In Short
- Real estate agencies must comply with Australian Consumer Law and state regulations to avoid disputes.
- Misleading advertising, unconscionable conduct and failing to act with due care and skill can lead to legal penalties.
- A clear complaints handling process helps resolve issues early and prevents escalation.
Tips for Businesses
Ensure property listings and advertisements are accurate to avoid misleading conduct claims. Treat all clients fairly, especially vulnerable individuals, and explain contracts clearly. Implement a structured complaints system that is easy to access and responsive. Proactively managing compliance and customer concerns reduces the risk of disputes and legal action.
As a real estate agency owner, you already know that satisfied customers are an essential part of a business. Disputes are harmful because they draw resources away from your real estate business’ productive activities. The best way to avoid conflicts is to ensure compliance with your legal obligations to keep customers happy.
It is crucial to grasp the significance of the Australian Consumer Law (ACL), a national law operating under the Competition and Consumer Act 2010 (Cth). The ACL is designed to prevent misleading, deceptive and unconscionable conduct in commercial transactions. Additionally, state and territory laws provide further guidelines for real estate agency transactions. This article outlines relevant laws and conduct that you should avoid when operating your real estate business.
What Are the Relevant Laws?
The first step is to familiarise yourself with the laws governing real estate agency businesses. Each state and territory has distinct laws dealing with aspects of the real estate industry. For example, in New South Wales, the following are essential:
- Property and Stock Agents Act 2002 (NSW): This Act sets out licensing requirements for real estate agents, including application and renewal processes. It prescribes the professional conduct expected of agents, including when managing trust accounts, entering into agreements and conducting property transactions. Additionally, it empowers NSW Fair Trading to take action against non-compliant agents.
- Residential Tenancies Act 2010 (NSW): This outlines the rights and obligations of tenants and landlords. Agents must handle rental bonds and rent payments according to the Act. The Act requires accurate condition reports at the start and end of tenancies. It also sets out responsibilities for repairs.
- Strata Schemes Management Act 2015 (NSW): The Act regulates the management of strata schemes. Property owners can delegate specific functions to the strata committee or managing agent, streamlining tasks.
Understanding these laws will enable you to fulfil professional obligations as a real estate agent, thereby minimising the chances of disputes arising.
Australian Consumer Law Requirements
The ACL sets out requirements that businesses must meet when providing services to consumers, including real estate agency services.
In particular, the ACL prohibits real estate agents from engaging in misleading or deceptive conduct or unconscionable conduct in the provision of services to consumers.
Additionally, the ACL sets out specific guarantees that you are required to meet when providing your services to consumers. These guarantees include providing services:
- with due care and skill;
- within a reasonable time; and
- that are fit for purpose.
Misleading or Deceptive Conduct
Misleading or deceptive conduct can occur through statements or omissions 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.
When advertising a property’s price, agents should base it on a market appraisal or the seller’s acceptance. This means you should not advertise at an unreasonably low price to attract interest. Likewise, it is important not to encourage bidding up prices by falsely claiming that the seller has rejected an even higher offer.
Other kinds of misleading and deceptive conduct include:
- a false impression about the quality of a property for sale;
- false or misleading testimonials about a property or your services;
- deceptive advertising to prospective buyers about the sale of land.
This factsheet outlines your key real estate advertising requirements.
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 assisting vulnerable clients.
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 due care and skill; 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.
Continue reading this article below the formHow Should You Handle Complaints?
Despite your best efforts to minimise disputes about your agency’s performance, you will likely, at some stage, receive complaints. Consider purchasing the Australian Standard for Complaint Handling Systems (AS 4608-2004) or developing your internal system. The elements of a good complaints process are:
- Visibility: The system should be easily identifiable to users, ensuring they know where and how to lodge complaints.
- Accessibility: It should be straightforward for users to access the system and make a complaint without undue burden.
- Responsiveness: The system must address complaints promptly and respond appropriately.
A well-executed complaints handling process can provide reassurance to your customers, thereby preventing disputes from escalating to the court system.
Key Takeaways
Legal obligations must always inform your dealings when running a real estate business. At a broad level, you should act honestly, fairly and reasonably with due care and skill. You can implement a complaints handling system to resolve customers’ issues satisfactorily. A breach of the law may entitle your customers to a refund, replacement or compensation, among other remedies.
For more information about real estate compliance, our experienced real estate lawyers can assist you through 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.
Frequently Asked Questions
To avoid misleading or deceptive conduct, ensure all property information and advertisements are accurate and not exaggerated. Base price estimates on a market appraisal or seller’s instructions, and avoid underquoting. Clearly explain contracts to clients and use disclaimers where necessary, ensuring they are visible and legible.
A strong complaints process should be visible, easy to access, and responsive. Ensure clients know where to lodge complaints, resolve issues quickly, and document all interactions. Consider implementing a structured complaints system to prevent disputes from escalating. Addressing concerns promptly can improve customer satisfaction and reduce legal risks.
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