Catch 24 On Agents’ Contracts

Posted on October 22, 2007 by | 4 Comments

Tim O'Dwyer M.A., LL.B by Tim O’Dwyer M.A., LL.B
Solicitor
Consumer Advocate
watchdog@argonautlegal.com.au


 


Since 1st July 2007, Queensland estate agents and their employees have been breaking a law with a maximum penalty for breach of $22,500 or two years imprisonment. On that date the rules relating to real estate contracts changed utterly when agents’ right to prepare contracts was suddenly and severely limited. Since then anyone in real estate who made sales, leased properties or explained a document or clause would have broken the law.Foxes guarding the hen-house


Few in real estate were aware such a law had come into force. Apparently neither the Beattie government nor the new Bligh government formally notified anyone – not even the Office of Fair Trading. The Real Estate Institute of Queensland, belatedly discovering despite that this radical reform had slipped through Parliament, failed to inform its members. The Hookers, the Harcourts, the Professionals and so on were also in the dark – as were their franchisee agencies. The REIQ emailed its members only after I blew the whistle in a Courier Mail article (on 18th October, 2007), and predicted that all hell would break loose once it sank in that agents could not prepare contracts like they used to. After explaining that Queensland’s real estate goal posts were quietly moved by Section 24 of Attorney-General Kerry Shine’s Legal Profession Act 2007, my article continued:



Agents and their employees may now only fill in details in preprinted contracts and other documents. No longer can they lawfully add clauses, conditions or annexures to contracts, tenancies, leases or listing agreements. No matter, it seems, whether these add-ins come from within agencies, from books of clauses, from the parties to contracts or are drafted by their solicitors. Agents and their employees are also prohibited from giving advice “about the contract or the details that are filled in”


Why the change? Blame lies squarely on the industry itself, a succession of State governments and the Office of Fair Trading. But I accept some responsibility for having dumped on former Attorney-General Rod Welford when his Legal Profession Bill unreservedly green-lighted agents’ contract preparation. After I drew his attention to better consumer protection laws in the Australian Capital Territory, he agreed that a “tightening up” might need to be considered. Four years later the Explanatory Notes to Section 24 of Kerry Shine’s Bill describe “tightening the reservation of legal work exemption for property agents.”.


Agents could always lawfully prepare contracts provided it was for free. Contract and document preparation was work reserved otherwise for practising solicitors. An agent’s job, agents said, was to find buyers, prepare contracts then quickly get them signed. A solicitor’s conveyancing job, agents said, really began after that.


The Office of Fair Trading claims that its regulatory (and consumer protection) role does not extend to agents’ contracts, and has long declined to investigate complaints about how … agents prepared contracts. The government cop-out was that punters who ignored Fair Trading’s legal advice warnings took their chances with agent-prepared contracts. Needless to say, contractual confusion frequently results from agents’ contract efforts. Conveyancing solicitors have to cope daily with gobbledegook contracts. A country solicitor complained publicly that “amateurs” were permitted to prepare contracts while solicitors were left to clean up the mess. Much of that mess, compounded by Fair Trading’s hand-washing, was caused by licensed amateurs who merely filled in details.


A letter-writer to a suburban newspaper, after an unsatisfactory dealing with Fair Trading, concluded agents were a “protected species”. He suggested the government “draft laws to protect the consumer – instead of issuing warnings to read contracts”. It remains to be seen if the drafting of Section 24 is tight enough to properly protect real estate consumers.


I concluded by wishing Attorney-General Shine (now also in charge of the Office of Fair Trading) lots of luck as he tried “to remove the foxes from the chicken house”.


This is part of the REIQ ‘s extraordinary email to its members:



“While the REIQ was not consulted during the development of recent amendments, as soon as we became aware of the legislation, we wrote to the Attorney-General in August to seek clarification of the scope of an agent’s involvement in the preparation of contracts under section 24 (2) (e) … The basis of our communication with the Department has been regarding uncertainty in the wording of the amended legislation. Specifically, a number of key terms remain undefined. We have highlighted the fact that the long-standing system of agents’ involvement in document preparation has assisted in maintaining an efficient contracting process … Advice from the Attorney-General’s office confirms that the effect of the minor amendment was to limit the exemption to the specific functions performed by a PAMDA licensee under the Act. The Attorney-General’s office has indicated that there have been no significant changes from the former legislation. There is no ban on agents amending contracts and agents can still draft forms for everyday business use.”


 While the foxes were obviously in no hurry to vacate the chicken house, how did the Queensland Law Society respond? Disappointingly, there was no reaction from the solicitors’ professional body, and no explanatory email to its members. But solicitors did receive this bulletin two days before my article appeared:



The Queensland Law Society is investigating a number of complaints about individuals who are not solicitors providing conveyancing services in possible contravention of the provisions of section 24 of the Legal Profession Act 2007.


The most effective way of investigating such conduct is to obtain documents from law practices that have received correspondence and documents from these persons in the course of a conveyancing transaction. Such correspondence and documents will assist QLS to establish whether a breach of section 24 has occurred.


The Society requests the assistance of the profession in the investigation of these complaints. If you believe that you have correspondence or documents that may assist, please contact the Society’s Professional Standards Department.


Clearly my Law Society had different priorities from the many conveyancing solicitors who responded encouragingly to my article, and who agreed with my interpretation of Section 24. Unlike agent-prepared contracts (which we see daily), illegal conveyancing documents are actually few and far between.


POST SCRIPT: All Property Agents and Motor Dealers Act licensees (including resident letting agents, auctioneers, property developers, pastoral houses and commercial agents) are caught by Section 24’s limitation on filling in details and its prohibition on advice.



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4 Comments

  • FloridaPhil says:

    Hmmm… From across the pond, we try to limit attaching additional addenda to the contract other than those produced by our Board. Our standard contract and addenda are well written for the protection of all parties involved in the transaction.

    I will send over some horses for the fox hunt.

  • The situation is the same in Victoria. It has always been illegal for estate agents to draft contracts, except as provided by Section 53A of the Estate Agents Act 1980.

    Estate agents are permitted to do no more than to fill in the blanks of a standard contract document or a contract prepared by a qualified lawyer.

    However, estate agents go much further than this by actually drafting terms and conditions to be inserted into the contract. The Real Estate Institute of Victoria (REIV) aids and bets this practice by actually issuing to estate agents a set of special conditions for use by estate agents when preparing offers for purchasers.

    It seems lost on the REIV and its estate agent members that when the estate agent is acting for the vendor it is highly inappropriate to the estate agent to be drafting documents for the purchaser. It should be obvious that there is a conflict of interests in such circumstances.

    The problem is compounded by estate agents who insert terms and conditions for their own purposes (search “Ian Reid” on this blog site for examples).

    Estate agents are often aided and abetted in this practice by conveyancers and lawyers who rely on estate agents for lucrative conveyancing referrals (search “Richard Wood Solicitors” on this blog site for examples).

  • http:// says:

    what i understand and was told is we can no longer put in any clauses? for example we cant include a clause which states that the owner has to re-roof before the settlement date

  • Estate agents have never been permitted to draft clauses for contracts. First, the estate agent acts for the vendor and it is a conflict of interests for the estate agent to draft terms for a purchaser. Second, the estate agent is not qualified to draft contractual terms and to provide legal advice to the parties as to their legal rights and obligations pursuant to the drafted terms.

    Why wouldn’t an estate agent simply advise the parties to consult their lawyers anyway?

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