by Peter Mericka B.A., LL.B
Real Estate Lawyer
Qualified Practising Conveyancer Victoria
Director Lawyers Real Estate Pty Ltd
Shane Lowe is the Director of Methvens Professionals Real Estate in Mooroolbark, Victoria. A case of “contract switching” resulted in some startling revalations from Mr. Lowe. It seems that Mr. Lowe and the great P.T. Barnum have much in common when it comes to business ethics.
P.T. Barnum is credited with the saying, “Never give a sucker an even break and never wise up a chump”. This advice is regularly observed in the real estate industry where estate agents take every opportunity to limit the chances of a purchaser backing out of a sale.
Lawyers often experience difficutly in properly representing their clients in real estate sales because of commission-driven estate agents who fear that a purchaser may not proceed with a purchase. In order to limit the chances of a purchaser backing out, some estate agents go to extraordinary lengths. The now famous Ian Reid Gazumping Clause and the Ian Reid Finance Condition are two examples.
Some estate agents will go even further, using what is known as the “contract switch”. This is where the sale contract prepared by the vendor’s lawyer is provided to the estate agent, but the estate agent switches it, replacing it with one that is more to the estate agent’s liking. The vendor’s lawyer is not told of the switch, and only discovers it after the sale has been effected by the estate agent.
For some estate agents “switching” the contract is not enough to cut off the purchaser’s options, and so special conditions, designed to limit the purchaser’s opportunity to withdraw from the sale are inserted into the contract.
Our law firm was engaged to represent the vendor in a real estate sale transaction in which Methven Real Estate Professionals Mooroolbark was appointed as estate agent. In this particular case the Methven agent not only “switched” the contract without our knowledge, but also switched the building inspection condition we had drafted for one which severely limited the purchaser’s right to withdraw from the sale.
Because this type of behaviour could constitute a criminal offence in certain circumstances, I wanted an explanation for the Methven agent’s conduct. Mr. Lowe’s explanation, provided in a letter signed personally by Mr. Lowe, was most revealing.