Misleading conduct and statutory breaches

In recent years, real estate agents around Australia have received attention for ongoing practices that did not give a true indication of the price at which their vendor clients would consider selling their properties.  This conduct has attracted the attention of regulatory bodies and also seen changes to the law.

It reflects a concern that some of these practices do not align with their professional obligations.

In spite of this, it was reported in the Australian Financial Review on 3 October 2017 that a valuer and buyers’ advocate alleged that six out of seven real estate agents were deliberately under quoting expected selling prices to attract buyers to attend auctions in Melbourne. The suggestion was that those agents who quoted an appropriate price were being disadvantaged because they were not attracting as many people to the auction and therefore properties were being passed in more regularly.

It was said in the article that those who underquoted attracted more people to the auction.  It was not suggested those homes were sold undervalue.

This was against the background where in Victoria in May this year laws were introduced to prohibit under quoting. Similar laws had been introduced into New South Wales previously.

Further, it was on the back of concerns and prosecutions raised against agents in several states, including Western Australia, in recent years against inaccurate pricing, including the use of inaccurate range pricing of properties in advertising materials.  The complaint is that the range does not reflect the price based in which a vendor would sell.

In Western Australia, agents need to be careful not to make false or misleading representations, including about the sale price of property. To do so may constitute a breach of the Consumer and Competition Law 2010 (Cth) or of the Australian Consumer Law (WA).1

In Western Australia under the Real Estate and Business Agents and Sales Representative Code of Conduct 2016 agents must act in good faith in the best interest of their client, with due care diligence and skill, honesty and must not “engage” in conduct that is misleading or deceptive or is likely to mislead or deceive within the meaning of the Australian Consumer Law (WA).  A breach of the Code of Conduct is an offence under the Real Estate and Business Agents Act 1978.

Further, by regulation 26 where an agent or sales representative gives an opinion as to the current market price of real estate or business then that agent must not act as a sale agent or representative for that person unless that agent or representative gives the person in writing a statement of the opinion; the reason on which the opinion is based; and if available information regarding similar sales evidence to support that opinion.

It follows that in Western Australia, sales agents must tread very carefully in the area of giving opinions as to price and that if the price opinion is not properly held and cannot be justified, the agent may be exposed to prosecution and potentially civil claim by their principal.

No opinion should be expressed unless it is justified and justifiable.

Further, the property should not be advertised or promoted for sale in a misleading way, particularly as to price, with an eye to engaging with potential purchasers who are otherwise outside the vendor’s proposed selling price.

The obligations on agents (and other professionals) are high: misleading behaviour cannot be used to achieve an end.

Disclaimer – the information contained in this publication does not constitute legal advice and should not be relied upon as such. You should seek legal advice in relation to any particular matter you may have before relying or acting on this information. The Lavan team are here to assist.