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Legislative Council - Fifty-Second Parliament, Second Session (52-2)
2013-05-14 Daily Xml
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STATUTES AMENDMENT (REAL ESTATE REFORM REVIEW AND OTHER MATTERS) BILL

Committee Stage

In committee.

(Continued from 2 May 2013.)

Clause 12.

The CHAIR: The Hon. Mr Darley has an amendment.

The Hon. J.A. DARLEY: Mr Chairman, I will be withdrawing all my amendments.

Clause passed.

Clause 13.

The Hon. D.G.E. HOOD: I have been told that I should take the lead of the Hon. Mr Darley and follow his example, but I will not do that: I do have some amendments to move, and it is a serious matter, so forgive me. I move [Hood-2] 1:

Page 7, lines 4 to 11 [clause 13(7), inserted subsection (6a)]—Delete subsection (6a) and substitute:

(6a) If, in relation to a sales agency agreement, a notice of expiry is given in the prescribed manner to the vendor by the agent who has been authorised to act on behalf of the vendor under the agreement—

(a) the vendor may, by notice given to the agent before the date on which the agreement is due to expire, indicate his or her intention not to extend the agreement, in which case the agreement terminates on that date; or

(b) if notice is not given under paragraph (a), the following provisions apply, subject to subsection (6ab):

(i) the agreement may be extended—

(A) by agreement between the parties recorded in writing and dated and signed by the parties no earlier than 14 days before the agreement is due to expire; and

(B) for a period not exceeding the number of days prescribed by regulation;

(ii) if the agreement is not extended under subparagraph (i), it is taken to have been extended by force of this paragraph for the period prescribed by regulation from the time at which it would otherwise have expired.

(6ab) A sales agency agreement cannot be extended more than once.

(6ac) If a notice of expiry is not given by an agent to a vendor in accordance with subsection (6a), the sales agency agreement terminates on the date on which it is due to expire and cannot be extended.

I should say to my colleagues in the chamber that amendment set [Hood-1] is redundant. Members in this place would have received an email from me several days ago which essentially outlined the purpose of these amendments. There are only a few of them.

I would state at the outset that they are supported by the Real Estate Institute of South Australia and I have had personal discussions with Greg Troughton who, I am sure, many people in this place know well. He has endorsed these amendments, and we have done them in cooperation with him and the institute. I would also like to acknowledge the work of the Hon. Terry Stephens, who has presented very similar amendments. There are a few minor differences, but they are of course very similar, so I think in the end we will get there.

Just to briefly explain these amendments, I think they are fairly clear, and they deal with the ending of the agency agreement. There was some contention about how an agency agreement should end and what happens. My amendments spell out what happens at the end of an agency agreement. Essentially, there are three outcomes, which again I think are spelt out fairly clearly in the amendments themselves. Basically, at the expiry of the agreement, it is up to the agent to send a notice to the vendor 14 days before the agreement lapses explaining that there are, essentially, three options available to the vendor, and I think they are spelt out quite clearly in the amendment.

The CHAIR: Before you respond, minister, the Hon. Mr Stephens also has an amendment to clause 13, which we should have considered first.

The Hon. T.J. STEPHENS: I move:

Page 6, lines 33 to 40 (inclusive) [clause 13(5)]—Delete subclause (5)

This amendment removes the original bill's subclause (5a), which prohibits changes to a sales agency agreement in regard to selling price. Our understanding is that this would be burdensome on the vendor, as there may be a considerable amount of time between when the in-principle selling price was first agreed and when the property finally goes to auction, which would warrant a change, however slight. These agreements should be as flexible as possible, which the original subsection (5) of the act allows.

I should note, particularly for the benefit of my crossbench colleagues, that this amendment is the test case for the removal of the 110 per cent nexus provision, which is amendment No. 6 standing in my name.

The Hon. G.E. GAGO: The government strongly opposes this amendment. This is a key provision designed to stamp out underquoting in the real estate industry once and for all.

There were two things of interest in the second reading debate on the proposed underquoting reforms that need to be noted. The first is that the Hon. Terry Stephens read out a letter, pretty well verbatim, from Mr Steve von der Borch, a principal at Harcourts Aqua, who attacked the proposed underquoting provisions; the second is that the honourable member proceeded to question me about the lack of complaints and enforcement action that Consumer and Business Services had undertaken in relation to underquoting.

I have already explained why it is so difficult for the CBS to take enforcement action; how ironic it is, then, that of the two assurances the CBS has actually received over the last few years in relation to underquoting, one is from Vonte Bre Pty Ltd, the sole director of which is—you guessed it—Mr Steve von der Borch. It seems a little incongruous that the opposition has relied so heavily on the opinions of someone in the industry about underquoting who has, himself, given an assurance that he will not underquote in the future.

I simply do not understand why the opposition is so keen to throw a party for those agents who engage in this insidious practice, especially when everyone—the opposition, the real estate industry and the general public—is in agreement that we must get rid of underquoting. It is the general public that suffers the most, but obviously the Hon. Terry Stephens and the Liberal opposition do not care about their interests.

