Victorian Estate Agents Amendment on Price Underquoting Passes Both Houses

On 25 October 2016 the Estate Agents Amendment (Underquoting) Bill 2016 (the Bill) passed through the Victorian Council, having already passed through the Assembly on 15 September 2016. Primarily, the Bill introduces several measures designed to, “. . . act on areas of poor practice and complaints against estate agents” [see Victorian Assembly Daily Hansard, of 30 August 2016, p 30].

The Bill, once enacted, according to the Ministers second reading speech, will amend the Estate Agents Act 1980 (Vic) to introduce new measures to address the problem of underquoting by estate agents and their representatives in the sale of residential property. According to the Minister for Consumer Affairs, Gaming and Liquor Regulation, Ms Kairouz  (the Minister) in her second reading speech the Bill delivers on the government's commitment to act on these issues.

About the Bill

According to the Ministers speech the Bill once enacted will:

•  improve the transparency of agents' estimated selling prices; 
•  improve the information available to consumers; and 
•  create certainty about the way prices are quoted and advertised.

Further, the Bill introduces substantial penalties for non-compliance with a new substantiation notice process to assist the director of Consumer Affairs Victoria (the CAV) in monitoring compliance with the new requirements enacted by the Bill.

In addition to the changes introduced by the Bill, estate agents and agents' representatives will still be required to comply with the Australian Consumer Law (Cth) (the ACL) and other laws in the marketing and sale of land in Victoria. In other words, as per the Ministers second reading speech:

At present, the provisions of the Estate Agents Act 1980 (Vic) when it comes to underquoting, apply to all property sales. The Bill introduces new requirements restricted to residential property sales - the sector of the market identified as being the main problem area. Such restriction is viewed as also reducing the compliance burden for agents in non-residential property sales.

The Estimation of Selling Price and Information Statements

Current estate agent methods for the estimation of selling price for a property is to use comparable property sales information. The  changes made by the Bill are intended to make the current method more transparent. The changes do this by requiring agents or their representatives to determine a reasonable estimate of the selling price:

• that explicitly takes into account the sale prices of the three properties that the agent reasonably considers to be the most  comparable to the property for sale; and, 
• to include that estimate in the engagement or appointment. 

The amendments in the Bill set out the matters agents or representatives must have regard to in choosing the three comparable properties, including guidelines issued by the director of CAV. 

If an agent reasonably believes that there are fewer than three comparable properties, as required by the Bill, the agent is exempt from this requirement, but is still required to ensure that their estimate is reasonable.

The Bill will reqire a "statement of information" to be displayed at any inspection of the property, with any internet advertisement for the property published by or on behalf of the agent or representative, and must also be provided to prospective buyers on request within two business days.

Other information to be included in a statement of information will also include:

• an indicative selling price, which must not be lower than the estate agent's current estimated selling price;
• any asking price advised by the seller, or any offer rejected on the basis of price; and 
• the median selling price for the suburb. 

The requirement for the information, according to the Minister " . . . will ensure that prospective buyers will have access to the most accurate current pricing information, even if a price has not been advertised for the property. 

Advertised Prices

The Bill will alter the advertising of residential property prices by providing that any advertised price must be a single price or a range of not more than 10 percent. In addition the use of qualifying words or symbols in relation to the advertised price, such as, "offers over", "from" or "plus" will be prohibited to prevent such words or symbols being misleading to prospective buyers as they offer no information about what additional amount is required.  Further, the Bill prohibits estate agents or their representatives from advertising below the estimate contained in the engagement or appointment.

Penalties and Enforcement proposed by the Bill

The Bill proposes substantial penalties of up to 200 penalty units, or more than $31,000, for noncompliance with the requirements set out in the Bill.

Next Steps

Having passed all stages the Bill is expected to be assented to very shortly,  As for when it commences operation, section 2 of the Bill provides for the Bill's provisions to be proclaimed, but further provides that: ". . . if a provision of this Act does not come into operation before 1 July 2017, it comes into operation on that day".

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Estate Agents Amendment (Underquoting) Bill 2016 (Vic) and 2nd Reading Speeches and EMs as reported in the TimeBase LawOne Service

The new “Underquoting” law – the changing landscape for Victorian estate agents (Miles Oakley)