On May 1 2017, the Estate Agents Amendment (Underquoting) Act 2016 (Vic) will take effect in Victoria. In a targeted effort to crackdown on the practice of underquoting, the new legislation imposes additional obligations on estate agents and their representatives selling residential properties. With the inclusion of new offences and the threat of sharper penalties for non-compliance, familiarity with the Act is essential.
Importantly, s 47A of the current Estate Agents Act 1980 (Vic) will be replaced by a number of prescriptive measures, controlling the listing and marketing of residential properties. In a bid to increase certainty, the new provisions envision the transparent exchange of pricing information during selling campaigns.
A summary of the new requirements is set out below.
a figure that is reasonable and takes into account the sale prices of the three most comparable properties in the area will need to be included within the sales authority. The estimated selling price must take the form of either a single price estimate or a range estimate of no more than 10 per cent. If the estimate is no longer considered reasonable, the seller must be informed in writing and the sales authority and advertising must be updated.
this must be displayed at all open for inspections, included with all online advertising and provided to prospective buyers on request.
The statement notification must include the following:
: although the provisions of the current Act apply to all property sales, it is important to note that the new provisions will only apply to residential property sales. This means the sale of rural, commercial and industrial properties remain unaffected by the new laws. Please note, the provisions of the Australian Consumer Law remain applicable.
: the new laws can only be applied to sales authorities signed on or after 1 May 2017.
The risk of a significantly increased penalty of up to $31,000 (200 penalty units) will accompany failures to comply with the Act. For more serious offences, agents may also face losing the commission received from a property sale.
The Director of Consumer Affairs Victoria will have the power to seek information or documents that substantiate the estimated or indicative selling price, including the details of the comparable properties used. We understand that the upcoming changes may cause concern for lenders, particularly given the requirement to include an indicative selling price in the statement of information.
Whilst there is no requirement to directly incorporate price references in advertising, it is important to note that the Act requires a statement of information to accompany any online advertising and to be provided to purchasers upon request. As noted above, this will include the indicative selling price.
Consumer Affairs Victoria has published the approved forms to be used on its website. Please see the attached links below to view the relevant form:
The Act places a clear onus on the lender to provide the appropriate information to the agent to ensure that the required figures are calculated correctly. Given the increase in pecuniary penalties following non-compliance, we anticipate that estate agents and their representatives will attempt to allocate the burden of calculating these figures to the lender. It is also likely that lenders and their representatives will encounter resistance from agents where a statement of information has not been provided.
Ideally, input should be obtained from both the property valuer and the agent in calculating the figures for the estimated selling price and the indicative selling price. It is recommended that valuers be asked to comment on the above matters so that this information may then be provided to agents.
In order to reduce the risk of potential liability, the obligations imposed by the legislation must be adhered to, unless an exception applies. To facilitate compliance during selling campaigns, lenders should ensure that an agent that is familiar with the requirements outlined above is appointed.