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									Real Estate News

Edition 1, 2007

From the Minister
As the new Minister for Consumer Affairs, it is my pleasure to welcome you to the first edition of Real Estate News for 2007. On behalf of the Bracks Government, I am keen to work with estate agents to ensure ongoing confidence in Victoria’s thriving real estate industry. This means we need to keep up to date with current and emerging issues in the market; many of these will be raised through Real Estate News. One issue that has received a lot of media attention recently is the emergence of rental bidding by consumers to secure a rental property in a highly competitive market. I welcome The Real Estate Institute of Victoria’s action in issuing its Guidelines Regarding Residential Rental Bidding in response to this issue. I support the REIV’s aim of ensuring that the process is fair and transparent for consumers and Consumer Affairs Victoria will continue to monitor compliance in this regard.

Our special feature in this edition reminds agents to fulfil their obligations in managing trust accounts. Unfortunately, recent inspections by Consumer Affairs Victoria reveal some serious breaches in this area. Such breaches can undermine consumer confidence in the industry. It is vital for the industry that all agents can assure their clients that the large sums of money given in trust during real estate transactions are kept safely. Inside this edition you will find very practical tips about completing agency authorities and employing agents’ representatives. I encourage you to use the various services promoted in this newsletter to help keep informed about the law and deliver quality services to your clients. Your valuable feedback is welcomed on any topics raised in Real Estate News and I’d encourage you to contact Consumer Affairs Victoria if you have any matters to raise.

HON DANIEL ANDREWS MP Minister for Consumer Affairs

Inside
2. Feature: Trust accounts 2. Compliance news 3. Mailbag 4. Completing agency authorities 4. Employing agents’ representitives 6. Residential tenancies 6. Directory 7. Online services 8. The new real estate guide
Printed on recycled paper

Feature: Trust accounts

Compliance inspections In October 2005 Consumer Affairs Victoria commenced a real estate inspection program to monitor estate agents’ compliance with obligations imposed under the Act. Inspections are operating in accordance with the legislation in identified target areas where we believe there are potential risks to consumers’ trust moneys. Target areas have been identified on the basis of past inspections that indicate where regulatory breaches are likely to occur. A risk analysis of all the targets is conducted to determine the priority for inspections. In 2005/2006, 336 inspections were completed resulting in two corporate agents having conditions placed on their licences. The 2006/2007 inspection program is currently ongoing and several inspections have been referred for investigation as a result of serious trust accounting breaches.

Agents’ obligations The Estate Agents Act 1980 (the Act) requires estate agents who maintain trust accounts to have those accounts audited on an annual basis. The Act requires trust accounts to be audited after 30 June each year. Audit reports are required to be submitted to the Director of Consumer Affairs Victoria no later than 30 September each year, unless approval has been given for an alternative date. Agents who breach these regulations risk loss of licence and severe civil or criminal penalties. Estate agents are encouraged to contact their accountants/auditors in the first instance or refer to the reference material prepared by the Estate Agents Council, in particular The Guide to Real Estate Trust Accounting for any trust account inquiries. The reference material is available at www.consumer.vic.gov.au. Unidentified trust money Section 59A of the Act requires that at the end of a period of 12 months – started on the date of receiving a payment – all unidentified trust moneys be dealt with under the Unclaimed Moneys Act 1962. The Unclaimed Moneys Act 1962 states that the legislation does not apply to unclaimed moneys under the value of $20. To satisfy the provisions of the Act, estate agents are to handle any unclaimed moneys under the value of $20 in line with the requirements of the Unclaimed Moneys Act 1962. If at the end of the 12 month period the estate agent is unable to identify the person entitled to the payment, the estate agent is to deal with the funds in an ethical and appropriate manner. For further information about unclaimed moneys, please refer to the State Revenue Office www.sro.vic.gov.au Deficiency in trust accounts Subject to the Estate Agents (General, Accounts and Audit) Regulations 1997, estate agents must immediately notify Consumer Affairs Victoria on becoming aware of any trust account deficiencies not rectified within two business days. Notification of a deficiency should include: • the date on which it occurred, and • the amount, and • the reason why it occurred, and • full particulars of any action taken to restore it. Estate agents who breach this regulation risk civil and criminal penalties.

