Vendors: Appointing an agent
A A seller. can sell their own property without engaging an All the property a person has, including real property and personal property. It is often used to describe property belonging to someone who has died, or the property of a bankrupt. A person who acts for someone else. They can make decisions, carry out tasks or make agreements for the other person. For example, if you ask someone to bid for you at an auction they will be acting as your agent., although they need to employ an agent to conduct a formal auction, if they want to hold one. Individuals who A written law made by parliament. Also called an ‘Act of parliament’, ‘statute’ or legislation. as estate agents must be licensed. The licensing body is the Business Licensing Authority (BLA) (see ‘Contacts’ at the end of this chapter).
In Victoria, the BLA, together with the Estate Agents Council, regulates estate agents’ activities and A type of property ownership or arrangement where one party, known as the trustee, holds property or money for the benefit of another party, referred to as the beneficiary. accounts, administers the estate agents’ A binding promise made as reassurance that another person will carry out their legal obligations (e.g. paying a debt). The person making the promise is called a guarantor. If the person being guaranteed fails to pay, the guarantor becomes responsible for the debt. fund (which repays clients when estate agents or their staff steal money held in trust) and investigates complaints.
The Real Estate Institute of Victoria (REIV) is the representative body of estate agents practising in Victoria; most agents are members of REIV.
An estate agent should be formally appointed in writing as the agent for a vendor’s property as this protects both the vendor and the agent. The agent is not entitled to take their commission without a written appointment; however, an agent can market a property without being appointed.
There are three types of appointment:
- general sale authority: this makes the fees payable only if the agent is the effective cause of the sale;
- exclusive sale authority: this makes the fees payable if the property is sold by the agent, or by any other person including the vendor, to a person who was introduced to the property during the authority period, or up to 120 days after the end of the period, and who buys as a result of the introduction; and
- exclusive auction authority: this makes fees payable on the same basis as the exclusive sale authority.
The authority must contain specific information about the agent’s fee, a statement identifying discounts and rebates, etc., and a statement about where complaints about the agent can be made.
The right of the agent to sell under a general and an exclusive sale authority lasts for 60 days and under an exclusive auction authority for 30 days, unless another period is specified in the agreement.
A vendor may also negotiate the fees, advertising The amount charged by a lawyer for legal work. Lawyers can only charge the amount agreed with the client in a costs agreement or the amount stated by a court in its rules. The party who loses a case usually has to pay all their own costs plus most of the costs reasonably incurred by the other side. See also indemnity costs. and the terms with the agent.
Vendors can engage multiple agents for the one sale to act for them simultaneously, either as conjunctional agents (so that the agents share the fees) or by giving each agent a general sale authority (which entitles only the selling agent to receive commission).
Most residential properties are sold through exclusive sale authorities as this option gives the agent the greatest incentive to earn the fees.
Sale by private treaty or auction?
Vendors need to decide whether to sell by private treaty or by auction. Sale by auction is popular, but a vendor should only choose an auction if they:
- are prepared to pay the extra expenses;
- understand the agent’s authority; and
- are satisfied that it is the best marketing strategy for their property – the estate agent should provide guidance on this.
Auctions and COVID-19
At the time of writing (1 July 2020), due to the restrictions put in place in response to COVID-19, auctions are being conducted online, usually during the week.
Unless the estate agent’s authority states otherwise, the cost of advertising a property for sale is paid for by the vendor, not the agent. The cost of advertising for a private treaty sale is usually much less than the cost of advertising for an auction sale.
It is recommended that vendors ask for a detailed list of advertising expenses from each agent when they are selecting an agent to sell their property.
Advertising is generally sold at a discount by newspapers, signboard suppliers and printers to bulk buyers (such as agents). Vendors are entitled to this discount. The estate agent’s authority may state that the agent can keep the discounts. A vendor can delete this clause and ask that the discounts be paid to them.
Estate agents’ fees
Fees are stated in the estate agent’s authority. There is no limit on the amount an agent can (1) A statement giving the details of a crime an accused person is claimed to have committed. (2) A personal property security. (3) A judge’s directions to a jury at the end of a case.. It is up to the vendor to negotiate a price.
