Retaining an agent
Real estate agents and their sales representatives must be registered. When retaining an agent it is important to check they are registered in accordance with the Land Agents Act 1994 (SA). Registered agents and sales representatives are issued with registration cards which they can produce if requested.
Sales agency agreement
An agent cannot act for a vendor unless a sales agency agreement has been signed. Before entering into a sales agency agreement, the agent must provide the vendor with a written guide which sets out their rights and obligations under the agreement [see Land and Business (Sales and Conveyancing) Act 1994 (SA) s 20].
Prior to 1 January 2014, the sales agency agreement is required to include the vendor’s genuine estimate of the selling price which can be a single figure or a price range with no more than a 10 percent variation. This means that the difference between the lowest and highest figure in the range cannot exceed 10 percent. However, there is no requirement for the agent to tell the vendor how they reached the estimate. The agreement also needs to state the selling price which the vendor is seeking, or which would be acceptable to the vendor, expressed as a single figure. The agent is not allowed to act on behalf of a vendor who does not specify a minimum sales price.
From 1 January 2014, changes have been made to the content of the sales agency agreement relating to the selling price. The agreement is required to specify the agent's genuine estimate of the selling price as a single figure, with no qualifying words or symbols. This is consistent with the manner in which a property is to be marketed by the agent. In addition to the written guide referred to above, the agent is also required to provide details of sales of comparable land and any other information on which the agent relies in support of the estimated selling price.
The sales agency agreement is also required to state:
- the manner of sale to be used;
- the vendor’s rights to terminate the agreement;
- whether the agent will be able to accept offers on the vendor’s behalf; and
- the duration of the agreement.
The longest period which the agreement can run for is 90 days, after which time a new agreement will need to be entered into. It is possible to have an agreement which runs for any amount of time less than 90 days.
From 1 January 2014, if a property is to be sold by auction, the sales agency agreement cannot be amended prior to the auction or terminated prematurely and a fresh one entered into to increase the selling price. This is to prevent a property from being marketed at a low price, and then increasing the price prior to auction.
In addition, from 1 January 2014, a sales agency agreement can be extended for up to another 90 days, provided that a Notice of Expiry is given by the agent within 14 days of the expiry date, and the extension is signed by both the agent and the vendor. Only one extension is permitted. If a Notice of Expiry is given by the agent, the vendor must respond to the notice, otherwise it will be automatically extended for a period of 180 days. During the period of extension, the vendor may terminate the agreement on giving 7 days notice to the agent.
Importantly, if there is any marketing or advertising which will be provided that will be separately charged for, the amounts to be charged and the times for payments to be made need to be set out in the agreement. This should remove the risk of the vendor being billed for additional costs which they were unaware of. The agent also needs to disclose within the agreement if these services will be carried out by a third party, and if the agent will receive any rebate, discount or other benefit from that third party. This aims to prevent real estate agents from profiting from their referrals to other service providers, and encourage them to pass any discounts they receive onto the vendor.
Legislation prohibits an agent from advertising property at a price lower than the estimated selling price, in order to attract a large number of buyers and artificially creating interest in a property.
Form 1 disclosure statement
When selling a house, a vendor needs to provide a document called a Form 1 to the purchaser [Land and Business (Sale and Conveyancing) Regulations 2010 (SA) Schedule 1]. When the vendor has hired a real estate agent, it is the agent’s responsibility to prepare the Form 1 and to make all the inquiries necessary to do so accurately.
Even though it is the agent’s responsibility to prepare the statement, a vendor needs to ensure that they provide their agent with correct information so that the Form 1 is accurate.
It is also the responsibility of the vendor or, if they have an agent, their agent to serve the Form 1 on the purchaser. It needs to be served on the purchaser personally, or sent to their address by registered post. When the contract has already been signed, the Form 1 needs to be provided to the purchaser at least 10 clear days prior to the settlement date. It is advisable to get the purchaser’s signature to show that they received the Form 1, due to the ramifications if the Form 1 is not served.
If, as a purchaser, you have already signed the sales contract, it is important to carefully look at the information contained in the schedule of the Form 1. It is always preferable to obtain independent advice as soon as possible. If there is anything of concern within the Form 1, you should exercise your cooling off rights immediately, as you only have two days to do so
Where a property is to be sold at auction, the Form 1 needs to be made available to the public at the offices of the vendor’s real estate agent or at those of the auctioneer for three business days before the auction. It also needs to be available for at least 30 minutes before the auction at the place where the auction will take place.
Relationship between the Form 1 and the purchaser’s cooling off rights
The time the Form 1 is served on the purchaser will affect their cooling off rights. If the Form 1 is provided before the contract is signed, then the cooling off period will commence on the date which the contract is signed. However, if the Form 1 is not provided until after the contract is signed, then the cooling off period does not start until the Form 1 has been served on the purchaser. Also, should there be any inaccuracies in the Form 1, then it is deemed to be defective, and will not trigger the cooling off period. A vendor can alter the Form 1 to correct any inaccuracies, but the cooling off period will only commence on the date that the corrections are made.
If the Form 1 is not served on the purchaser, or the one served is inaccurate in some way, then the purchaser will have the right to rescind the contract at any time up until settlement. Therefore, it is important for the vendor to ensure that a complete and accurate Form 1 is provided to the purchaser in a timely fashion.
The relationship between the Form 1 and the cooling off period is important because the Form 1 will disclose particulars about the property which may impact on the purchaser’s decision to purchase the property
Consequences of not providing an accurate Form 1
There are remedies available to a purchaser when they have already settled on the property but were not provided with a Form 1, or the Form 1 was incorrect. The purchaser may apply to a Court to have the contract set aside, and can be awarded damages so as to restore them to the position they were in before the contract was completed. The purchaser may not wish to have the contract set aside, but can seek damages from the court to compensate them for any loss which they incurred as a result of the vendor’s failure to provide them with an accurate Form 1 disclosure statement. For example, if the Form 1 failed to disclose that there was restoration work required to be done to the house under the Heritage Act 1993, this may not affect the purchaser’s wish to retain the property, but they may want to be reimbursed for the costs incurred in carrying out the required building works.
In addition, it is an offence not to provide a Form 1 disclosure statement to the purchaser at least 10 days prior to settlement. It is also an offence if the Form 1 which is served on the purchaser is incomplete or incorrect in some way. These are punishable by a fine of up to $10,000.
The content of the Law Handbook is made available as a public service for information purposes only and should not be relied upon as a substitute for legal advice. See Disclaimer for details. For free and confidential legal advice in South Australia call 1300 366 424.