As a real estate business owner, you must adhere to rules that protect consumers. To be precise, your customers have rights under the Australian Consumer Law (ACL), which operates nationally and is found in the Competition and Consumer Act 2010 (Cth). Each state or territory also provides additional protection in fair trading rules. The ACL prevents misleading, deceptive and unconscionable conduct in commercial transactions. Moreover, consumer protections may override contractual terms. This article explains key ACL considerations for real estate agents.
The General Protections
People who meet the conditions are eligible for general protections in the ACL. In particular, there are protections against:
- conduct that is misleading or deceptive;
- conduct that is unconscionable; and
- services provided without due care and skill.
What Transactions Are Eligible?
Only some customers have a right to claim protection under the ACL. A “consumer” is a person or a business that meets at least one of the following conditions:
- bought a good or service for less than $100,000, including GST;
- purchased a good or service for personal, domestic or household use; or
- purchased a vehicle or trailer used mainly to transport goods on public roads.
It is not enough that a consumer has purchased goods or services that satisfy one of the categories. Even if a transaction meets the conditions above, goods purchased for re-supply or a manufacturing process are still excluded.
Likewise, a person must buy goods “in trade or commerce” to receive consumer guarantees under the ACL. “In trade or commerce” means private sales between individuals are generally excluded from the scope of the ACL. Likewise, the sale must occur within Australia.
Continue reading this article below the formMisleading or Deceptive Conduct
Misleading or deceptive conduct can occur by statements, representations or omission by silence. Inserting a disclaimer into promotional material may protect your business from being sued. However, courts will look at factors such as the size and font of your disclaimer to determine whether it is sufficient to alert consumers.
Real estate agencies should ensure that they are fair and honest in their dealings.
Unconscionable Conduct
Unconscionable conduct refers to behaviour that offends good conscience. Liability may arise from exploiting your clients when providing services or forming contracts.
A court will consider factors like:
- the parties’ bargaining positions;
- whether the parties act in good faith; and
- whether a person uses undue influence.
Real estate agencies should consider their legal obligations when providing assistance to vulnerable clients.
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Due Care and Skill
When you provide a service to a client, you must do so with due care and skill. There is no precise definition of what due care and skill means; it refers to what is reasonable given the circumstances.
Generally, real estate agencies must carry out their jobs in a manner that is as good as a competent provider with average skills and experience.
Unfair Contract Terms
As a real estate agent, you must not enter into unfair standard-form contracts with clients. Contracts for services can include those you enter with customers, like lease agreements, as well as business contracts.
A standard-form contract is typically a ‘take it or leave it’ document with little opportunity to negotiate. This will likely apply to most standard form real estate client agreements.
Additionally, a term may be unfair if it:
- creates a significant imbalance in rights and obligations between parties;
- is not reasonably necessary; or
- would cause detriment to the disadvantaged party.
There is no formula for what is unfair. Each case depends on the facts, and a court will consider the contract as a whole.
Real estate agencies should ensure that they do not use standard-form contracts without checking terms are suited to each client. You should review lease agreements and agency agreements to remove unfair terms or amend them to make these balanced.
What Remedies Are Available?
Suppose your real estate services fail to comply with the ACL. In that case, your customers may be eligible for a refund, compensation or cancellation of the contract. The exact remedy available will depend on whether your real estate business’ failure to comply with the ACL was significant or minor.
In relation to an unfair contract, such as a lease agreement, a court may declare a certain provision to be void, meaning it has no effect. A court might make orders to compensate for damage caused by the unfair term or order you to stop undesirable behaviour.
State or Territory Laws
While the ACL is a national law, each state and territory provides additional consumer protections within their fair trading rules. There are also residential tenancies laws setting out similar obligations. When operating your real estate business, ensure you know the local law or speak to a lawyer for assistance.
Key Takeaways
Legal obligations, including the Australian Consumer Law (ACL), must always inform your dealings when running a real estate business. At a broad level, you should act honestly, fairly and reasonably, in line with the standards in law. A breach of the law may entitle your customers to a refund, replacement or compensation, among other remedies.
For more information about complying with the Australian Consumer Law, our experienced real estate lawyers can assist you as part of our LegalVision membership. For a low monthly fee, you will have unlimited access to lawyers to answer your questions and draft and review your documents. Call us today on 1300 544 755 or visit our membership page.
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