An estate agent’s authority must show:
- details of the commission and outgoings; and
- if the fee is calculated on a percentage basis, a statement of the fee expressed as a percentage and dollar amount that would be payable on the reserve price or other relevant amount.
The fee can be based on a Formal delivery of legal documents to a person to tell them there are court proceedings against them which they must defend, or to make sure a witness in a case knows when they have to go to court to give evidence. or series of services, such as holding open for inspections, negotiating the An agreement that the law will enforce. and collecting the deposit, or it can be a commission on the price.
Vendors should ask for a detailed price list from the agent before signing the estate agent’s authority.
Victoria has enacted underquoting laws that apply to residential properties. Agents must prepare a statement of information for each residential property they are engaged to sell. The statement of information must include an indicative selling price for the property, details of the three most comparable properties and the suburb’s median house or unit price. Complaints about underquoting are dealt with by Under the Australian Consumer Law, a person who buys goods or services for less than $40 000 or for personal or home use. Affairs Victoria (www.consumer.vic.gov.au).
Advice to vendors
Shop around for an agent. You should consider the costs, and the agent’s competence and experience before making your choice. It is also recommended that you conduct thorough negotiations before appointing an agent. Negotiations should cover the type of appointment, commission and advertising costs.
As a vendor, do not:
- sign a contract of sale that contains terms (including a price) that you are unhappy with; ask the agent to renegotiate with the buyer;
- agree to sell the property to the agent, or to anyone employed by the agent, or to a company associated with the agent without first seeking advice about section 55 of the Estate Agents Act 1980 (Vic). These contracts may involve the buyer in a A situation where someone’s personal interests or their duties to another person could affect the way they carry out their duties. If there is a conflict of interest in performing up a role, the person generally should not accept that role. For example, a lawyer should not agree to represent the buyer as well as the seller in a sale of land.. You should consider raising your price by the amount of commission or get the agent to forego commission to ensure that the agent is not getting an artificial discount not available to any other buyers;
- sign a contract of sale by which your property is sold for a price less than the value of the loans secured on the property (including overdrafts that are indirectly secured) unless you consult your lender and your A legal practitioner (lawyer) who sees clients and opens files to deal with their legal matters but usually does not appear in court. See also barrister. or financial adviser first.
Ultimately, selling the property is your decision as the vendor. You must determine whether an The first step in agreeing to make a legally binding agreement. An offer must be accepted before there can be a legally enforceable contract. For example, a person can offer to sell their car for $5000 and a buyer can accept the offer and pay that purchase price. is acceptable. An agent must pass on all offers to you. If the offer is above the sale price specified in the agent’s appointment and you refuse it, you may be liable to pay the agent’s fee.
Advice to buyers
The expenses of conveyancing, the fee for using an electronic conveyancing platform, A state tax on the transfer of ownership of property such as land, or on leases., the A restriction attached to ownership of property to secure the repayment of money borrowed. The mortgage stops the owner of the property selling it until they have paid off the debt. lodgement fee, registration fees, insurance and other charges can add around six per cent (or more) to the purchase price of a property. Note that every buyer A document that sets out what a person wants to happen to their money and other property after they die. fare differently due to the duties, insurance and concessions that apply.
Pre-purchase contract review
Before you make an offer to buy a property, you should send your conveyancer or conveyancing solicitor the contract of sale to review. They will recommend which special conditions to have struck out, what conditions to add, and what to do further diligence on in light of what has been disclosed in the A document that a seller (vendor) of real estate must give to the buyer buyer before a contract of sale is signed. It contains information about the property, such as rates and council planning restrictions that affect it. Also called a section 32 statement..
You should get the contract reviewed before you make an offer, as once you have signed the contract, you cannot amend it unless the vendor agrees.
