By Melissa Clark - 23 Mar 2010
The new Real Estate Agents Act (REAA) 2008 came into force on 17
November 2009. The new rules imposed on licensed real estate agents
have been embraced positively and for the most part, the market
seems to have responded in the same way.
An important new rule is that agents must now disclose known
property defects to potential buyers. If there are no known defects
but it appears likely that a property may have hidden or underlying
defects (based on the agent's knowledge and experience of the real
estate market) the agent must either:
- Get confirmation from the seller that the property does not
suffer from any such defect; or
- Tell potential buyers of any significant potential risk so that
they can get expert advice.
Not surprisingly, real estate agents are now asking sellers
direct questions about potential defects before the agency
agreement is signed. Under the new rules, if a seller tells an
agent not to disclose any defect or risk, the agent cannot continue
the agency.
Some agents are requiring sellers to certify that their property
is not subject to any defects or hazards, or to make a "leaks"
disclosure. Others are seeking indemnities from sellers if any
information provided by the seller is incorrect or misleading, by
omission or otherwise.
Tips for buyers
As a buyer you should always make your own enquiries about the
condition of a property and obtain reports and advice from the
relevant professionals. Under the new rules agents can no
longer simply rely on caveat emptor or let the buyer beware.
Agents must answer your specific questions about the potential for
defects, particularly if any of the standard warranties have been
deleted from the sale and purchase agreement or the auction
conditions.
Tips for sellers
As a seller, be sure to read the fine print of the agency
agreement. Be clear about what you are acknowledging or
certifying in relation to known or potential defects.
If you don't have actual knowledge of the condition of the
property (e.g. if the property is owned by a trust and you are an
independent trustee) you must include a limitation of liability
clause in the agency agreement. The inclusion of such a clause has
not been an issue for any of the agents we have dealt with over the
last few months.
As part of the sales process we are constantly reviewing agency
agreements before they are signed. We are also advising sellers
about the various disclosure certifications as these differ from
agency to agency. We have standard limitation of liability clauses
available for use where a seller does not have actual knowledge of
the condition of the property.
If you require any further information or have any queries,
please contact Melissa Clark.