Purchasers are fed up with seeing an advertised property price, outlaying money on building inspection reports, turning up to an auction, and then finding out that the vendor never, ever intended to sell the property at that price. These situations are causing significant consumer detriment in respect of financial, emotional and time commitments.

The vendor and the agent can get away with it, and they know they can. They can get away with it because, under current legislation, the reserve is not regulated and there is no nexus between the marketing of a property and the reserve set by a vendor. At any time prior to the start of the auction a vendor can set their reserve, and this reserve could be any figure, no matter what is put in the sales agency agreement as their acceptable price. Marketing of the property still continues at the lower figure specified in the sales agency agreement, even when the vendor is fully aware that they have no intention of accepting an offer at that price.

This situation also leads to collusion between the agent and the vendor. They can easily collude to specify a low price in the sales agency agreement and market at that price, knowing full well that the vendor can set their reserve at any figure above that price. By creating a nexus between the acceptable selling price and the vendor specified in the sales agency agreement and the reserve, this new provision will:

1. encourage the vendor to seek more than one valuation on their property;

2. encourage the vendor to specify an accurate selling price in the sales agency agreement;

3. eliminate the marketing of a price significantly lower than what the reserve will be;

4. eliminate collusion between the agent and the vendor to deliberately estimate low prices in the sales agency agreement; and

5. create transparency in the auction process by allowing a purchaser to have a reasonable idea of what the reserve of a property will be if it is marketed.

The government will not back away from this commitment to ensuring that the real estate industry is as transparent and accountable as possible.

The Hon. T.J. Stephens' amendment negatived.

The Hon. D.G.E. HOOD: I spoke to my first amendment a moment ago.

The CHAIR: Do you intend to move amendments Nos 2 and 3?

The Hon. D.G.E. HOOD: I am happy to move them as one and explain them now. I move:

Page 7—

Line 14 [clause 13(7), inserted subsection (6b)]—After 'agreement' insert:

under subsection (6a)(b)(i)

Lines 19 to 22 (inclusive) [clause 13(7), inserted subsection (6c)]—Delete subsection (6c) and substitute:

(6c) A vendor may, by notice in writing given to the agent at any time during a period of extension of a sales agency agreement, terminate the agreement without specifying any grounds.

These are, again, very simple amendments and were explained in the email I sent out a week or so ago. They deal with the ending of the agency agreement and exactly how that would work. Essentially, it puts in place a time period of 14 days, prior to which time the agent has to advise the vendor that it will come to an end, and deals with exactly how that is to be done. I think it is straightforward enough.

The CHAIR: The Hon. Mr Stephens, you also have your amendment, covering lines 4 to 32, which overlaps with the Hon. Mr Hood's amendment.

The Hon. T.J. STEPHENS: I move:

Page 7, lines 4 to 32 (inclusive) [clause 13(7), inserted subsections (6a) to (6d)]—Delete subsections (6a) to (6d) (inclusive) and substitute:

(6a) An agent who has been authorised to act on behalf of a vendor by a sales agency agreement must, not later than 30 days before the agreement is due to expire, give the vendor notice in writing of the approaching expiry of the agreement and the rights of the vendor to extend the agreement in accordance with this section or to make a new sales agency agreement with the same agent or another agent.

Maximum penalty: $5,000.

Expiation fee: $315.

(6b) A sales agency agreement may be extended at any time before it is due to expire by notice in writing given by the vendor to the agent who has been authorised to act on behalf of the vendor by the agreement.

(6c) A sales agency agreement that has been extended under subsection (6b) continues, by force of this section—

(a) for a further period equivalent to the duration specified in the original agreement; and

(b) on such other conditions as applied under the agreement immediately before its extension,

(subject to any variation of the agreement in accordance with this section).

(6d) Despite subsection (6c)(b), a party to an agreement that has been extended under subsection (6b) may, at any time during the period of extension and without specifying any grounds, terminate the agreement by giving the other party at least 7 days notice in writing of the termination.

The Hon. G.E. GAGO: The government rises to support all of the Hon. Dennis Hood's amendments. These amendments are moved following negotiations between the government and the Hon. Dennis Hood's office and REISA. The main differences between these amendments and what was originally proposed by the government are as follows.

First, the notice of the vendor's rights to extend or terminate must be provided to the vendor no later than 14 days before the expiry of the agreement. This is a new provision and the government is happy with this extra layer of consumer protection.

Secondly, the extension may be up to a period of 180 days rather than the government's original proposal of 90 days. We still consider the 180 days too long but acknowledge the fact that the vendor is able to terminate the extension immediately and at any time. This helps to alleviate any concerns about the undue locking in of consumers for long periods.