As a buyer, do not sign a contract of sale until:
- your conveyancer or solicitor has reviewed the contract of sale and the vendor’s statement;
- your lender informs you in writing that finance is preapproved (i.e. that you qualify for a loan);
- you have checked that the boundaries of the land correlate with the title measurements (which are on the title plan in the vendor’s statement) – check the distance from the land to the street corner (or the ‘connecting point’) shown on the plan, to ensure that the land inspected is the same as the land in the title (note that your ability to object to a title based on measurements of the land may be restricted under a standard contract);
- you have checked whether you are required to install child-proof locks and barriers that comply with Australian standards for any swimming pool or spa on the property;
- you have checked with the local council that the swimming pool or spa has been registered with the council and that the pool/spa fencing is compliant (and you have a compliance certificate);
- you have checked with the local council to ensure that the land can be used in the way you intend;
- you have checked the area’s planning permits (at www.planningalerts.org.au) and considered if these will affect your The pleasantness, benefits and enjoyableness of an environment. While individual features such as a toilet block are called ‘amenities’, amenity in planning law is a quality, not a location or a thing. For example, building a toilet block will add to the number of public amenities in the area, but it may also decrease the amenity of the near neighbours. or privacy; and
- any conversations you have had with the estate agent about early access to the property, certain goods coming with the property or other special conditions are written into the contract.
The documents you are required to sign immediately on purchasing the property are the contract of sale and the vendor’s statement. Do not sign any other documents without independent legal advice.
Section 27 statement
At the time the buyer signs the contract of sale, it is common for the vendor or their agent to present a section 27 statement for the early A document signed by parties ending a court action. The party who began the action agrees to drop it, often in exchange for a payment by the other party. Also called terms of settlement. of the buyer’s deposit (By authority of, or in accordance with, or as directed by, some court order or legislation. section 27 of the SL Act). This statement contains details of any mortgage or caveats over the property, which allows the buyer to make an educated decision about whether to To agree to something being done, to approve an action or arrangement. See also informed consent. to their deposit being released.
In certain circumstances, lawyers consider it safe for the buyer to consent to the vendor accessing the deposit before settlement. Most importantly, the vendor should have sufficient (1) Fairness and justice. (2) A right to property that the court will recognise even though it does not amount to full legal ownership. (3) A set of legal rules that aims to reduce any harshness that would result from strict application of the law. in the property to enable the mortgage to be discharged at settlement without relying on the deposit and they should not be in Failure to do something that is legally required. For example, a person who fails to make a payment on their car is in default on the loan; if they continue to be in default the creditor may issue a default summons to take the debtor to court. of their mortgage. ‘Sufficient equity’ is generally Treated by the law as if something is the case, even if that is not the reality. For example, children may be deemed to have the same home as their parents, whether they actually live there or not. Or a person may be deemed to have given their consent to something if they hear about it and do not object. Compare rebuttable. to mean that the total debts owing on the mortgage do not exceed 80 per cent of the purchase price.
If a buyer agrees it is safe for the vendor to have early access to the deposit, they can sign the section 27. Once this done, whoever is holding the money in trust is authorised to release the deposit to the vendor.
If a buyer objects to their deposit being released early (and they need to state a Legally binding or effective. reason for the objection), the vendor will not be able to access the deposit until settlement.
If a buyer neither consents nor objects to the request, 28 days after service of the section 27 on the buyer, the deposit can be released to the vendor by the person holding it in their A bank account in which money is held on behalf another person, not for the use of the account holder. For example, a lawyer’s trust account holds clients’ money. It is regulated by strict accounting rules that safeguard the clients’ interests. For example, a trustee may hold a child’s inheritance for them until they turn 18..
A buyer has 28 days from receiving the section 27 to object to the early release of the deposit. It is permissible for an estate agent to provide the section 27 with the contract so that time begins to run from the signing of the contract. However, it is not permissible for an agent to ask a buyer to sign a section 27 consenting to the release of the deposit at this time. This is because a buyer is entitled to have a reasonable opportunity to assess the information (or have their lawyer assess it).
If you receive a section 27 statement, seek legal advice before signing it. If the agent gives it to you directly, ask for it to be forwarded to your conveyancer or conveyancing solicitor for their review.
