STATUTES AMENDMENT (REAL ESTATE REFORM REVIEW AND OTHER MATTERS) BILL

Second Reading

Second reading.

The Hon. G.E. GAGO (Minister for Agriculture, Food and Fisheries, Minister for Forests, Minister for Regional Development, Minister for the Status of Women, Minister for State/Local Government Relations) (17:19): I move:

That this bill be now read a second time.

I seek leave to have the second reading explanation inserted in Hansard without my reading it.

Leave granted.

The Government has always supported a real estate framework which promotes and protects the interests of consumers while at the same time enabling agents to conduct their business as expeditiously and efficiently as possible. Buying a property is probably the biggest financial investment most people will ever make and it is essential that the Government gets this balance right.

The Government can only do this by listening to the concerns of vendors and purchasers in the marketplace as well as those within the industry working at the coalface. To this end, the Government acknowledges the support and cooperation of members of the public and those within the industry for their comments and insights which have proved invaluable in developing these reforms.

The Government has got the balance right and the Bill is a reflection of the Government's commitment to ensuring that its real estate legislation is as robust and effective as possible. In particular, the Government has listened to ongoing concerns about the practices of underquoting and bait advertising.

Consumer and Business Services continues to receive complaints from prospective purchasers about properties selling at auction far in excess of marketed prices and more disturbingly, being passed in at prices well above those marketed. Prospective purchasers are outlaying money for building inspection reports based on a marketed price for a property and then finding that the property was never intended to be sold for that price. This is due to the fact that the setting of a reserve price is unregulated.

This situation also facilitates collusion between the agent and the vendor. The agent and vendor can easily collude to specify a low price in the sales agency agreement and market the property at that price with the full knowledge that the vendor can set a reserve at any figure above that marketed price at any time prior to the auction.

It is not a question of the Government failing to enforce underquoting provisions in the legislation. It is almost impossible to prove that the estimate of an agent is not genuine or that the property was sold well above the advertised price as a result of deliberately disingenuous estimates rather than market forces.

The Government made it quite clear to stakeholders that if they were unable to provide a satisfactory solution to this problem, then the Government would intervene with legislation which would.

Most submissions that tackled this issue referred to the unwillingness of the Government to enforce the current provisions rather than proffering a strategy to fix the problem. The one strategy suggested to the Government in no way resolved the issues of proof and collusion that the legislation is unable to currently address.

The Government believes that the most effective way of eliminating the practice of underquoting once and for all is to create a nexus between the price sought by, or acceptable to, the vendor and the reserve price set by the vendor. In this way, the expectations of the purchaser will be realistically met when the auction of a property is based on advertising that reflects the genuine selling price of the vendor.

The proposals contained in the Bill will accomplish three main objectives:

to strengthen the rights of consumers;

to increase the level of transparency of real estate transactions, in particular, auctions; and

to reduce the administrative burden on real estate agents and auctioneers.

The Bill implements the recommendations of the review into Parts 4 and 4A of the Land and Business (Sale and Conveyancing) Act 1994 and addresses other issues raised during consultation with Consumer and Business Services, industry stakeholders and the public.

In late 2007, Parliament passed the Statutes Amendment (Real Estate Industry Reform) Act 2007 (the Real Estate Reform Act) which commenced on 28 July 2008. The reforms contained in the Real Estate Reform Act were significant and established much higher standards for land agents in their professional conduct. Included in the legislation was a provision requiring that Parts 4 and 4A of the Land and Business (Sale and Conveyancing) Act 1994 be reviewed with a report to be tabled in Parliament. Part 4 regulates the way properties are advertised and sold and the manner in which consumers engage the services of an agent, while Part 4A regulates the manner in which auctions are conducted.

Extensive consultation on the review took place with industry and consumer associations which culminated in a report that was tabled in Parliament on 16 September 2010. During consultation on the review, many observations and comments were made on provisions that were not within Parts 4 and 4A. However, these have also been considered and form part of the complete set of reforms that are contained in the Bill and the regulations that will be made following passage of the Bill.

The Bill implements the following key measures which arose from the review of Parts 4 and 4A:

agents will be required to provide details of sales of comparable land or other information on which the agent will rely in support of his or her estimate of the selling price which they must include in the sales agency agreement. This provision will further strengthen the requirement included in the Real Estate Reform Act that agents specify in the sales agency agreement their genuine estimate of the likely selling price of the property being sold;

agents will be able to extend a sales agency agreement for one further period of 90 days provided that the vendor agrees to an extension within 14 days of the expiration of the original agreement and that the vendor has the right to terminate the extension with seven days' notice;

agents will now have a more flexible time limit of 48 hours in which to deliver a copy of the verification of vendor's statement certificate to the vendor and 48 hours (if agreed by the vendor) in which to deliver a copy of the sales agency agreement to the vendor;

auctioneers will now only be required to audibly announce that the standard conditions of auction apply as binding contractual conditions. The requirement to audibly announce each auction condition has been removed;

auctioneers will be permitted to use a unique identifier comprising a number, letter, colour or some other identifying feature when taking bids from purchasers, rather than just a number. This will still provide sufficient protection against dummy bidding and retain transparency in the auction process; and

the definition of what constitutes a representation as to the likely selling price in marketing residential land will be tightened to prohibit the use of words or symbols in relation to single price advertising and only allow the use of words or symbols in price range advertising when used to denote a range.

