Estate Agents Kicked Out Of Negotiations

Published 13 March 09 09:45 AM | Peter Mericka 

OPINION
by Peter Mericka B.A., LL.B
Real Estate Lawyer
Qualified Practising Conveyancer Victoria
Director Lawyers Real Estate Pty Ltd

 

Real estate agents have been parading about in their "negotiator" suits like the naked emporer in his invisible new clothes, trying to convince consumers of their competence in real estate negotiations. I have had enough of incompetent real estate agents' stupid mistakes, deceptive practices and consumer indifference. I have now banned real estate agents from the negotiation stage of the real estate sale!

In past weeks my office has received the usual number of formal written contracts prepared by real estate agents, containing dumb mistakes:

"Settlement: is due on 31 February, 2009"

incomprehensible special conditions:

"1. Should the offer be accepted by the Vendor, a more detailed contract be drawn up with specifications to suit purchasers requirements, but within the builders proposed budget, to the satisfaction of both parties' solicitors."

and deceptive special conditions (the classic deceptive special condition is the one circulated to real estate agents by the Real Estate Institute of Victoria (REIV) which limits the purchaser's right to end the contract to rare situations where the building is affected by a major structural defect).

Enough is enough.  We now inform our vendor clients and their real estate agents that all expressions of interest are to be directed to us, and that we will attend to all matters associated with negotiation of the sale, preparation of the contract, and completion of the sale and conveyancing.

Real estate agents are prohibited by law from conducting genuine negotiations

Few real estate agents, let alone real estate consumers, are aware that real estate agents are prohibited from providing legal advice or performing any of the legal work involved in real estate negotiations, and that they face a penalty of imprisonment for 2 years if they do so.

In the past we have required real estate agents to consult us before presenting offers to vendor clients, and have had to put up with arrogant and reckless real estate agents ignoring our instructions and causing problems for vendors and purchasers alike.

We are no longer allowing real estate agents to participate in real estate negotiations, and we have set out a number of reasons in support of our stance.

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Filed under: Contract, negotiation, negotiator

Comments

# Negotiator said on March 13, 2009 4:51 PM:

I negotiate lots of sales and I write up plenty of contracts and I always use the special conditions recommended by the REIV which have been prepared by the REIV solicitor.  Are you saying I am being illegal when I am following REIV instructions because if you are your saying the REIV is being illegal too.

# Peter Mericka said on March 13, 2009 5:38 PM:

Hi Negotiator,

All lawyers know that a real estate agent is not permitted to offer the legal advice or to perform legal work associated with real estate negotiations, including the REIV's own solicitor.

The REIV knows that it is setting its members up to commit criminal offences by providing them with precedent special conditions, but it is arrogantly indifferent to the consequences to consumers or its own members.  Remember, this is the same organisation that previously argued that the crime of dummy bidding was a legitimate real estate agent tool.

If a purchaser tells you that they will be making their offer subject to a building inspection report, and you advise them that the REIV precedent will protect them, and you explain to them how it will protect them, and you insert it into their offer for them and assure them that they are safe, you are playing the role of the purchaser's lawyer.  And you're paid by the vendor!

Negotiator, when you do this you commit a criminal offence under the Legal Profession Act, and you may also be engaging in misleading and deceptive conduct.

Does the REIV care?  Here's how you can put them to the test.  Have the REIV's corporate solicitor confirm to you in writing that:

1. You are entitled to advise the purchaser to use the REIV precedent special condition for building inspections;
2. You are entitled to explain the nature and effect of the special condition to the purchaser;
3. You are entitled to answer the purchaser's questions about the special condition and how it protects him; and
4. The purchaser's solicitor will not be entitled to complain that you have improperly engaged in legal practice when so advising the purchaser on the special condition.

Let me know if the REIV even bothers to respond to your request.

# George Rousos said on March 14, 2009 4:29 PM:

Go Peter,

Love your work, you make my job so much easier as a trainer for the real estate industry.