Inspecting the building
The contract of sale may contain warranties about the quality of the building. The rule is still ‘Let the buyer beware’. In the past, buyers who purchased goods could not easily get a refund if there was something wrong with the goods. These days buyers can get refunds or exchanges much more easily because consumer protection laws say goods must be of reasonable quality, work properly and do what they are supposed to do., meaning ‘let the buyer beware’. However, deliberately misleading statements made by the vendor or their estate agent may give the buyer a right to compensation.
There are two types of pre-purchase inspections:
- A building inspection involves a builder examining the building, inside and out, and noting any issues from major structural faults to In Victoria, a child or young person under 18. See also infant. defects, Money paid to a person to financially support them. When a couple has separated both parents have a duty to support their children, and a court can order a parent to make regular payments to support the children. Maintenance for a spouse is now less common, and must be applied for within 12 months of a divorce. It is usually covered in a final settlement of all property. issues and safety hazards. Outside, a building inspector will look for cracking and rising damp, and will examine drains, gutters, sheds, retaining walls, fences, windows and roofing. Inside, a building inspector will look for cracks in the walls, uneven or springy floorboards, leaky ceilings and the quality of the finishes and fittings. Some inspectors will also investigate roof spaces (to check the framing and insulation) and under the floor, but these areas are often excluded.
- A pest inspection looks for Material presented to a court to prove or disprove a fact. It can include what witnesses say as well as documents and other objects. of timber pests (e.g. termites).
There are two ways buyers can do a building/pest pre-purchase inspection:
- If the property is not being sold at an auction, buyers can make an offer subject to a satisfactory inspection. The special condition is added to the contract and the buyer is given a set time frame to organise the inspection. If the inspection identifies defects that are not to the buyer’s satisfaction, they can terminate the contract and get their deposit back. Another option is to add a condition to the contract that allows a buyer to terminate the contract if an inspection reveals defects that to fix require work above a certain value. Buyers should note that usually vendors will only accept an offer made subject to an inspection that reveals a major building defect or a major pest infestation. This is a higher threshold than a report needing to be to the buyer’s satisfaction. If this is the case, a buyer will only be able to terminate the contract and get their deposit back if the inspection reveals these major issues.
- If the property is being sold at an auction, your only option is to get the inspections done before the auction.
Buyers can employ a licensed building inspector or an architect to conduct a building inspection – and if necessary, a licensed pest control operator – to ensure the property is sound before making an offer. The professional fee for a building and pest inspection of an average-sized house is about $400–$600.
What are chattels?
Chattels or goods are movable items that are not fixed to the land (e.g. a non-integrated dishwasher, washing machine, garden shed, a garden statue, television antenna, light fittings, a swimming pool pump and filter, and floor rugs).
Unless specified and included in the contract of sale, the vendor is entitled to remove chattels. If a buyer wants to purchase these movable items, they should be included in the chattels or goods clause in the contract of sale.
The vendor must give the buyer a vendor’s statement (also called a ‘section 32 statement’) before the buyer makes an offer on the property.
The vendor’s statement is a key document in the sale of a property; the contract is Having no legal effect. A void agreement has something wrong with it, so it cannot be a legally binding contract. For example, a verbal agreement to buy land would be void, because the law says those contracts have to be in writing. without it. The vendor’s statement contains information about the land. It does not contain information about the quality and condition of the buildings or fittings, the conformity of buildings with building regulations, any land wrongly included inside the fences, or any land in the title that is outside the fences.
A buyer should make independent enquiries to verify the information contained in the vendor’s statement, and to discover any information not included in the statement.
An omission or error in the vendor’s statement may allow the buyer to avoid the contract of sale without any penalty at any time before settlement.
It is in the vendor’s best interest to ensure that the vendor’s statement is carefully prepared by their solicitor or conveyancer.