The Bill also addresses a number of other issues drawn to the attention of the Government through the consultation process:

the definition of 'small business' is amended to include businesses to the value of $300,000 excluding GST. This will provide greater protection to more purchasers of small businesses as they will now receive a vendor's statement;

a cooling-off notice will now be able to be delivered by email with the permission of the vendor. This is consistent with the current allowance for the notice to be delivered by facsimile;

bodies corporate will now have access to the cooling off period if purchasing residential land. This will be of particular benefit to small investors who are trustees of family trusts or superannuation funds and who will now have the opportunity to consider the contents of a vendor's statement in deciding whether or not to proceed with the purchase of residential land;

auctioneers or agents will be required to take all reasonable steps to give a purchaser notice of the times and places at which the vendor's statement can be inspected prior to the auction. They will be able to do this by incorporating the relevant information in a newspaper advertisement, promotional material delivered to the purchaser, on their website or in a prominent position on their signboard. This will provide the purchaser with a far greater likelihood of seeing the statement and being able to inspect the vendor's statement prior to bidding at the auction; and

vendors or agents will now be permitted to display the prescribed notice in a prominent position at an open inspection so as to indicate that the purchaser may take one if they so choose rather than personally give a copy to every prospective purchaser.

In addition, the Bill incorporates a number of other amendments that have arisen separately to the review and are considered appropriate for inclusion in the Bill.

the reserve price will not at any stage be able to be greater than 110 per cent of the selling price sought by, or acceptable to, the vendor as stated in the sales agency agreement. The vendor or agent will not be able to vary the sales agency agreement in respect of the selling price sought by, or acceptable to, the vendor. If the sales agency agreement is terminated, the agent must not make a new sales agency agreement with the vendor specifying a selling price sought by, or acceptable to them which is greater than that specified in the former agreement unless the period of the former agreement has elapsed.

restrictions are placed on agents and sales representatives who wish to disclose to prospective purchasers the fact that other offers may have been made in relation to residential land that the agent is authorised to sell.

The creation of a nexus between the selling price sought by, or acceptable to, the vendor and the reserve will accomplish the following objectives:

(1) encourage the vendor to specify an accurate selling price sought by, or acceptable to them, in the sales agency agreement;

(2) eliminate the marketing of a price significantly lower than the reserve;

(3) eliminate collusion between the agent and the vendor to estimate low prices in the sales agency agreement; and

(4) create transparency in the auction process by allowing the prospective purchaser a reasonable idea of what the reserve will be if the property is marketed.

disciplinary action against agents or sales representatives who are found guilty of specific offences (breaching marketing requirements, acting in conflict of interest situations and making false and misleading representations) will be enhanced by requiring the Court to cancel their registration and disqualify them either permanently; or for a specified period; or until the fulfilment of stipulated conditions; or until further notice. The commission of these specific offences will have serious and automatic consequences and more align penalties to the type and level of offending;

agents who fail to comply with the marketing provisions of the legislation will not be able to demand, receive or retain commission or expenses in respect of the sale of the land;

agents will no longer be permitted to specify their genuine estimate in the sales agency agreement as a price range. This better reflects the requirements of the prescribed minimum advertising price and subsequent marketing of the property;

payments from the indemnity fund will be expanded to include the costs of investigating compliance with and the costs of prosecutions taken under the Land and Business (Sale and Conveyancing) Act 1994. In addition, payments from the indemnity fund will be able to be utilised towards the costs of reviewing the operation of the Conveyancers Act 1994, the Land Agents Act 1994 and the Land and Business (Sale and Conveyancing) Act 1994; and

various penalties will be increased to reflect the seriousness of those offences.

I commend the Bill to Members.

Explanation of Clauses

Part 1—Preliminary

1—Short title

2—Commencement

3—Amendment provisions

These clauses are formal.

