers are protected by the Australian Consumer Law (ACL) if an agent is involved with the property transaction. The ACL offers these buyers protection against misleading, deceptive and unconscionable conduct.
The ACL also provides protection for prospective leasees where an agent is involved in the lease transaction.
From the perspective of the buyer or leasee, where the commercial exemption applies to an agent's work, this is essentially the same as if the property owner had chosen not to use an agent. In both cases the requirements of the Act do not apply.
Learn more about the exemption at our Frequently asked questions - Commercial property agency work page.
Agents should also refer to the Commercial property agency work exemption page.
Following consultation with industry stakeholders, the following ‘price offer’ requirement is reinstated. It applies to agency agreements for the sale of a residential property:
If the agreement provides for the property to be offered for sale by private treaty, the agreement must specify the price at which the property is to be offered.
Agents who are using an agency agreement for the sale of residential property, on or after 15 August 2016, should check that the offer price term is in the agreement. If not, they should insert the term in the agreement and have the agent and seller each initial and date the insertion.
This requirement is included in clause 5 in Schedule 8 of the 2014 Regulation.
Pre-purchase property inspection reports
Prospective home buyers had raised concerns about the cost of obtaining pre-purchase property inspection reports for several years.
Following public consultation, the Government amended the laws to help prospective buyers access information about key reports. This will enable a prospective buyer to contact the author of a report, if they wish to ask about obtaining a copy.
The NSW Government supported this sharing of reports in seeking ways to improve services for consumers through the new collaborative economy (also known as the peer-to-peer or sharing economy). The amended laws take into account the growing trend of businesses using online services to make key pre-purchase property inspection reports available at a lower cost than would otherwise be possible.
Commercial property work exemption
IPART recommended that the NSW Government should exempt commercial property agents who sell or manage property for a related corporate entity or a large commercial property owner from the requirements of the Act. This exemption was proposed in its Report on Reforming Licensing in NSW, which was publicly released in August 2015. The NSW Government accepted this and all other recommendations in the report.
The clause 46A amendment in the 2016 Regulation gives effect to this Government decision.
Reinstatement of price offer requirement
An agency agreement for the sale of a residential property by private treaty must now state the price at which the property is to be offered for sale.
When new underquoting laws were introduced, the previous requirement was removed as it was considered unnecessary. However, industry stakeholders asked for this requirement to be brought back. This was to clarify the offer price for the seller and agent, and may help prevent underquoting. This ‘price offer’ information may also be useful when NSW Fair Trading investigates claims of underquoting.
Comments were invited on the proposed draft Regulation in a public consultation. Comments were considered to finalise and amend the Regulation. Amendments were made to clarify the types of pre-purchase inspection reports that agents would need to record and ensure the exemption for commercial property agency work was the same as what IPART had recommended.
To read the laws relating to these reforms in full, you can access the 2016 Amendment Regulation on the NSW Legislation website.
Consumers can refer to this webpage for updates. Agents should check that they are subscribed to our Property Matters enewsletter so they can receive regular updates.
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