Three Tales of Deceitful Real Estate Agents Successfully Sued

Comments

# George Rousos said on January 13, 2012 11:37 AM:

Hi Tim,

Today I received a letter from Kim Bryant - Fair Trading Liaison Officer that the additional matters raised on misleading and deceptive conduct, are being examined and a response will be provided shortly on the future regulation of the Australian Real Estate Industry.

The additional matters raised were sourced from this fact sheet below, which was developed by Industry Training Consultants to highlight the issue of misleading and deceptive conduct and the systematic risk management approach needed to avoid breaches and potential prosecution.

http://www.itc.nsw.edu.au/How%20to%20maximise%20the%20eventual%20sale%20price%20in%20a%20fragile%20market%20Version%201.9.pdf

Unfortunately Tim, our research shows that traditional real estate businesses haven't as yet modified their business models to comply with the new Commonwealth Competition and Consumer Act 2010 in particular - misleading and deceptive conduct, unconscionable conduct and unfair contracts.

I have rationally concluded Tim that neither, state government agencies nor giving the responsibility of regulating the real estate industry to a National Licensing Authority to fix these systemic problems (which go way beyond the conduct of real estate agents) is the answer to raising levels of transparency and protecting consumers in the markeplace. The property market appears too important to be regulated on its current typically severely fragmented basis and we have this ongoing problem with media and investment spruikers, and developers being all unregulated areas of the housing market, but to make matters worse - there are now reports of fund managers, mortgage brokers and financial planners slowly edging their way into the real estate arena and not having met the state legal requirements on licensing. And the worst thing of all, is that the Australian Securities and Investments Commission ( being ASIC ) are powerless to do anything on this front when they have no jurisdiction to regulate the property market and protect consumers. I've been told by ASIC officials it is a matter for parliament and one that state fair trading ministers need to take seriously for the sake of economic growth and stability.

Also, as you are aware and going by the article below, NSW alone made $3.9 billion from real estate stamp duties in the year 2011 to June, around one third of the national total. I concur with the comments made in this article, that any lost revenue could be paid for by increasing the goods and services tax by a quarter, from its current rate of 10 per cent to 12.5 per cent or implementing a broad-based land lax on the owner-occupied home. The Henry tax review reported that “ideally there is no place for stamp duty in a modern tax system”. It found they discourage property turnover and penalise property improvements

http://www.macrobusiness.com.au/2011/09/abolishing-stamp-duty/.

I don't know about you Tim, but I can feel a real estate revolution is just around the corner with a high level of technological innovation and change to drive it.

By the way the title heading of your article "Three Tales of Deceitful Real Estate Agents Successfully Sued" is an absolute beauty and from me well done!

# Peter Mericka said on January 13, 2012 11:46 AM:

Hi George,

Just on the issue of ASIC needing control over real estate businesses, if real estate businesses were to operate as incorporated legal practices they would certainly come within the purview of ASIC, as well as that of the Legal Services Commissioner.

# George Rousos said on January 13, 2012 12:04 PM:

Hi Peter,

Even better !

# Geoffrey Adam said on January 13, 2012 12:53 PM:

Loved the article, Tim.

Regulators and State Governments have deliberately chosen to avoid easy low-cost enforcement in the introduction of the national occupational licensing legislation.  That legislation expressly enable each jurisdiction to elect to use one of two mechanisms:

-  the usual prosecution process whereby the DPP considers a report from the regulator and, if the DPP wants tp proceed, the police are engaged to gather evidence, etc. etc.  Very resources hungry, costly and slow!

-  for less serious offences, a 'show cause' process in which the regulator with reasonable grounds to suspect a breach serves a notice on the alleged offender requiring him/her to show cause why he/she should not be penailsed (scope of penalty outlined) on the basis of the alleged facts set out in the notice.  If the alleged offender is unable/unwilling to refute the alleged facts, he/she is penalised on that basis by a special tribunal - with the penalty taking into account any prior history and matters raised by the offender.  This process is particularly applicable to alleged fiduciary breaches because a fiduciary must be able to show that he/she did act in the client's best interests.  It also means that minor breaches (which are presently ignored by DPPs owing to cost, resources and relative unimportance) are progressed.  Relatively quick and cheap.

The Govts and regulators have elected not to use the 'show cause' mechanism.  The only reasons that come to mind are:

-  electoral - ie they do not want to upset anyone;  or

-  cost - ie they do not want to spend money on enforcement.

My personal view is that either reason is unacceptable and encourages unethical and illegal behaviour.  

# Florence said on January 13, 2012 1:25 PM:

It's really necessary to have a law or something that would control real estate businesses. Aside from we're talking about trust in this matter, we're also talking about property investments which is huge money investment.

# Peter Mericka said on January 13, 2012 2:28 PM:

Geoffrey Adam, you may have heard about a Melbourne real estate agent to deceived a purchaser into paying $200,000 more for a property.  He was sued by the victim, but what what about the serious criminal offence of Obtain Financial Advantage By Deception under Section 82 of the Crimes Act?

Well Consumer Affairs Victoria, as regulator of real estate agents in this State, appears to have decided that a serious criminal offence involving a gross breach of trust in circumstances of fiduciary duty is not something it wants before the criminal courts.  Instead, CAV has asked VCAT to determine whether or not the real estate agent should be regarded as fit to hold an estate agent's licence.

Surely a custodial prison sentence could have answered this question so meekly raised by our supposed industry watchdog.

We need to take this industry away from lame duck regulators who have no stomach for proper regulation and enforcement, and entrust it to those who are better staffed and equipped to deal with it.  A well resourced Legal Services Commission and ASIC would put things right.

# Loyal local said on January 16, 2012 10:10 PM:

Hi, I live in a small coastal town in NSW. A very run down house in a well-known street has had a very nice renovation done on it - it looks fantastic. The problem is it is being marketed by a very high profile local real estate franchise as a "new contemporary home" but it is definitely not a new build. It was a 1940s build I'd say, and in very poor condition. The phrase "new contemporary home" appears on the street sign, in the agents window, on a postal flyer and on the internet. The asking price is astronomical. It is the most blatant case of misleading advertising I have ever seen. I don't know what to do as a complaint to fair trading cannot be anonymous. The problems of being a small town resident....I have photos of the house pre and post-renovation, taken from the same angle. If it wasn't so wrong it would be funny. Any advice? I would just really like to see the agent delete the word new from the listing.

# TIM O'DWYER said on January 17, 2012 3:44 PM:

Hi loyal local, please give me a phone call to discuss a possible solution to your concern: 0732081488

# MazinGanim said on January 21, 2012 8:50 PM:

Without a strategy you are just throwing something against the wall and seeing if it sticks. Tim, I have a point, The additional matters raised were sourced from this fact sheet below, which was developed by Industry Training Consultants to highlight the issue of misleading and deceptive conduct and the systematic risk management approach needed to avoid breaches and potential prosecution. What do you say?

# Peter Mericka said on January 22, 2012 12:27 PM:

Mazin, you didn't add the link to the fact sheet.

# Brandon Fosters said on February 4, 2012 1:46 AM:

Without a doubt, Westerns have surely taken a right step. They were ditched by a shrewd real estate agent and they got all the possible rights on earth to get compensation for their losses. My point of view—you gotta do away with absolute researches before buying and selling home from real estate. Roam around and get hang of market prices on properties or you can hire some trustworthy real estate agents.