Compliance news

Averwood Pty Ltd
Minister for Consumer Affairs Daniel Andrews directed a Frankston estate agency to cease trading and froze its bank accounts after a breach of an earlier court injunction restraining access to the estate agent’s trust account by its OIEC and company officer. This action was initiated following a routine audit that confirmed almost $90,000 in deficiencies in sales and rent trust accounts. In December 2006, Averwood Pty Ltd – trading as Pro Active Real Estate from premises at 487 Nepean Highway, Frankston – and its Director Robert Swan had limits placed on their access to trust accounts by the Melbourne Magistrates’ Court. Another agent was brought in to handle three settlements threatened by the deficiencies. The OIEC, Mauro Di Quinzio, gave an undertaking to the Court that he would refrain from being involved in the estate agency’s business. Following a further withdrawal from the agent’s trust account made despite the Court orders, the Minister for Consumer Affairs ordered that the Averwood bank accounts be frozen and that the estate agency cease trading. Fortunately, because Averwood Pty Ltd was registered as an estate agency, affected consumers will have access to the Victorian Property Fund. Consumer Affairs Victoria is concerned because this is the third estate agent trust account deficiency matter we have had to deal with in the past two months. The Act requires agents to keep strictly audited accounts and records, and not take commissions in advance or use them for their own purposes. Agents who breach these regulations risk loss of licence and severe civil or criminal penalties. In November 2006, Consumer Affairs Victoria successfully concluded a case against Malvern estate agent Graeme Ralph Drew who pleaded guilty to deficiencies in trust accounts totalling $83,500.

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2006/2007 Trust fund inspections
The 2006/2007 inspection program is continuing and two hundred and eighty nine inspections were conducted on targeted agents between 1 July and 31 December 2006. One hundred and fifty nine (55 per cent) of the estate agents inspected were found to have minor breaches of the Act or Estate Agents (General, Accounts and Audit) Regulations 1997. Consumer Affairs Victoria officers notified the OIECs or licensed estate agents of these businesses and requested that they rectify the breaches. Fifty nine (20 per cent) of the estate agents inspected were found to have serious breaches regarding the conduct of their trust accounts. Consumer Affairs Victoria is pursuing appropriate action in relation to these alleged breaches.

Mailbag

We were pleased to receive this letter from an estate agent in response to the last newsletter: I read with interest your Mailbag reply regarding the frustrations of buyers with prices quoted to them against what the vendor would reasonably expect to get for their property. The trouble, as I see it, is that the new rules and regulations brought in 2004/05 have done nothing to stop agents ‘highballing’ vendors then explaining to them the merits of ‘lowballing’ buyers to build a market place for a competitive auction. Every owner wants a great price and the likelihood of a competitive auction is all vendors are after; they (clients) want the truth when they are buyers, but when they are vendors they want every lie in the book told because it affects their hip pockets. Maybe you (Consumer Affairs Victoria) should fine and charge vendors who allow agents to deliberately underquote? The rules only refer to what is written on the authority, which is stage two in the sale process, not what has been tendered by the agent in the submission for agent selection, which is stage one in the sale process. We are finding quite often that once local agents have gained the business, when signing the authority they talk to vendors about ‘marketing strategies’ which include the price quote. It is at this stage that agents write on the authority a figure that is usually significantly lower than what was tendered originally by the vendor. Our reply Based on the information contained in complaints received by EARS, it would appear that some vendors are complicit in misleading advertising strategies. Agents should be aware that regulation 12 (2) of the Estate Agents (Professional Conduct) Regulations 1997 states that an agent must act in accordance with the instructions of a principal, except where to do so would be unlawful or contrary to good agency practice. Vendors demanding that a marketing campaign be designed to deliberately mislead buyers and not reflect their asking price should be advised of an agency’s obligations to obey the law. In these cases, the agent should also be asking: ‘Do I want to take on this business?’ The Director of Consumer Affairs Victoria can require an agent to show evidence of how an estimated selling price was reached. In its consideration of the response from an agent to such a request, Consumer Affairs Victoria may contact the vendor to confirm the details of the information the agent has provided.

