EPMEPM: Best Practice & Legislation

Following the Rules

To ‘comply’ is to ‘act in accordance with’, to ‘conform’ or to simply ‘follow the rules’, so, as a real estate profession, we are all ‘on the same page’. Because of this requirement, over the last few years in particular, the subject of ‘compliance’ and the real estate practitioner has been great press for our various media in Australia – mostly to the detriment of all the good operators. Bill Robertson from Think Real Estate, explains why compliance is so important.

Firstly, what is compliance all about?

‘Real Estate compliance’, in my opinion, is defined as ‘exactly what the good, ethical operators have been doing all their real estate careers but now, because of the few unethical operators in agency practice, the various real estate Governing Authorities are forced to write ethical practice into law’.

What is at the core of real estate compliance?

In most States of Australia, the legislation requires all agency businesses be effectively controlled and supervised by a licensed agent. The man or woman who has the title of ‘Licensee’ ‘Licensee-in-Charge’, ‘Person-in-Effective Control’ is in the hot seat. Therefore, they should be turning the heat up on all employees by supervising them closely. If this is not done, they are in breach of the law. For these reasons, the new or amended legislation introduces tighter requirements for the supervision and control of employees and clarifies the responsibilities of licensees for employees’ conduct.

What is the role of the State Government Consumer Affairs / Office of Fair Trading, or the equivalent Real Estate governing body?

Because the Legislation covering the range of responsibilities and the operation of the property services industry is administered either by the State Office of Fair Trading, or Real Estate Governing Body, it is very ‘consumer-driven’ – and rightly so. One could argue that it is disappointing that ‘doing the right thing by consumers’ had to be legislated, just because there are a few bad apples out there in our industry (as there are in every industry) who need to be brought into line.

What can happen if agents are caught doing the wrong thing?

The short answer to this is if you are found non-compliant – not ‘following the rules’, when audited, you will be fined. If it is a large non-compliance issue, it is a large fine, plus being named and shamed – by your competitors as well as the Governing Authority. If it is a minor issue, you may get off with a warning.

As well as fines, if an agency does not have the legal right to collect commissions – whether property management or sales commissions, you may be forced to either forfeit or return such commissions, plus be fined into the bargain. This commonly happens through an agency is using a non-compliant agency agreement and/or because agency personnel are completing such agency agreement incorrectly.

How often do compliance audits occur?

As often as consumers take aim and complain because Governing Body compliance audits happen continuously as the result of a consumer complaint, with the random audit (if the compliance enforcement inspectors are in your area) or you may be next on the list – especially if you have never had a compliance audit.

What are some of the common mistakes agents and salespeople make?

The actual completion of the sales or management agency authority / agreement – mistakes such as:

  • using a non-compliant and out-of-date agency authority / agreement
  • entering the incorrect name of the licensee
  • entering the incorrect licence number
  • no figure entered at all for the ‘estimated selling price’ or ‘agent’s opinion of market price’
  • no figure entered at all for ‘price at which the property is to be offered’ or ‘listed price’.
  • completing incorrectly, or ignoring altogether the ‘rebates, discounts and commissions’ clause (in most jurisdictions)
  • not offering the cooling-off of agency agreement to the principal (in most jurisdictions)
  • no signature of principal or agent (or both) on agency authority / agreement
  • no proof of authority / agreement being served back upon principal within the specified time
  • not using the correct disclosure form when there is a need to disclose

A real estate agent or salesperson pitching their estimated selling price high – just to get the listing, or pitching their advertised price, or price guide, too low just to get buyer interest, is also high on the ‘to do’ list of compliance enforcement inspectors. Another item high on the enforcement inspector’s checklist is the actual advertising and marketing copy, including photographs (window, website, data-base marketing, brochures etc) that could be deemed ‘false and misleading’ to the consumer.

However, most fines or the forfeiting of commissions are not just as the result of having a compliance audit undertaken at your office by an officer of the Governing Body. Most heartache is caused through unhappy sellers and unhappy landlords. They simply contact their own solicitor, and ask if something can be done. The next step is for their solicitor to sight the Sales or Management Agency Authority / Agreement, find one or two – or many mistakes.

The final step is you receiving a formal solicitor’s letter stating that, in their opinion, the authority / agreement is invalid resulting in ‘no commission due and payable’ – or ‘we suggest 50% of commission payable under the circumstances’ etc. After all the hard work done, would you want this to happen a few times per year?

How can you get prepared and get the big issues knocked into shape?

Whether you are a real estate principal, a sales/office manager, or an individual:

  1. First, check out your State Governing Authority website for the real estate industry and review the compliance information clearly available
  2. Next would be, if you feel you are a little exposed, to have an independent compliance audit, or compliance check – either for yourself, or your real estate business, undertaken by a friendly and helpful non-Government Authority specialist. They will spend a few hours on-site to check how you are going, plus fix many things on the spot and then give you a full report and simple procedures and checklists to immediately put into place.
  3. Once you feel you are on top of the major compliance issues, suggest the subject of ‘compliance’ becomes an on-going agenda item at every sales [and property management] meeting.

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