Bills

Land and Business (Sale and Conveyancing) (Beneficial Interest) Amendment Bill

Introduction and First Reading

The Hon. J.R. RAU (Enfield—Deputy Premier, Attorney-General, Minister for Justice Reform, Minister for Planning, Minister for Industrial Relations, Minister for Child Protection Reform, Minister for the Public Sector, Minister for Consumer and Business Services, Minister for the City of Adelaide) (12:00): Obtained leave and introduced a bill for an act to amend the Land and Business (Sale and Conveyancing) Act 1994. Read a first time.

Second Reading

The Hon. J.R. RAU (Enfield—Deputy Premier, Attorney-General, Minister for Justice Reform, Minister for Planning, Minister for Industrial Relations, Minister for Child Protection Reform, Minister for the Public Sector, Minister for Consumer and Business Services, Minister for the City of Adelaide) (12:01): I move:

That this bill be now read a second time.

I rise to speak briefly about the Land and Business (Sale and Conveyancing) (Beneficial Interest) Amendment Bill 2017, which amends the Land and Business (Sale and Conveyancing) Act 1994. The bill significantly strengthens protections for consumers when selling a property which includes land or a business. The intention of the bill is for consumers to feel confident they are not being unfairly taken advantage of if they choose to sell to a real estate agent or sales representative or one of their associates. I seek leave to have the remainder of the second reading explanation inserted in Hansard without my reading it.

Leave granted.

Through the introduction of harsher penalties for those found guilty of offences under section 24G in line with the level of risk associated with the sale of property, it is hoped that there will be a stronger deterrent factor for agents considering whether to take the risk. This is the first time section 24G has been reviewed and amended since the introduction of the section in 2008.

The need for the proposed amendments has become increasingly apparent in recent times as a result of failed prosecutions under section 24G. There have been many situations where the agent or sales representative in question has blatantly acted unethically and caused a financial detriment to their client for their own benefit; however, due to technicalities in the legislation, their actions have fallen just outside of the scope of the provisions and therefore they have not been successfully convicted of an offence. The most common scenario is where relatives of employees are used to purchase properties, or transactions are performed in the name of body corporate entities where agency employees are the sole directors.

Whilst it is difficult to envisage every possible scenario in which an agent or sales representative could escape liability, every effort has been made to consider hypothetical situations and address all previous shortcomings of the section. For example, the definition of an associate has been expanded to include a relative of an employee of the agent, and step-relations have been classified as relatives to reflect changes in family structures that have evolved over time. The scenario mentioned earlier regarding a body corporate has also been addressed by clarifying who is considered an associate of a corporate entity.

Directors of real estate agencies will now be discouraged from using the corporate entity as a vehicle to gain a beneficial interest through the introduction of a vicarious liability provision, unless it is proven that due diligence was exercised and the director could not have prevented the commission of the offence. Likewise, both general managers and managers of individual real estate branches will now be held liable for the actions of their employees in certain circumstances, unless they are able to rely upon the general defence that exists in the Act. This allows for a high level of accountability at a managerial level, and encourages high level management to ensure that offences are not committed within their agency. A specific provision has been inserted to ensure that managers of individual branches (as opposed to general managers overseeing the corporate entity) are not held liable for transactions occurring in other branches so as not to capture scenarios that are too far removed from the manager.

Although it is true that there will always be members of the industry that will choose to commit offences, the existing penalties under section 24G of the Act were grossly disproportionate both to the level of detriment suffered by vendors and the benefit received by the agent or representative. Penalties have been increased from $20,000 to $50,000 for many offences and aggravated offences have been established for each existing offence, with penalties of up to $100,000 or 2 years imprisonment. In line with other legislation, offences will be aggravated if vendors are aged over 60, are under guardianship, or are suffering from a mental incapacity. The importance of the aggravating factors are clearly seen when looking at previous cases, where the most significant losses suffered have involved the elderly or those who are not able to fully understand the transaction.

Lastly, the Bill proposes to increase the time limit for prosecution proceedings to be commenced from two years to five years, and up to seven years in extenuating circumstances. The reason for this is that previous attempted prosecutions have often been impeded by time restrictions due to the lengthy nature of property transactions.

The proposed reforms have been welcomed by key industry bodies, who have recognised the regulatory gap and have witnessed unethical and illegal transactions firsthand. In addition, Consumer and Business Services, the regulatory body responsible for the administration of the legislation, are committed to streamlining the exemption process and improving the efficiency of the application process.

I commend this Bill to the House.

Explanation of Clauses

Part 1—Preliminary

1—Short title

2—Commencement

3—Amendment provisions

These clauses are formal.

Part 2—Amendment of Land and Business (Sale and Conveyancing) Act 1994

4—Amendment of section 24G—Restriction on obtaining beneficial interest in selling or appraising property

(1) The penalties in section 24G(1) and (2) are increased (from $20,000 to $50,000) and a penalty is added for an aggravated offence ($100,000 or imprisonment for 2 years). Aggravated offences are defined at new subsection (10a).

(2) Proposed new subsection (2a) will prohibit three new categories of person from obtaining, or being concerned in obtaining, a beneficial interest in land or a business that an agent is authorised to sell. The categories are:

(a) a natural person who is responsible for managing or supervising the agent's business (including, but not limited to, a natural person referred to in section 10 of the Land Agents Act 1994, in relation to that business);

(b) a natural person who is responsible for managing or supervising 1 or more places of business of the agent at which any of the negotiations, administration or other functions relating to the sale are conducted by employees of the agent or persons otherwise engaged by the agent (including, but not limited to, a natural person referred to in section 11 of the Land Agents Act 1994, in relation to that place of business);

(c) in the case of an agent that is a body corporate—a director of the body corporate (within the meaning of the Land Agents Act 1994).

(3) The penalty for the offence in section 24G(3) is increased to the same level (and with the addition of the penalty for an aggravated offence) as for the preceding subsections.

(4) Section 24G(4) is amended to clarify its interaction with new subsection (10a).

(5) Section 24G(6) is amended to clarify the persons that that subsection is talking about.

(6) The penalty for the offence in section 24G(9) is increased from $5,000 to $10,000, with a new penalty for an aggravated offence added of $20,000.

(7) Proposed subsection (10a) sets out what constitutes an aggravated offence while new subsection (10b) facilitates the proof of paragraph (c) of the definition of aggravated offence.

(8) The definitions of associate and relative are substituted, while a new definition of medical practitioner is inserted.

5—Insertion of section 39

This clause inserts section 39 into the Act with the effect of imposing directors' liability for offences committed by the bodies corporate.

6—Amendment of section 40—Prosecutions

This amendment increases the period of time within which prosecutions for summary offences against the Act may be commenced, namely to within 5 years (or, with the consent of the Minister, 7 years) after the alleged offence (this is up from within 2 years (or, with the consent of the Minister, 5 years)).

Debate adjourned on motion of Ms Chapman.