However, we have received some complaints from agents when they try to submit an offer to the vendor's solicitor, the lawyer will state they are interfering with the contract ( conditional with the cooling off) and therefore can be sued in tort.

However, as you know, this is a breach of the solicitor's duty of responsibility to their client.

We simply tell the agents to submit the offer in writing to the vendor and let them take it up with their solicitor, this ensures everybody complies with the strict legal principles of the law and the laws of morality under the Trade Practices Act.

Cheers

# Peter Mericka said on March 14, 2009 5:45 PM:

Hi George,

I have to confirm that I am in Victoria, so my comments are confined to the situation in Victoria.

I regard solicitors or conveyancers who refuse to accept offers on behalf of their own clients as an utter disgrace.

I have personally experienced situations when acting for purchasers, where the purchaser has caught the estate agent out on lies or other forms of deception, and sought to bypass the agent and have the offer submitted direct to the vendor via the vendor's solicitor.

Time and time again, we are told by negligent and incompetent solicitors and conveyancers (who are well and truly at the top of the referral lists of the agents) that all offers have to go through the real estate agent, and that the real estate will handle the negotiations.

I don't mind if a estate agent passes the purchaser's offer to the vendor and advises the vendor to deliver it to the solicitor.  But in Victoria the real estate agent writes up the purchaser's offer (giving legal advice along the way), then hands the vendor a pen, and the contract (in that order), and hovers until the vendor signs (offering legal advice if the vendor has any questions).  The estate agent then holds the contract until the 3 day cooling offer period has passed, then provides copies of the contract to the parties' solicitors.

Our problems in Victoria is the close relationship between shonky estate agents and CLOWNS (Conveyancers and Lawyers Offering Worthless Negligent Services.)

# Tim O'Dwyer said on March 14, 2009 10:31 PM:

Meanwhile in the Deeep North (Queensland) one of my clients, who's currently buying a house subject to selleing hers, phoned last week to say that she had a buyer.

That's good news, I said. And asked her to let me see the contract offer before she signed. It's already signed, she replied, and explained how her agent had pressured her to do this the night before. No matter to the thug of an agent that the agent's client had protested that her solicitor would want to check it out and make sure the dates fitted with her current purchase contract.

#%@$&#* agents!

# Tim O'Dwyer said on March 14, 2009 10:52 PM:

But wait, there's more:

When my pressured seller mentioned that I was her solicitor, her agent promptly tried to persuade her to engage another solicitor for her sale.

No doubt had my client not resisted this outrageous, but not uncommon, skulduggery, the agent would have steered this lady towards a less-than-independent tame conveyancing lawyer.

Queensland law, which is rarely complied with and never policed. requires agents to give buyers and sellers alike a "genuine opportunity" to obtain independent legal advice before contracts are signed. The law also requires the foxy agents to give buyer chickens a written warning which urges, among other things, to "exercise extreme caution in accepting the advice of anyone referred" by the seller's agent.

Unfortunately the useless Labor government here does fully understand that sellers are consumers who need to be better protected and cautioned about their own agents' wiles. So there is no similar statutory warning for sellers.

Many wonder why Queensland agents are such a protected species.

# Peter Mericka said on March 15, 2009 10:26 AM:

Hi Tim,

We currently have a complaint with Consumer Affairs Victoria involving a real estate agent who referred a purchaser to a "pet" solicitor.  The pet solicitor allowed the real estate agent to have total control over the sale and contract.

The real estate agent, having been told in writing by the purchaser to prepare the contract with a finance condition, deliberately prepared the contract without the finance condition.  When the purchaser was about to sign the contract she noticed that there was no finance condition, and so she filled in the finance condition section of the contract (a standard form document with provision for this).

Between the time the purchaser signed, and the agent presented the contract to the vendor for signature, the real estate agent swapped the page containing the finance condition, and replaced it with a new page which had no finance condition (apparently the agent was sure the purchaser would get finance, and didn't want the vendor to be bothered with a finance condition).

