Buying property is a significant investment for individuals, families and businesses alike. A real estate agent is, therefore, in a position of trust and responsibility. They should behave honestly, fairly and professionally towards all parties involved. Furthermore, they should take care to ‘sell’ a property by highlighting its assets without misleading or deceiving the buyer. Laws and regulations surrounding misleading and deceptive conduct exist to protect consumers from false representations about properties they buy.
This article sets out a guide to determine whether a real estate agent is engaging in misleading or deceptive conduct.
Defining Misleading and Deceptive Conduct
Misleading and deceptive conduct is a broad umbrella that includes actions, statements and advertisements made about a property. Engaging in misleading and deceptive conduct is prohibited under the Australian Consumer Law (ACL). Additionally, state-based provisions are in place to specifically regulate the conduct of real estate agents.
Misleading and deceptive conduct encompasses anything that objectively causes a false impression of a property or its features. So, the question to consider is whether a reasonable person would have a mistaken perception of the property due to the actions of the real estate agent. For example, photographs on advertisements that are excessively photoshopped may be misleading or deceptive as they create a wrong image of the property in the viewer’s mind.
To minimise the potential for misleading and deceptive conduct, real estate agents should:
- disclose all information relevant to the buyer’s decision to buy the property;
- advertise the selling price based on a reasonable estimate according to market research;
- ensure advertisements represent an accurate image of the property; and
- refrain from making false or deceptive claims about the location or features of the property.
Intention is Irrelevant
The intention of the real estate agent is irrelevant in determining whether they engaged in misleading and deceptive conduct. The issue is whether the conduct is objectively misleading; not whether the real estate agent meant to mislead the buyer.
If a seller advises the agent of a particular feature of the property, it is up to the agent to confirm the truthfulness of the statement. If the agent is unable to do this, they should advise the buyer that the information is from the seller and has not been verified. For example, if a seller informs the agent that the property is 100 square metres, the agent must check relevant documentation, such as contracts of sale, before advertising the information.
Statements About the Future
Real estate agents must have reasonable grounds for making a statement about the future of a property. When a real estate agent makes such a statement, they are giving the impression that they have reasonable grounds to make that prediction. If they do not have reasonable grounds, they are engaging in misleading and deceptive conduct.
Information given to buyers regarding the future selling price of a property must be an honest estimate based on a reasonable assessment of the market. If the market is particularly unstable, the buyer must be made aware of this.
Silence Can Be Misleading and Deceiving
There is no standalone duty to disclose facts about the property to the buyer. However, silence can give a false impression amounting to misleading and deceptive conduct. The following situations may require real estate agents to disclose information:
- facts that are of concern to the buyer and not readily apparent;
- if a change happens, rendering a previous statement the agent has made false; or
- if a buyer explicitly asks for information.
To determine if a failure to disclose a fact is misleading or deceptive, consider whether a reasonable person would have a mistaken impression of the property because of the agent’s failure to disclose a fact.
For example, if a property has a water leakage that is not readily apparent, the real estate agent must communicate this information to the buyer. Similarly, if the real estate agent initially told the buyer that there were no water leakage issues and the issue is subsequently discovered, the real estate agent must make the buyer aware that the initial statement is no longer valid.
In addition to the ACL, each state and territory has specific legislation regulating the conduct of agents.
|State or Territory||Legislation|
|Australian Capital Territory||The Agents Act 2003|
|New South Wales||Property, Stock and Business Agents Act 2002|
|Queensland||Property Occupations Act 2014|
|Victoria||Estate Agents Act 1980|
|South Australia||Land Agents Act 1994|
|Northern Territory||Agents Licensing Act|
|Western Australia||Real Estate and Business Agents Act 1978|
|Tasmania||Property Agents & Land Transactions Act 2005|
Real estate agents are trusted with significant investments and are therefore in a position of trust and responsibility. They should act in a manner that is ethical and honest towards parties involved in a sale of property. To determine whether a real estate agent has engaged in misleading or deceptive conduct, consider whether a reasonable person would have a mistaken impression of the property as a result of the real estate agent’s behaviour. Statements about the future of the property and silence can amount to misleading or deceptive conduct.
If you have any questions, contact LegalVision’s advertising compliance lawyers on 1300 544 755 or fill out the form on this page.
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