16 September 2016
Consumer Protection would like to remind real estate agents and sales representatives about fulfilling their obligations in respect of the laws governing the real estate industry.
This follows recent court action in the State Administrative Tribunal (SAT) against two real estate agencies, which were subsequently reprimanded and fined.
Case 1: Non-disclosure
In one action, an agency was fined $1,000 and charged $500 court costs for the non-disclosure of sewerage issues to the buyers of a property.
Real estate agents and sales representatives are reminded they have a responsibility to tell prospective buyers certain information about homes offered for sale.
In this case, the agency had managed the property, which was on a septic system, for five years. During the time the agency managed the property it was advised, via a plumbing contractor’s invoice that the septic system was likely to cause future problems and was given a standard recommendation that it be connected to the available sewerage system.
This information was not conveyed to the subsequent buyers of the property. Shortly after buying the property the new owners reported a toilet blockage and became aware of the real estate agency/property manager’s inadvertent nondisclosure of its prior knowledge.
As both the listing and property management agency, the agency was well placed to be aware of the pertinent facts. The buyers should have been informed of the septic/sewerage issue prior to their making an offer, so they could potentially factor in the cost of sewerage connection into their offer.
For more information read the media release and a bulletin on disclosure.
Case 2: Trust accounts
In the second action, an agency was fined $5,000 and ordered to pay court costs of $308 for their accounting failures which included:
- withdrawing money without authority from a trust account;
- failing to properly record transactions in their trust account journal;
- failing to deposit money into their trust account as soon as practicable as required by the Act;
- depositing funds into the operating account instead of the trust account; and
- failing to reconcile trust account balances.
Clients’ money is put at great risk if is not deposited promptly into the correct account and then properly accounted for in the agency’s journal.
The laws are designed to clearly separate funds held in trust on behalf of clients, from the money being used for the day to day operation of the agency. For more information read the media release.
The outcomes in the SAT confirm agencies need to understand how important it is to safeguard the interests of consumers by fully complying with the legislation which regulates the real estate industry.