Lifting the ban on Agents purchasing property
Proposed changes to legislation may now allow real estate agents to purchase properties from their own vendors. This would overturn the long-standing ban on agents buying property directly from clients or through a third party such as a family member.
The Consumer Affairs Legislation Amendment (Reform) Bill 2010 (Bill) may allow estate agents to purchase properties they have been commissioned to sell.
Currently, real estate agents, their employees or families are severely restricted from buying their clients’ properties and can only do so with the permission of the Directorate of Consumer Affairs. Several cases of estate agents using their position to acquire property at below market value have been prosecuted.
The change in the Bill now before Parliament could overturn a long-standing ban on estate agents buying homes directly from clients or through a third party such as a family member.
The proposed legislation would enable estate agents to buy property from vendor clients with the written consent of the seller and a “legal practitioner, conveyancer or accountant representing the vendor”. The estate agent would be required to notify Consumer Affairs within seven days of receiving such consent.
The responsibility to ensure and confirm that transactions are at arms length and reflect true market prices will now shift from the Directorate of Consumer Affairs to a “legal practitioner, conveyancer or accountant representing the vendor”. However, the proposed new legislation assumes that the vendors’ legal practitioner, conveyancer or accountant has the requisite experience and knowledge to approve such transactions.
In these circumstances, I would assume that the vendor would be forced to incur additional costs as it is likely the vendors’ legal practitioner, conveyancer or accountant would obtain independent market valuations to ensure the transaction is an arms length transaction.
It is likely that the proposed change will make sellers, particularly non-English speakers and the elderly, more vulnerable.
We will keep you updated with respect to this legislation. In the meantime, if you have any questions contact one of our Commercial Property lawyers.
Author: Evelyn Marcou