Thirdly, if a vendor has not indicated that they wish to terminate the agreement following receipt of a notice of expiry, the agreement will automatically roll over to a period of 180 days. The government originally had some concerns about this provision, particularly as the onus is now on the vendor to terminate the agreement at some point rather than just let it naturally lapse.

However, after further consideration, the government feels that these concerns are alleviated by the fact that the automatic rollover only occurs if the vendor has received the notice of expiry and not responded and that the vendor has the right to terminate any extension immediately and at any time. The new notice of expiry provisions will also encourage the vendor to consider the progress of their agent in making a decision about whether to terminate or extend which can only be a good thing.

The Hon. T.J. STEPHENS: Given that this amendment is basically heading down the same path as my amendments that I flagged some time ago and we moved in the other place, the opposition is very happy to support the Hon. Dennis Hood and his intent.

The Hon. T.A. FRANKS: Just for the record, the Greens indicate they will be supporting this amendment as well and commend both the Hon. Dennis Hood and the Hon. Terry Stephens for their work in drawing the attention of this issue to the council. We also commend the government for being able to negotiate with this council to agree to these amendments.

The Hon. D.G.E. Hood's amendment to insert new subsection (6a) carried.

The CHAIR: The question now is that the other amendments moved by the Hon. Mr Hood be agreed to.

Amendments carried.

The Hon. D.G.E. HOOD: I move:

Page 7, after line 34—After subclause (8) insert:

(9) Section 20—after subsection (9) insert:

(10) For the purposes of this section, a notice of expiry, in relation to a sales agency agreement, will be taken to have been given to the vendor in the prescribed manner if it is given to the vendor no earlier than 14 days before the agreement is due to expire.

(11) In this section—

notice of expiry, in relation to a sales agency agreement, means a notice in writing—

(a) reminding the vendor of the date on which the agreement is due to expire and the vendor's rights to terminate the agreement; and

(b) setting out the vendor's rights to extend the agreement and the effect of subsections (6a), (6ab), (6b) and (6c).

Amendment carried; clause as amended passed.

Clauses 14 and 15 passed.

New clause 15A.

The Hon. T.J. STEPHENS: I move:

Page 9, after line 39—After clause 15 insert:

15A—Amendment of section 24G

Section 24G—after subsection (7) insert:

(7a) However, a person is not considered to obtain a beneficial interest in land or a business merely because the person is appointed as property manager in relation to the land or business.

This amendment removes a perceived conflict of interest in terms of the law for an agent appointed to manage a property that they have just sold. Currently, it could be argued that agents in breach of this could be liable for a fine of up to $25,000 or one year imprisonment. That is the basis for our amendment.

The Hon. G.E. GAGO: The government rises to oppose this amendment. This amendment is unnecessary and, once again, I simply do not understand why this amendment has been filed. The Attorney-General made it quite clear in the other place that an agent of a property who subsequently becomes a property manager does not obtain a beneficial interest in that property. Indeed, the member for Goyder also stated that he had received parliamentary counsel advice that stated exactly the same thing and that he would respect the Attorney-General's statement on the matter. So I am at a complete loss to understand why we are actually debating this amendment in this place.

While there is clearly no need for this amendment, I am happy to place on the record that an agent in such a situation as contemplated by this amendment does not obtain a beneficial interest in that property. They are merely acting as an agent or a servant of the owner of the property and are not obtaining any interest whatsoever.

Members interjecting:

The CHAIR: Order!

New clause negatived.

Clauses 16 to 22 passed.

The Hon. J.A. DARLEY: I would just like to add something. I withdrew my amendments on the basis that they would not be supported. This is mainly due to the fact that some agreement has been reached between REISA and the Society of Auctioneers. What I am seeking from the minister instead is a firm commitment that the government will not dilute the standards applicable to agents and sales representatives when considering the national occupational licensing regime, which I understand is due to commence in June 2014. No doubt all members would be aware that much of what we are agreeing to today relates directly to the government's considerations with respect to the nationalisation process. That commitment would provide the industry with a great level of certainty and clarity as it moves forward.

The Hon. G.E. GAGO: I can provide a response to the Hon. Mr Darley. While South Australia acknowledges the value of national licensing and harmonised eligibility criteria for licensing of property related to occupations, the government recognises the additional specialised nature of duties undertaken by real estate agents and sales representatives in South Australia. The government wishes to maintain the high levels of service and protection for South Australian consumers in this regard. The government is committed to ensuring that agreement can be reached in relation to the National Occupational Licensing System (NOLS) and to working within the NOLS framework.

At the same time, the government will endeavour to ensure that the higher level of protection and service is able to be maintained by setting qualifications at a higher level in South Australia in relation to these additional specialised duties carried out in this state outside the NOLS eligibility requirements. The government will be engaging with REISA and other interested parties in order to achieve this outcome through the NOLS consultation process and the passage of legislation reform required to enact NOLS in 2014.

Title passed.

Bill reported with amendment.

Third 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) (16:17): I move:

That this bill be now read a third time.

Bill read a third time and passed.

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