Geelong regional exercise
In July 2006 Consumer Affairs Victoria visited real estate agents in Geelong to conduct one of our regular regional and metropolitan compliance and enforcement exercises. These programs aim to: 1. Offer advice and information to businesses about their rights and responsibilities. 2. Ensure compliance with legislation. Consumer Affairs Victoria visited 42 Geelong estate agents and found: • 10 agencies with issues relating to over and/or underquoting. • 19 agencies with other breaches relating to statutory requirements and documents such as trust receipts, trust account reconciliations, sales authorities and staff records. • 12 agencies where no issues were identified.

Unlicensed trading
During 2006, Consumer Affairs Victoria successfully resolved a complaint from a purchaser who paid $25,000 to an agent as a deposit for a small business and was then refused a refund when the sale fell through. The sales person claimed that the deposit had been transferred to the vendor’s solicitor and disbursed. Consumer Affairs Victoria checked the sales person’s credentials in the Business Licensing Authority’s (BLA) public register and found that while he was an agent’s representative, he had not been employed as one for over a year. Our further inquiries revealed that the salesperson had placed the $25,000 deposit in his personal business account and not a trust account, as required by law. Following interventions by our Estate Agents Resolution Service (EARS), the salesperson consulted with the vendor who agreed to refund the $25,000 deposit to the purchaser. The salesperson was issued with a formal written warning reminding him to comply with all his legal obligations and instructing him to immediately lodge appropriate documentation with the BLA if he commenced employment with an agency. The agency that advertised the property was also issued with a formal written warning, despite claiming that the salesperson had been contracted as a consultant.

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We value your feedback Consumer Affairs Victoria welcomes all correspondence from real estate agents. Letters for publication in this newsletter can be sent to: Consumer Affairs Victoria Education and Information PO Box 123 Melbourne Victoria 3001 Alternatively you can email letters to: cav.communications@justice.vic.gov.au

• The authority is not dated: this affects the authority’s validity by creating uncertainty about when it starts and when it terminates. • The dollar amount of the commission is not stated when the commission is calculated on a percentage basis. • Alterations are not made on both copies of the authority (vendor/landlord and agent copies) and are not dated and initialed. • GST is not specified in the commission calculation. Under no circumstances should a vendor or landlord be required to sign a blank authority or an authority where certain information has been left blank. Blank spaces should be crossed out or otherwise completed. If agreed to by all parties, the authority may be subsequently amended. It is essential that adequate care and time is taken to complete the authority and that all amendments are initialed and dated by all parties on both copies. The terms of the authority should be carefully explained to the vendor or landlord and they should be given time to read the form before signing it. Investing time at the beginning of the process will minimise any confusion and avert future disputes. Also, when negotiating the authority, estate agents and their staff should be aware of their obligations regarding commission sharing and rebates. Any commission sharing arrangement must be disclosed to the vendor or landlord before obtaining their signature on an authority. Any rebates relating to the transaction should be detailed on the authority and should not be retained by the agency or its staff.

Completing agency authorities

The agency’s authority to sell or to lease and/or manage is a crucial document in any real estate transaction. The authority sets out the vendor’s or landlord’s instructions and the agreement reached with the agency about how the sale or lease will be undertaken. While it is not a prescribed form, the Act mandates the inclusion in the authority of certain information about the estimated selling price, rebates, commission, outgoings and making a complaint. Unless an agency has a written authority signed by the vendor or landlord, it is not entitled to claim commission or any other payments for the services it provides. Despite this, Consumer Affairs Victoria often sees copies of authorities which are deficient because they: • lack important information • do not meet legislative requirements, or • have a myriad of illegible, unsigned alterations which lead to ambiguity, confusion and misinterpretation. Failure to accurately complete the authority may render it invalid and result in a breach of the Act and the Estate Agents (Professional Conduct) Regulations 1997. Under regulation 11 estate agents and their staff have a duty to exercise skill, care and diligence in the conduct of their profession. This duty covers the completion of documents such as the authority. Most common errors in completed authorities • The agency’s licence name (eg, ABC Real Estate Pty Ltd) is not listed on the authority. Often only the agency’s trading name is listed (eg, Smooth Real Estate). • The vendor’s name is incorrect or incomplete: the full legal name of all vendors must be included. • The salesperson’s estimate of the selling price for the property is not provided or the price range stated is greater than 10 per cent. • The marketing expenses are not inserted: this prohibits the agency from later recovering these costs from the vendor or landlord.

