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Running a successful real estate business requires more than merely a keen eye for properties and savvy negotiating skills. It requires a thorough understanding of the legal framework that underpins the real estate industry in the state or territory in which you plan to operate. Having the proper contracts in place safeguards your interests and ensures smooth transactions and seamless operations. This article discusses some of the key contracts you should consider when running a real estate business.
Agency Agreement
An agency agreement is fundamental to a successful real estate transaction. Agency agreements establish how the real estate agent and property owner work together. Accordingly, it ensures both parties clearly understand their respective roles and responsibilities.
There are different types of agency agreements, all of which serve different purposes and require various clauses or features. You must carefully consider factors such as the:
- type of agency agreement you require;
- nature of the arrangement you are looking to formalise; and
- state or territory you are operating in.
For example, an auction agency agreement creates an exclusive right with one agent to sell the property at an auction. In this type of agency agreement, the commission must be paid to the exclusive agent. However, auction agency agreements are only formally recognised in New South Wales, Victoria and Queensland.
This factsheet provides an overview of a real estate agent’s professional obligations.
Privacy Policy
Privacy is a key concern for real estate agents and property owners alike, particularly in today’s digital age. A privacy policy allows your real estate business to outline how it will collect, use, store and protect its clients’ personal information.
It is important you understand your obligations under Australian Privacy Law. Even if you are not legally required to have a privacy policy, it is always good to be transparent when handling personal information.
This sends a good message to your clients that you take data protection seriously. In addition, it fosters credibility and safeguards your reputation in an increasingly data-conscious landscape.
If your business is what is known as an ‘APP Entity’, then you must have a privacy policy that includes all the information set out in the APPs. These include:
- the kinds of personal information you collect and hold;
- how you collect and hold personal information;
- the purposes for which you collect the personal information;
- how an individual may access their personal information and seek its correction;
- how an individual may make a complaint if you breach the APPs and, how you will handle their complaint; and
- whether you will likely disclose personal information to overseas recipients and, if so, to which countries.
Disclaimers
While advertising in every sector must comply with the Australian Consumer Law (ACL), transparency is particularly important in the real estate industry.
As a real estate business, you must avoid making false and misleading representations in your property advertisements regarding the:
- nature of the interest in the land;
- price payable for the land;
- location;
- characteristics of the land;
- use to which the land is capable of being put; or
- existence or availability of facilities associated with the land.
Furthermore, ensure that you are not making any claims about the characteristics of a property or piece of land in inaccurate photos or advertisements that give prospective buyers a false impression. Any statements you make alongside a photograph of the views or facilities available in a local area also must not be inaccurate or misleading.
One way you can help protect yourself in these situations is to include a disclaimer. Whether you are advertising a listing on your website or a third-party site, a disclaimer clearly states to the person viewing the advertisement that while you have made all reasonable attempts to verify the accuracy of the information provided, viewers should still make their own enquiries.
Disclaimers help to:
- mitigate the possibility of disputes;
- set realistic expectations; and
- establish transparent communication channels with clients.
Nonetheless, it is important to note that disclaimers do not exclude your liability entirely where the content as a whole is misleading or deceptive.
Key Takeaways
When running a real estate business, it is imperative to have the proper contracts in place. These documents are vital to protecting your legal interests. In addition, they are essential for facilitating clear, efficient and smooth processes, whether communicating with clients or formalising a transaction. For example, your business must utilise an agency agreement best suited to your business and the arrangement you wish to enter. Similarly, you should consider your obligations under privacy and consumer law and implement privacy policies and disclaimers. These contracts help mitigate your liability and ensure you communicate with your clients appropriately.
If you need help drafting a contract for your real estate business, our experienced real estate lawyers can assist 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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