When the purchaser's finance was refused, the purchaser asked her solicitor to cancel the contract.  The solicitor explained that this could not be done as there was no finance condition.  When the purchaser checked the contracts she discovered what had happened.

Now, this is where it gets really interesting.  When the purchaser instructed the solicitor to lodge a complaint against the real estate agent, the solicitor came up with this classic,

"I can't act for you in this matter any more, because the real estate agent is my husband!"

The client then found me.  Needless to say, the matter is also with the Legal Services Commissioner.

# George Rousos said on March 15, 2009 5:21 PM:

Hi Tim,

You are so correct in what you are saying.

Where are the statutory warnings for all sellers prior to entering into a contract????

Where is the law enforcement for the common law of contract? This is the law which protects the legitimate interest of the weaker party and most of all protects ownership of land.

The conveyancing legislation relates to the transfer of ownership of land and a buyer's cooling off rights etc.

Therefore, the legalities of recission for both parties fall under both state conveyancing legislation and the common law of contract. In NSW, we also have the contracts review act as you boy's would know, which was revolutionary when the NSW state government passed this legislation back in 1980.

However, they don't enforce it well enough, which seems meaniless why they introduced it in the first place.

The government in all states needs to get some clear guidelines out on contract law and the pro's and con's of the cooling off period.

This would go along way in removing alot of the stupidity in the marketplace.

Cheers

# Australian said on March 20, 2009 6:15 PM:

What are the rules for QLD, are real estate agents allowed to participate in legal real estate negotiations? And who does the contract  solicitor or real estate agent , Most agents will have the contract ready to sign on the spot ( even with only a first offer) is this stand ard practise? Solicitors should handle contracts not Agents

# Tim O'Dwyer said on March 21, 2009 7:13 PM:

Dear Australian,

I'm presently interstate using a borrowed lap-top, so I can't say much.

Other than to suggest that you'll find this issue addressed from different angles on several occasions in many of my posts on the Blog.

Happy searching!

# Australian Real estate said on March 22, 2009 1:34 PM:

Tim, thanks for your reply i will search around the blog

cheers

# Agent said on March 30, 2009 6:08 PM:

Peter,

I have no desire to enter into the legal minefield of giving any advice to purchasers that may be deemed to be legal advice. Can you then tell me how am I supposed to proceed when so many lazy conveyancers and solicitors contiue to refer legal issues back onto the agent as they claim it is our issue to deal with. In a lot of cases we find the people representing buyers and vendors only want to pass the buck. In these situations it is very difficult for an agent who wishes to comply with all the laws and regs to get anything done. You wont clean up this issue until solicitors and conveyancers take more responsibility for their side of the transaction.

Your thoughts?

# Peter Mericka said on March 31, 2009 4:27 PM:

Hi Agent,

It's a chicken and egg problem, exacerbated by bribe-fuelled competition between lawyers and conveyancers, and tolerated by apathetic regulators.

I agree with you whole-heartedly when you observe, "You won't clean up this issue until solicitors and conveyancers take more responsibility for their side of the transaction."

We're trying to lead the way back to a more responsibile and accountable industry by enforcing our bidding procedure whereby we take full responsibility for final negotiations and contract preparation and execution.

It's not easy though.  We've had lawyers who will not discuss contracts with us, and refer us to the agent.  We have even had a lawyer who sent his client to our office so that we could help his client to prepare his offer!  (although, this lawyer has since ceased to practise, and has become a licensed conveyancer instead).

# Peter Mericka said on March 31, 2009 5:38 PM:

Hi Agent,

Let me put this to you.  If you ever have a lawyer or conveyancer who won't do what they're being paid to do, and they expect you to provide legal advice to their client, just let me know and we'll generate some interesting blog postings!

# George The Trainer & Course Developer said on April 24, 2009 2:01 PM:

Hi Peter,

I thought these comments would be educational and good for all blogger's to read.