Employing agents’ representatives

Case study - County Court decision In 2004 the BLA refused Ms Camille Patricia Pennell (also known as Camille Patricia Snow, Christine Chisholm, Ann Marie Casey and Kimberley Castles) permission to be employed as an agent’s representative after finding evidence of guilt related to dishonesty offences. VCAT affirmed the BLA’s decision, but within days of the Tribunal’s decision, Ms Pennell attempted to gain employment as an agent’s representative. The BLA referred its serious concerns to Victoria Police and on 30 August 2006 Ms Pennell pleaded guilty in the Victorian County Court to perjury, making a false document and using a false document. Ms Pennell was sentenced to six months imprisonment, with the prison sentence wholly suspended for a period of three years. Prior to the court hearing, a licensed estate agent informed the BLA that she had employed a Ms Kimberley Castles as an agent’s representative on 24 October 2005. On 22 June 2006, the agent terminated Ms Castle’s employment after learning of her history and previous identity as Ms Pennell.

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Agents’ obligations The BLA is conscious of not only protecting the public from such conduct but also of protecting estate agency businesses and their clients from the potential ramifications of employing a person who goes to such lengths to hide her ineligibility from a prospective employer. All estate agency employers should carefully check prospective employees’ eligibility to be employed by them. This must be done in all cases, regardless of whether the applicant has been previously employed by your agency and wishes to resume work there, or is currently, or has previously been employed by another agency. While many employers understand their obligations, the BLA continues to receive enquiries about the criteria and the process for employing agents’ representatives. Eligibility criteria According to section 16 of the the Act, to be employed as an agent’s representative, applicants must: • be 18 years of age or over • have a registered address in Victoria • have passed the Course in Real Estate for Agents’ Representatives or other prescribed course, within the five years immediately preceding the date of starting work as an agent’s representative • not have been convicted or found guilty within the last 10 years of any offence involving fraud, dishonesty, drug trafficking or violence which is punishable by imprisonment for three months or more (whether or not a sentence of imprisonment was imposed) • not be the cause of a claim being made against the Victorian Property Fund • not be insolvent under administration (a bankrupt or in administrative arrangement) • not be a represented person under the Guardianship and Administrative Act 1986 • not be presently subject to a declaration by VCAT that makes them ineligible to act as an agent’s representative • not be the subject of any order by any regulatory body disqualifying them from acting as an agent’s representative. These eligibility criteria are listed and explained in full in the Guide to Becoming an Agent’s Representative and pages located in the Estate Agents section at www.bla.vic.gov.au.

Obligations when using an employment or recruitment agency It is becoming common practice for licensed estate agencies to use employment or recruitment agencies to fill short term agents’ representative positions. These recruitment agencies do not require an estate agent’s licence to place staff. For the purposes of the Act, it is the estate agency business - not the recruitment agency - that is employing the individual. So when a recruitment agent places a new agent’s representative with an estate agency, it is the licensed estate agent who is responsible for ensuring that the person meets eligibility requirements. It is also the estate agent’s responsibility to advise the BLA of the commencement and cessation of that person’s employment. This is the case even if the recruitment agency is also a licensed estate agent: all responsibility for checking eligibility and reporting to the BLA lies with the estate agency where the individual is employed to work. Assistance in documenting an applicant’s eligibility The BLA provides a form called Declaration of Eligibility to be Employed as an Agent’s Representative to assist you in documenting an applicant’s eligibility. You can use this form to help you obtain honest answers to eligibility criteria from applicants and ensure they meet requirements. This includes sighting a current police check which is no more than six months old and a course certificate, before applicants complete those sections of the form. Agents MUST sight a current police check before employing a person as an agent’s representative. A Consent to Check and Release National Criminal Record can be obtained from www.police.vic.gov.au. Agency employers should exercise judgement as to whether they need to also make a bankruptcy search. A search of the BLA’s online register should also be made to see if an applicant has been the cause of a claim against the VPF or has been disqualified from working as an agent’s representative in Victoria. Disqualifying criteria The BLA recommends that you seek legal advice to clarify any concerns that an applicant may be disqualified because of: • a claim against the VPF • bankruptcy • a relevant criminal offence within the last 10 years, as listed above. Applicants who are disqualified under these criteria can apply to the BLA for permission to become an agent’s representative.

