This information helps agents and certificate holders ensure that any representations they make do not create a false impression for a consumer.
Section 52 of the Property and Stock Agents Act 2002 (the Act) requires that a licensee or certificate holder must not induce a person to enter into any contract or arrangement by:
- any statement, representation or promise that is false, misleading or deceptive (whether to the knowledge of the agent or not), or
- any failure to disclose a material fact of a kind prescribed by the regulations (whether intended or not) that the agent knows or ought reasonably to know.
An offence under this section can attract up a penalty of up to $22,000.
The Property and Stock Agents Regulation 2014 (the Regulation) sets out rules of conduct (both general and specific) that apply to both licensees and certificate of registration holders.
Schedule 1 of the Regulation requires that an agent or certificate of registration holder must act honestly, fairly and professionally with all parties involved in a transaction. Failure to comply with the rules of conduct attracts substantial penalties.
The Australian Consumer Law (ACL) also applies to the conduct of real estate and property agents. Section 18 of the ACL prohibits misleading or deceptive conduct and section 30 prohibits false or misleading representations about the sale of land.
Publication of false, misleading or deceptive material
Agents must ensure that all information in a publication is accurate and does not create a false impression for consumers.
Fair Trading has developed guidelines to assist agents when publishing photographic advertisements to further explain the prohibitions against publishing misleading and deceptive material.
For this information, visit advertising guidelines
Section 4(1) of the Australian Consumer Law 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.
Predictions about trends in property values or potential returns on development or investments which are untrue or cannot be substantiated would constitute misleading conduct.
Sections 72-74 of the Act specifically cover representations as to the selling price of residential properties.
Further information about this can be found under the heading ‘Understating selling price estimates’ on this web page. 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 aware of the unpredictability of that market.
Concealment and silence
Misrepresentation can be about what is not said as well as what is said. Silence or omissions can be misleading in certain situations and this should be avoided.
Agents need to consider whether silence 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 could mean you are breaking the law.
Agents and assistant agents 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 and is not readily apparent to a buyer or seller.
Where information provided in an original statement subsequently changes and that change 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 she or he should obtain the information from the vendor or refer the person back to his or her conveyancer or relevant expert.
Intention to mislead is not relevant
Under the Act, an agent is generally liable for misrepresentation whether or not it was to their knowledge.
However, a defence exists when the licensee or certificate holder ‘…did not know, and had no reasonable cause to suspect’, [that his or her] statement, representation, or promise was false, misleading or deceptive [section 52(3)].
What is 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. In a property services context, these are facts which:
- may be sufficiently significant or relevant to influence decisions on whether to buy, sell or rent, and/or
- could impact the market value of a property.
Agents should discuss with sellers any market sensitive matters that are likely to be the subject of statements or representations by the agent when 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.
Following major reforms that commenced on 23 March 2020, an agent must not fail to disclose a material fact of a kind prescribed by the Regulation that the agent knows or ought reasonably to know.
This means that an agent could still be in breach of the law for failing to disclose a fact even though they didn’t know about it.
Clause 54 of the Regulation prescribes these kinds of material facts, including that:
- within the last 5 years, the property has been subject to flooding from a natural weather event or bush fire
- the property is subject to significant health or safety risks
- the property is listed on the register of residential premises that contain loose-fill asbestos insulation that is required to be maintained under Division 1A of Part 8 of the Home Building Act 1989
- within the last 5 years the property was the scene of a crime of murder or manslaughter
- within the last 2 years the property has been used for the purposes of the manufacture, cultivation or supply of any prohibited drug or prohibited plant within the meaning of the Drug Misuse and Trafficking Act 1985
- the property is, or is part of, a building that contains external combustible cladding to which:
- there is a notice of intention to issue a fire safety order or a fire safety order has been issued requiring rectification of the building regarding the external combustible cladding, or
- there is a notice of intention to issue a building product rectification order or a building product rectification order has been issued requiring rectification of the building regarding external combustible cladding
- the property is, or is part of, a building where a development application or complying development certificate application has been lodged under the Environmental Planning and Assessment Act 1979 for rectification of the building regarding external combustible cladding
To comply with this obligation, agents should take reasonable steps to determine whether any of the material facts set out in the above list apply to a particular property. This would include, at a minimum, making appropriate inquiries with the property owner.
Material facts that an agent could be reasonably expected to know and could find out by doing their own discovery include, for example, whether the property has been affected by a flood or bush fire or whether the property is listed on the loose-fill asbestos insulation register.
Other material facts, such as those relating to external combustible cladding, would be known by the property owner and revealed by prospective property purchasers doing their own due diligence in getting copies of the strata owners corporation’s records.
However, if an agent has those strata records and they contain information relevant to material facts, then the agent must disclose them.
It is unlikely that an agent would be held liable for not disclosing a material fact if the vendor intentionally concealed that information from the agent when they were questioned, and the agent could not otherwise be reasonably expected to know.
At what point should a material fact be disclosed?
Agents need to use their judgement when disclosing material facts.
Facts of a non-sensitive nature such as the area of the land on which the property stands, would likely 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.
Underquoting selling price estimates
Under sections 73 and 73A of the Act, it is an offence for an agent or assistant agent to falsely understate their true estimate of the selling price of a residential property.
This understatement could be in the form of written or verbal advice to a prospective purchaser, or in an advertisement which the agent published or caused to be published.
The same requirements apply to advice about methods 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.
Loose-fill asbestos insulation register
The addresses of specific properties containing loose-fill asbestos insulation are listed on the loose-fill asbestos insulation register.
The Regulation prescribes a property being listed on the public register as a kind of material fact. This means that an agent must disclose to a prospective purchaser if a property is listed on the loose-fill asbestos insulation register.
Additionally, an agent must not knowingly conceal this material fact from a prospective tenant, in accordance with the Residential Tenancies Act 2010 and Residential Tenancies Regulation 2019.