This is the current state of affairs we find ourselves working in, a corrupt, unsophisticated system, where more responsibility and accountability must happen on lawyers and conveyancer's, as you say.

However, unless they change their ways sooner, rather than later, more and more estate agents will continue to dabble in contract work and do their own exchanges to protect themselves from being sued under the Trade Practices Act.

The following is an email exchange we had with the REINSW Compliance Division. It seems even the institute here in NSW doesn't want to take responsibility either for preparing and authorising a legitimate contract for sale of land, that protects the legitimate interest of the vendor, who not only pays commission to it's members, but seems to forget the vendor is still the proud LEGAL owner of the property.

As you read ,shake your head and maybe laugh a little along the way.

Dear Sir/ Madame,   Sent Monday 23rd March

I recently received some expert legal advice and information I needed for training regarding Contracts for Sale of Land.

As you would be aware, the standard Contract for the Sale of Land in NSW (“the Contract”) contains numerous terms and conditions, which by convention over time have come to be expected in a contract that purports to assist vendors and purchasers in the conveyance of their properties. The current edition of the Contract is authorised by the Law Society of NSW and the Real Estate Institute of NSW. Although it may surprise many people, the whole contract is not to be found in prescriptive NSW legislation, but parts of it are inserted by Regulation, for example the ‘cooling off’ statement in Clause 12 of the Conveyancing (Sale of Land) Regulation 2005.

We also recognised, there being no common law remedies for the weaker party in the cooling off period or provisions of the contract which need to comply with the prescriptive NSW Contracts Review Act 1980.

The legitimate interest of the weaker party seem to be excluded here.

It must be noted  if a seller were to rescind a contract without reasonable grounds, then a buyer can pursue a legal remedy in the courts to recoup costs incurred in the conveyancing process,which protects the purchaser that way, but I believe the cooling off legislation doesn't go far enough to protect purchasers of properties and exclude the legal obligation on vendors and agents.

It seems the old fashioned caveat emptor, buyer beware still applies.

I'm sure you would appreciate the forfeited deposit is hardly appropriate compensation under the conveyancing legislation to a seller, as the seller's goal is to only sell the property. What is appropriate is knowing you have sold your property rather than carrying around the burden of having to start all over again with a tainted property. Can I suggest a good case study to get a hold of is the one taken from the 4th Edition of Introduction to Contract Law by Stephen Graw.

The case of Dodds vs Dickinson.

I should also emphasise that many sellers in NSW will insist that the buyer waive their cooling off rights, as the removal of initial interest on the property, may significantly damage any chance the seller has of finding other buyers.

Further to my above concerns raised, there have been reports to the ACCC that agents have not conveyed some or all of the offers made by prospective purchasers to the sellers. In fact in these cases, the agents have allegedly purported to make a counter offer on behalf of the seller. In some cases the prospective buyers have made direct contact with the sellers and have found out that the agent never conveyed the offer to the seller. Apart from breaching any obligations as an agent, such conduct could mislead consumers. Agents will engage in misleading or deceptive conduct if they fail to convey any reasonable offers to the vendor.

Agents should not hide behind the agency relationship as ultimately it is the vendor who will make any decision about what price they are willing to receive. It is imperative that all real estate agents ensure that the parties to real estate transactions are fully informed of all material facts. To that end, agents must ensure that all reasonable offers are conveyed to a vendor. Consequently:

• Real estate agents must immediately convey to a vendor all expressions of interest and offers relating to a property whether they be written or oral, unless the agent has been provided with written instructions by the vendor to the contrary.

• Real estate agents who have the listing of the sale of a property must ensure that they promptly convey to a vendor any offers to purchase the property, whether written or oral, provided to that agent by any other agent acting pursuant to a conjunctional agreement or acting directly for the purchaser, unless the agent has been provided with written instructions by the vendor to the contrary.This is all in pursuant to REIA Guidelines for section 52 of the Trade Practices Act.