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Permission application form Under Forms, the BLA website provides a Permission Application form that applicants who may be disqualified under the above criteria can use to seek permission to be employed as an agent’s representative. Completion of a prescribed course Agents frequently ask the BLA about acceptable prescribed courses. The current prescribed course is The Course in Property (Agents’ Representatives). Other prescribed courses are listed at www.bla.vic.gov.au under the heading Educational Requirements, in the Guide to Becoming an Agent’s Representative (see under Forms) and in the Estate Agents (Education) Regulations 2004. Applicants seeking employment as an agent’s representative for the first time must have completed the course during the five years immediately before they start work as an agent’s representative. The five year time limit does not apply to previously employed agents’ representatives, but they must have been previously employed as an agent’s representative in real estate during the last 10 years. These requirements came into operation in February 2004. Notifying applicants and the BLA After verifying eligibility, agents must: • give written authority to new agents’ representatives before they start work • notify the BLA in writing within seven days of new agents’ representatives commencing work. This can be done electronically through the BLA’s online service at www.bla.vic.gov.au. It is advisable to keep copies of all documents used to verify eligibility for employment as Consumer Affairs Victoria may seek evidence that agencies have completed the required checks.

Unfair terms added to printed terms often concern lease-breaking, subletting, liability for rent, condition of the property and special clauses relating to such things as carpet cleaning, use of fireplaces and pets etc. We are considering holding a forum for the industry in autumn to assist stakeholders to understand unfair terms and the ramifications of using common or typical unfair terms in tenancy agreements. Any queries can be directed to Deborah Westfield by telephone on 8684 6432 or by email deborah.westfield@justice.vic.gov.au.

Directory

Estate Agents Resolution Service
Tel: 1300 73 70 30 Email: cav.resolutionservice@justice.vic.gov.au

Residential Tenancies Bond Authority
Tel: 1300 13 71 64 Email: rtba@justice.vic.gov.au

Business Licensing Authority
Tel: 1300 13 54 52 Email: bla@justice.vic.gov.au

Business Registration
Tel: 1300 36 17 73 Email: consumer@justice.vic.gov.au Please write to or telephone relevant areas with any other comments and enquiries you have. Consumer Affairs Victoria GPO Box 123 Melbourne Victoria 3001. Alternatively you can visit our Victorian Consumer & Business Centre at 113 Exhibition Street, Melbourne.

Residential tenancies

Unfair terms in tenancy agreements
Consumer Affairs Victoria is currently preparing a guide for real estate agents and landlords to explain our approach to the application of unfair contract term laws to tenancy agreements. Unfair contract terms legislation came into effect in October 2003 as an amendment to the Fair Trading Act 1999. We are keen to inform and educate the industry about the nature of unfair contract terms in tenancy. Such terms permit the supplier but not the consumer to avoid or limit the performance of a contract and often impose penalties.

The Victorian Consumer & Business Centre (VCBC) 113 Exhibition Street, Melbourne (corner Little Collins Street) 8.30am-5.00pm Monday to Friday
Estate agents can now lodge licence and business name applications in person at the VCBC, situated in the new Southern Cross building at 113 Exhibition Street. The Centre’s one-stop-shop for consumers and business operators offers information and advice in a friendly and informal setting. Each week, an average of 850 clients visit the VCBC. Our concierge and customer service officers assist consumers and business operators to find the information they need. As well as accepting applications for estate agents licences, the VCBC provides agents and their clients with advice and information and receives complaints relating to residential tenancies and buying and selling homes.