If there is a dispute raised by the buyer, the vendor may challenge the contract avoidance in An independent body that hears legal claims brought by parties and decides between them. Serious cases are heard by a judge and jury, or just a judge. Less-serious cases are heard by a magistrate. and may win if the court is satisfied that the vendor acted honestly and reasonably and ought fairly to be excused for the wrong information, and that the buyer is in substantially as good a position as if all the information had been provided.
Buyers seeking to avoid the contract of sale due to an error or omission in the vendor’s statement should seek legal advice about the strength of their claim and the associated costs and legal implications before starting legal proceedings against the vendor.
A well-drafted vendor’s statement contains all the information required by the SL Act (s 32), including:
- the title and plan of subdivision;
- warnings about planning controls;
- easements, covenants and similar restrictions (including leases);
- planning information;
- prohibitions in the planning scheme against building a dwelling house, if the land is outside the metropolitan area;
- whether there is road access to the property;
- rates, taxes and outgoings charged on the land, or a statement that the charges do not exceed a specified amount;
- Found in a statute of delegated legislation. For example, a statutory authority or body is aperson or organisation that has special powers given by parliament to do work for the public benefit. charges on the land;
- services connected to the property;
- insurance details if the contract does not provide for the property to remain at the vendor’s risk until the settlement date;
- building guarantees and permits obtained in the previous seven years;
- any notice, order or approved proposal affecting the land that the vendor could be reasonably assumed to have known about;
- A body corporate created by registration of a plan of subdivision or a plan of strata or cluster subdivision. See also prescribed owners corporation. notices and liabilities;
- contaminated land;
- orders under the Land Acquisition and Compensation Act 1986 (Vic);
- Growth Areas Infrastructure Contribution;
- energy efficiency information.
If land is sold pursuant to a A contract of sale of real estate that allows the buyer to pay the seller in instalments over a longer period than usual; for example, three or five years. Ownership remains with the seller until the final payment is made. contract, the vendor must provide additional information, including details of interest and repayment terms of the loan. Details must be provided of any mortgages that will not be paid out at settlement, and the vendor’s default on the loan(s) (if applicable).
A copy of a current title search (also called a register search statement) must be attached to the vendor’s statement.
If the property being sold is an off-the-plan property, the vendor should disclose the latest version of the proposed plan of subdivision in the vendor’s statement.
It is common for the vendor’s statement to include other searches and certificates from the relevant rating and tax authorities to show the outgoings as at the date of the contract of sale.
It is Required by law to be done; a law that must be strictly complied with. Under mandatory reporting, people in particular jobs to tell a government agency if they know an offence is being committed – for example, doctors and teachers must report child abuse. Mandatory sentencing requires judges to give an automatic jail term for certain offences. for the vendor or their agent to give the buyer the due diligence checklist issued by Consumer Affairs Victoria before the buyer signs the contract of sale and the vendor’s statement. This checklist is available at www.consumer.vic.gov.au/duediligencechecklist.
In addition to the vendor’s Providing information to another person or institution as required by a contract or other legal process. regime set out in the SL Act, the Sale of Land A change made to a legal document or Act of parliament. Act 2019 (Vic), which took effect from 1 March 2020, provides that vendors and agents cannot knowingly conceal any Relevant or important. For example, material evidence is something that helps to prove an argument in a criminal case. facts about a property from a buyer.
This helps a buyer make a fully informed decision before buying a property, as some information about a property might only be known to an owner and may not be known to a buyer, even if they have personally inspected the property.
Material facts can include:
- whether a murder has occurred on the property;
- whether any building work has taken place without a building permit or planning permit, or that is otherwise illegal;
- the underlying cause of an obvious physical defect where the cause is not readily apparent on inspection (e.g. a large crack in a wall would be obvious to a buyer, but the underlying reason for the crack, such as defective stumping, may not be clear to a buyer);
- whether the property has been used as a methamphetamine laboratory;
- whether the property has flammable cladding;
- whether there is any asbestos on the property.
The vendor or agent must answer any questions from a buyer about material facts as fully and frankly as possible.
For more information, see the Material Facts Guidelines on the Consumer Affairs Victoria website at www.consumer.vic.gov.au/saleofland.