In finishing, I appreciate and thankyou for the time you have taken out to examine the content of this email and the concerns raised regarding Contracts for the Sale of Land.

This was their pittiful, buckpassing response, sent to me on Friday 3rd April.

Contracts for Sale Land - non compliance issue

From The Compliance Division REINSW

The Real Estate Institute of New South Wales (REINSW) is a member based organisation representing real estate agents in New South Wales.

Membership of the REINSW is not compulsory.  

The REINSW does not offer general real estate advice by public email or telephone enquiry services.

You can contact the Office of Fair Trading on 1800 625 963 (toll free line) or (02) 9895 0297 for free Real Estate advice. If you are a tenant seeking advice, please call the Tenancy Information line on 133 220.

The Office of Fair Trading does not offer support or advice to Commercial enquiries, in such cases you should contact your solicitor.

Feel free to visit the Consumer Information section of the REINSW website at www.reinsw.com.au <">http://www.reinsw.com.au/>  for information regarding various aspects of buying, selling and leasing property including the most frequently asked questions.

If you wish to be referred to a member agent in your area please contact crooney@reinsw.com.au <mailto:crooney@reinsw.com.au>

REINSW is not the regulating body for Real Estate Agents in New South Wales.  The regulating authority is the Office of Fair Trading. All complaints or enquiries concerning non-members must be directed to the Office of Fair Trading.

REINSW is committed to maintaining professional standards and will deal with all complaints concerning member agents.  If you wish to lodge a complaint about a member agent, please visit the following page for detailed instructions:

http://www.reinsw.com.au/Lodging-a-complaint/default.aspx <http://www.reinsw.com.au/Lodging-a-complaint/default.aspx>

Thank you for your enquiry.

Our Response on Friday 3/04/2009

Thankyou for your response.

The Office Of Fair Trading are well aware of this issue, in particular Mr Dominic Wong.  They have informed me, breach of obligations regarding agents conduct in exchange is high on their agenda item list. Steps are being taken to address the problem and that more clarity is required in this area of the law to enforce legal compliance under the Property Stock & Business Agents Act 2002.

The Office Of Legal Services Commissioner Mr Steve Mark, has also been informed on the very issue of unconscionable conduct on consumer transactions and the common law remedies in contracts for the sale of land for principal relief under a buyer's cooling off rights. This being in pursuant to the NSW Contracts Review Act 1980 and the common law of contract.

# deb carr said on May 19, 2009 7:09 AM:

Vic R.E. Agent demanded a Holding Fee to show our offer was genuine $1000...  Then required a deposit $23000 with our signatures of the Contract of Sale (with building, pest and finance conditions).  All paid and signed at the property while a Building Inspection was being done. Agent overheard the verbal Building Inspection being reported to us onsite.  Water damage in bathroom.  Agent has our $24000, we have no contract of sale signed by vendor.  Vendor has had 4 weeks to decide if she will lower purchase price or get her insurance to repair damage.  We verbally requested our deposit back but agent said that the property has been taken off the market and that should reassure us of the vendor's committement to this sale.  

# George Rousos said on May 31, 2009 10:31 PM:

Hi Deb,

I believe even when the vendor signs the contract, unless there are no special conditions, there is no  binding contract. I would check the building and pest condition in the contract first. Generally there should be some relief in the condition that would entitle you to your deposit back, if in fact it was reasonable to do so e.g water damage in bathroom.

Further to this, there must be a clause in the contract anyway, that allows the seller to rescind on the contract. However, this recision must be made on the basis of 'reasonable grounds‘ and not be an arbitrary or capricious act.

If a seller rescinds a contract without reasonable grounds then a buyer can pursue a legal remedy in

the courts to recoup costs incurred in the

conveyancing process.

A property shouldn't be taken off the market unless the buyer waives their cooling off rights or the contract becomes unconditional.

It is not in the client's best interest to take a property off the market when a contract is subject to some reservation.

The law doesn't condone such practice, unless the vendor provides written instructions to the contrary.