Only last year, Section 55 of the Estate Agents Act was amended. As you would be aware, this section is designed to prohibit an agent/employee/associate of an agent from purchasing a property listed with that agency, unless certain rules were met.
The long standing requirement of obtaining Consumer Affairs consent to the sale was changed last year to among other things, require a letter from the vendor’s lawyer or accountant.
But in both the original rules and the changes last year, the agent was entitled to be paid commission for the sale.
Not so under the new rules. A new section 55 of the Estate Agents Act 1980 came into effect in August this year and these new rules prohibit an agency from charging commission if the property is sold to the agent (or employee/associate etc).
Section 55(1) makes it an offence for an estate agent to obtain a beneficial interest in any real estate or business the estate agent has been commissioned to sell. A penalty of up to 240 penalty units ($29,313.00) or two years imprisonment or both can be imposed. Section 55(2) creates a similar offence for agents' representatives.
The definition of a "beneficial interest" casts a wide net - such as associated companies, trusts, or businesses that the agent might profit from. The Consumer Affairs page (link at the bottom of this post) sets this out.
Section 55(4) allows the agent or agent’s representative to obtain a beneficial interest in a property if each of four requirements are met:
1. The agent gets the vendor's written acknowledgement that the vendor is aware that the person isinterested in obtaining the interest in the property and consents to the agent or agent’s representative obtaining that interest;
2. The agent acts fairly and honestly in relation to the transaction;
3. No commission or other reward is payable with respect to the transaction; and
4. The vendor is left in substantially as good a position as the vendor would be if the real estate or business were sold at fair market value.
The third requirement – no commission can be charged - is a surprising change. This effectively leaves the agency with no reward if the agent or an employee/associate wishes to purchase the property.
This might even leave the vendor worse off – the only interested buyer prepared to pay the asking price might be someone at the agency.
Point four is interesting – if the agent/employee pays full market price and no commission is charged, then the vendor is actually in a better position than had a member of the public purchased at the same price.
The Consumer Affairs page (including the required Disclosure of conflict of interest to vendor (Word, 677KB) form) can be found here Consumer Affairs page
Note that this is a general summary for discussion purposes, and it is important to carefully review the legislation or seek specific advice if these changes apply to you. Note that the definitions of "beneficial interest" should be carefully examined if you or an employee has a connection to the proposed purchaser.