Part 2—Amendment of Conveyancers Act 1994

4—Amendment of section 31—Indemnity fund

The purposes for which the indemnity fund may be applied is expanded to include—

the costs of investigating compliance by conveyancers with the Land and Business (Sale and Conveyancing) Act 1994;

the costs of prosecutions for alleged offences by conveyancers against the Land and Business (Sale and Conveyancing) Act 1994;

the payment of amounts, approved by the Minister, towards the cost of reviewing the Conveyancers Act 1994 or the Land and Business (Sale and Conveyancing) Act 1994 insofar as that Act relates to conveyancers.

Part 3—Amendment of Land Agents Act 1994

5—Amendment of section 29—Indemnity fund

The purposes for which the indemnity fund may be applied is expanded to include—

the costs of investigating compliance by agents or sales representatives with the Land and Business (Sale and Conveyancing) Act 1994;

the costs of prosecutions for alleged offences by agents or sales representatives against the Land and Business (Sale and Conveyancing) Act 1994;

the payment of amounts, approved by the Minister, towards the cost of reviewing the Land Agents Act 1994 or the Land and Business (Sale and Conveyancing) Act 1994 insofar as that Act relates to agents or sales representatives.

6—Amendment of section 47—Disciplinary action

Proposed subsection (1a) will require a Court to cancel the registration of a person and disqualify him or her from being registered if he or she has been found guilty of an offence against section 24A(2), section 24G(1), (2) or (3) or section 36 of the Land and Business (Sale and Conveyancing) Act 1994 and the circumstances of the offence form, in whole or in part, the subject matter of a complaint, unless the Court is satisfied on the balance of probabilities, by evidence given by the person on oath, that the offence was trifling or committed in exceptional circumstances.

Proposed subsection (1b) clarifies that the Court may exercise such other powers under section 47 as the Court considers appropriate in the circumstances.

Part 4—Amendment of Land and Business (Sale and Conveyancing) Act 1994

7—Amendment of section 3—Interpretation

This clause adds the term standard conditions of auction to the definitions in section 3 of the Act since it is now used in different sections in the Act.

8—Amendment of section 4—Meaning of small business

This clause increases the upper limit applying to the definition of a small business from $200,000 to $300,000 excluding GST.

9—Amendment of section 5—Cooling-off

This clause enables a cooling-off notice to be given by email. It also amends subsection (7)(a) of the principal Act with the effect that bodies corporate purchasers of land who were previously prevented from cooling off in relation to contracts for the sale of residential land will now have the right to cool off in those circumstances.

10—Amendment of section 9—Verification of vendor's statement

This clause gives an agent 48 hours to provide a vendor with a copy of the certificate signed by the agent confirming the completeness and accuracy of the particulars of the vendor's statement.

11—Substitution of section 11

This clause substitutes section 11.

11—Auctioneer to make statements available

Section 11(1) requires an auctioneer or other agent acting on behalf of the vendor to make the vendor's statement available for perusal by members of the public at the office of the agent or auctioneer for at least 3 consecutive business days immediately preceding the auction and at the place of auction for at least 30 minutes immediately before the auction. It also requires such an agent to take all reasonable steps to give prospective purchasers notice of the times and places at which the vendor's statement may be inspected before the auction. The kinds of steps considered reasonable, set out in section 11(2), are if the agent—

incorporates the notice with promotional material for the sale that the agent or sales representative delivers to the purchaser; or

offers to deliver the notice, or promotional material for the sale incorporating the notice, to the purchaser but the purchaser refuses to take it; or

publishes the notice in a prominent position—

(i) in promotional material for the sale on the agent's website or in a newspaper circulating generally throughout the State or the area in which the land or business is situated; or

(ii) on the signboard advertising the sale at the land or at the premises of the small business.

12—Amendment of section 13A—Prescribed notice to be given to purchaser

This clause enables the prescribed notice to be given by a vendor to a purchaser, in the case of an inspection that is open to the general public, by displaying the notice in a prominent position on the land and so as to indicate to persons inspecting the land that a copy of the notice may be taken by those persons.

13—Amendment of section 20—Authority to act as agent

Section 20(1) is amended to require the agent's genuine estimate of the selling price to be expressed in the sales agency agreement only as a single figure (and not as a price range). This is now consistent with how the selling price sought by or acceptable to the vendor is to be expressed. In neither case may qualifying words or symbols be used to express the price.

Section 20(2) will require an agent, before making a sales agency agreement, to provide details of sales of comparable land and any other information on which the agent will rely in support of his or her estimate of the selling price. Failure to comply with this requirement attracts a maximum penalty of $5,000 or an expiation fee of $315.

Section 20(4) is amended to enable an agent to provide a copy of a signed instrument or agreement to the vendor or purchaser either immediately or at a later time within 48 hours as agreed with the vendor or purchaser.