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VCBC residential tenancy services • Advice to tenants and landlords regarding their rights and responsibilities in relation to standard residential tenancies, at all stages of a tenancy. This includes residents of rooming houses and caravan parks. • All services relating to residential tenancy bonds including lodgement, transfers and claims. In most cases we are able to process urgent bond claims (i.e. when a tenant is going overseas) providing the bond claim form has been completed correctly and all necessary information is provided. • The full range of Consumer Affairs Victoria’s information products, publications and forms. • Interpreting services are available for non-English speaking customers. Other consumer and business services The VCBC also provides consumers with information to assist them with a wide range of tenancy and consumer transactions and accepts consumer complaints. The VCBC offers services to a range of business operators relating to: • • • • • • • • • • • Business names Associations and co-operatives Liquor licensing Estate agents Prostitution service providers Motor car traders Finance brokers Credit providers Travel agents Introduction agents Second-hand dealers and pawn brokers.

Online services
Now we are here for you 24 hours-a-day, seven days-aweek. We know that estate agents and agents’ representatives are busy people. We know that your working days are often filled with meeting the needs of your clients and that it can be difficult to complete all your administrative obligations during business hours.
That is why we have developed online services that are available 24/7 so you can easily: • submit forms, pay fees and give new contact details to the BLA • print RTBA weekly agent statements, complete bond claim forms, and print summary information that is acceptable to VCAT • read electronic versions of Real Estate News and email subscription links to your staff. So, what are you waiting for? Register for online services with the BLA now at: www.bla.vic.gov.au Register for RTBA Online now at: http://rentalbonds.computershare.com /vic/registeredusers/ Subscribe to Real Estate News now at: www.consumer.vic.gov.au/subscribe

Regional services
In addition to our Melbourne headquarters, Consumer Affairs Victoria has offices in Morwell, Wangaratta, Bendigo, Ballarat, Geelong, Mildura and Warrnambool. We also regularly visit a wide range of other towns across Victoria to provide face-to-face services. You can refer any purchasers, vendors, landlords or tenants who need information or advice on laws relating to buying, selling or leasing property to one of our offices for assistance. Our regional offices also have a range of real estate publications and forms available for estate agents, their staff and their clients. For more information visit www.consumer.vic.gov.au or call 1300 55 81 81.

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Have your clients got the real estate guide?
Consumer Affairs Victoria’s revised and updated Real Estate: A guide for buyers and sellers is again proving popular with home buyers and sellers. The Guide is being advertised in metropolitan and regional newspapers, through the internet, and in some estate agents’ magazines. The advertisements encourage clients to get the Guide from their local estate agency. The Guide contains useful information for both buyers and sellers on: • choosing a home loan • dealing with an estate agent • the vendor’s statement and other legal documentation • property inspections, and • methods of sale. Director of Consumer Affairs Victoria Dr David Cousins encourages all estate agents to display, promote and distribute the Guide to prospective clients. Real estate guide updated The Guide has been given a face lift and updated with extra information. Apart from changing the look and updating the pictures, the content has been reviewed to ensure currency, consistency and to remove any ambiguities.

Real Estate yers A guide for bu rs and selle

updated Revised and October 2006

Revisions include: • • • • • • • New information on vendor and co-owner bids and dummy bidding. Clarifications to the authority types and authority period. Extra information on buying off-the-plan. Extra information about assessing sustainability of homes and new allotments. Legislation updates on bodies corporate and conveyancing. Revised text on builders’ warranty insurance and owner-built properties. Updates to the glossary and contacts sections.

¡

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Order the Guide now
Order quantity Name of contact person Daytime telephone number

(
Name of organisation

)

Address (this must be a street address – PO boxes cannot be accepted)

Postcode Email address

Fax order to (03) 8684 6333
Email cav.communications@justice.vic.gov.au

OR

Post to Consumer Affairs Victoria Education & Information Branch GPO Box 123 Melbourne Vic 3001


								
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