NSW Fair Trading Investigates Agency For Possible Underquoting
Wednesday 10 December 2014 @ 10.13 a.m. | Legal Research | Trade & Commerce
NSW Fair Trading Minister Matthew Mason-Cox said Fair Trading is investigating possible underquoting activity at one agency from its latest real estate compliance operation in Sydney’s inner city.
The Minister said:
“We launched Operation Belaya last week [during November 2014], which we had specifically developed to cover general real estate compliance, including intelligence gathering to ascertain any evidence of underquoting.
During its inspections, NSW Fair Trading identified certain information that requires further investigation to establish whether or not representations made by a real estate agency in relation to a number of recent sales were misleading.’’
Definition of Underquoting
Underquoting is when an agent falsely understates the selling price of a property in the course of marketing that property and is a contravention of s 73 of the Property, Stock and Business Agents Act 2002 (NSW).
Penalties for Breaches of NSW Law
Mr Mason-Cox said:
“Agents who engaged in this illegal practice could face a maximum penalty of $22,000 or depending on the severity of the breaches an agency could have its licence cancelled … Underquoting is a serious offence and NSW Fair Trading will not tolerate activity of this kind … Not only does it seriously compromise the integrity of the real estate market, it puts enormous financial stress on innocent home buyers.’’
Given the results of this recent operation, NSW Fair Trading will continue to focus on the real estate industry on a number of issues, including underquoting and will not hesitate to undertake enforcement action against those that are found to be non-compliant.
Action by NSW Fair Trading
Operation Belaya covered the inner-city and Haymarket area of Sydney, with officers checking licences and certificates, current continuing professional development and professional indemnity insurance, as well as current and past financial year qualified audits.
The Minister commented:
“From the 836 licences checked, 24 penalty infringement notices were issued valued at $27,100 for a range of breaches, including operating without a licence, failure to lodge an audit or complete continuing professional development before the renewal of a licence or certificate.”
Operation Belaya is the tenth operation targeting the real estate industry conducted by NSW Fair Trading in the metropolitan and greater Sydney areas since January 2014.
Why is Underquoting an Issue?
Underquoting is when a property is promoted at a price that is less than the seller's asking price or auction reserve price, the agent's own personal estimate of the selling price or a genuine offer by another prospective buyer. The practice of underquoting is shameful and illegal as it artificially drives up the price of the property and may cheat prospective buyers of purchasing a home.
The NSW Fair Trading Investigation so far
To date this year [2014], more than 762 estate agents have been visited and the licenses or certificates of 1342 agents have been sighted. This generated more than 59 penalty infringement notices for various offences, including individuals working or advertising without a licence and failing to supervise staff and the business.
Action by Consumer Affairs Victoria
In a related matter in Victoria, Consumer Affairs Victoria conducts random inspections of real estate agencies and reviews agency documentation. Depending upon the severity of the offence, a wide range of tools against agents who underquote can be used – these may include warning letters, enforceable undertakings, injunctions and prosecutions. The action taken depends upon the impact on a buyer and the seriousness of the breach.
Also in Victoria, the Coalition announced plans, previous to the election, to require agents to advertise the correct price range for a home, including the reserve price, with fines of up to $29,000 for offenders and a hotline for buyers to report alleged dishonesty.
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