Section 20(5a) is inserted with the effect that a sales agency agreement for the sale of residential land by auction may not be varied by increasing the amount specified in the agreement as the selling price sought by, or acceptable to, the vendor. This measure aims to ensure that the vendor's price cannot be set low for the duration of the marketing campaign (to entice potential purchasers) and then suddenly increased just before an auction. This is one of the measures of this Bill that is designed to prevent bait advertising.

Section 20(6) is amended to enable an agent to provide a copy of any variation to a sales agency agreement to the vendor either immediately or at a later time within 48 hours as agreed with the vendor or purchaser.

Subsections (6a) to (6c) will enable sales agency agreements to be extended for a single period not exceeding the number of days prescribed by regulation provided that the extension is recorded in writing and dated and signed by the parties no earlier than 14 days before the agreement is due to expire. An agent must provide a copy of the record of extension to the vendor either immediately or at a later time within 48 hours as agreed with the vendor. The vendor may at any time during the period of extension, terminate the agreement without giving a reason by giving at least 7 days written notice.

Subsection (6d) is intended to prevent agents and vendors from prematurely terminating a sales agency agreement and entering into a fresh sales agency agreement specifying a higher vendor price. This is one of the measures of this Bill that is designed to prevent bait advertising.

Section 20(9) has been amended to require an agent to keep a copy of the record of any extension of a sales agency agreement.

14—Amendment of section 21—Requirements relating to offers to purchase residential land

The proposed amendment substituting subsection (2) is in the nature of a drafting tidy-up. It is proposed to further amend this section by inserting 2 new subsections which, while allowing an agent or sales representative to disclose to prospective purchasers the fact that other offers may have been made in relation to residential land, only allow the disclosure if the agent or sales representative complies with the requirements of those subsections.

15—Amendment of section 24A—Representations as to likely selling price in marketing residential land

Clause 15(1) and (2) amend section 24A of the Act and are consequential on the amendment of section 20(1) (above).

Section 24A(2) is substituted with the effect that the following requirements will apply to agents and sales representatives when making representations in marketing residential land:

representations as to the likely price for the land must be expressed as a single figure without any qualifying words or symbols and must not be less than the prescribed minimum advertising price (which is the greater of the agent's or the vendor's price specified in the sales agency agreement at the time of the representation);

representations as to a likely price range for the land must be expressed using two figures only, being the lower and upper limits of the range, with the lower limit being an amount that is not less than the prescribed minimum advertising price and the upper limit being no more than 110% of the lower limit.

Contravention of subsection (2) attracts a maximum penalty of $20,000 or imprisonment for 1 year.

Subsection (3) prohibits an agent from demanding, receiving or retaining commission or expenses in respect of the sale of land if subsection (2) has not been complied with (contravention attracting a maximum penalty of $5,000 or an expiation fee of $315).

Subsection (4) enables a person who, despite subsection (3), has paid such commission or expenses, to recover that amount as a debt from the agent.

16—Substitution of section 24I

This clause substitutes section 24I

24I—Standard conditions of auction for residential land

This section has undergone minor drafting improvements and now clarifies that the standard conditions of auction are binding on the vendor and purchaser, the vendor and the auctioneer and the bidders and the auctioneer.

17—Amendment of section 24J—Preliminary actions and records required for auctions of residential land

This clause amends section 24J(1) of the Act. Previous paragraph (b) (requiring an auctioneer to read out the standard conditions of auction) has been deleted and replaced with a provision now only requiring the auctioneer to draw the public's attention to the fact that the standard conditions of auction (as required to be made available for perusal before the auction) apply to the auction as binding conditions.

New paragraph (ba) will prohibit the reserve price for the land from exceeding 110% of the amount specified in the sales agency agreement as the vendor's price. This is one of the measures in the Bill designed to prevent bait advertising.

18—Amendment of section 24K—Registered bidders only at auctions of residential land

The amendments effected by this clause enable a unique identifier other than an identifying number (namely, including a letter, colour or some other identifying feature) to be allocated to intending bidders at an auction of residential land.

19—Amendment of section 27—Preparation of conveyancing instrument for fee or reward

The maximum penalty amount for this offence is increased from $5,000 to $20,000, making it consistent with penalties for similar offences.

20—Amendment of section 28—Preparation of conveyancing instrument by agent or related person

The maximum penalty amount for this offence is increased from $5,000 to $20,000, making it consistent with penalties for similar offences.

21—Amendment of section 29—Procuring or referring conveyancing business

The maximum penalty amount for this offence is increased from $5,000 to $20,000, making it consistent with penalties for similar offences.

22—Amendment of section 30—Conveyancer not to act for both parties unless authorised by regulations

The maximum penalty amount for this offence is increased from $5,000 to $20,000, making it consistent with penalties for similar offences.

Debate adjourned on motion of Hon. D.W. Ridgway.