Issue 57 - The Real Estate Agents Act 2008. - November 2009

What it will mean for consumers.

Many will be aware that Real Estate Agents will shortly be required to follow the requirements of a new Act, in respect of their Real Estate businesses.

Although there are many changes with the new Act, most will not have a direct bearing on consumers. One change that may well have a dramatic effect, however, is that relating to the ability of consumers to seek and obtain redress for perceived wrongs

• As from 17 November 2009, in respect of complaints about Real Estate Agents and Salespeople, representations may be made directly to the Real Estate Agency Authority, without charge, and such complaints may result in the agency being required to pay fines or restitution of various kinds to consumers, as well as running the risk of suspension or cancellation of licences.

This is a great advance on previous legislation where the high cost of taking an agency to court often meant that even a favourable verdict was often a pyrrhic victory.

• Another welcome change is the requirement for salespeople to provide to the seller, relevant written statistics about property sales in the area.

With a little bit of luck, this may go someway to combating what I understand is a common tactic locally of asking what price a seller wants and then agreeing that that can be achieved, even if, in some cases the requested price is tens of thousands above a realistic figure.

• Education and Training of salespeople is another area that is receiving attention under the new Act and associated regulations. The salespersons’ training course will be extended to a six week (part-time) course and it is to hoped that some of that time will be devoted to training would-be salespeople how to sell.

The old course dealt with relevant legal matters, the mechanics of calculating a price, filling in a listing form and filling in an agreement for sale and purchase. There was no training, however, in what I would have thought would be the obvious areas of selling and negotiation.

• Another of the big changes, and one that is long overdue in my opinion, is the specific requirement for agencies to identify in an agreement of agency, all rebates, discounts or commissions to which the agent is eligible to receive in respect of expenses paid by the client. In other words, if the agency is charging anything over and above their commission, (for example advertising), then should the agency be entitled to receive a rebate or discount or other benefit from placing that advertising, they must disclose the fact (including a reasonable estimate of the value) of the benefit.

As an aside to this, all of our Managers attended one of the training sessions about the Act, presented by the Ministry of Justice. I was amazed by the reaction from the attendees, to this portion of the Act. To say that it was unpopular would be to understate the case. A large number of agents were not at all happy that their bulk discounts (read kickbacks) would now be required to be disclosed to sellers. One even asked if he would have to disclose that he would be eligible for a free holiday. (most certainly!)

I would suggest that most agencies that seek vendor payment for advertising, (and that includes auctions), would be likely to be receiving kickbacks in some form or other, so watch for this one!
 

• An interesting, new provision is contained in Sec. 130 of the Act. Briefly, (and I paraphrase) it states that a client who signs up for a Sole Agency Agreement may, by 5 p.m. on the next working day, cancel the agreement by written notice to the agent, with fax and email both able to be used to advise the agent. This will apply even if some agencies try to get around it by specifying that clients agree not to cancel.

At the very least, this may provide some relief for clients who feel that they have been bullied into signing the authority.

• Further to the above, where clients have signed agency agreements for a period of more than 90 days, they will now be able, as of right, to cancel the arrangement as soon as the 90 days have elapsed, should they so wish.

This should go a long way to prevent agencies ‘tying-up’ clients for long periods of time.

• A big departure from previous requirements is the need for the clients (sellers) to be given a copy of the guide (prepared by the Real Estate Agents Authority) and to acknowledge receipt of that guide.
• There are also guides available for buyers and the same requirement for agents to give buyers a guide (and receive written acknowledgement that the guide has been given) applies.

At time of writing, the guides have yet to be published, so the precise contents are, as yet, unknown. The main thing to be aware of is the need for them to be supplied to all sellers and buyers as from 17 November.

•  All agreements for an agent to act on behalf of home sellers must be in writing and a copy of the agreement given to the client within 48 hours of signing.

Although there is little change here, it is as well to know what is required of agencies. Unless there is such agreement, signed by both parties, the agency is not entitled to either commission or expenses from the client.

• Another change comes from Schedule 2 of the Act, which requires salespeople to have held their Sales Licences for a minimum of 6 months before they are entitled to draw up Agreements for Sale and Purchase or give legal advice in respect of such agreements.

If you, therefore, as either a buyer or seller of real estate, come across a new salesperson, be sure that they have the required 6 months in the business before you let them deal with you in respect of an Agreement for Sale and Purchase.

•  And finally, all signage of Agents, as well as their website, advertising, and written documents of any kind, must contain the name of the Agent and the fact that  they are licensed under the new Act., and
• In cases where the Agent’s business is not being carried out in the Agent’s name, the name under which the business is being carried out.

This means that, for those agents who carry on business under the name of a franchise, they must, by law, mention both the franchise name and their own name as agents.