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Make it work for you!
Presented by Paul Donovan & Helen Burnsideof MDS LegalTel: 9325 9353
pdonovan@mdslegal.com.auhburnside@mdslegal.com.au
THE OFFER & ACCEPTANCE
Why are we here?
Follows on from Joint Form seminar.
Myriad of issues for agents.
Refresher for some, new for others.
Personal preservation.
Competitive edge – GOT!!
The REIWA Legal Hotline
Operated by MDS.
Popular REIWA service.
A guide.
Can’t consider documents.
It’s free!
Forms, forms, forms…
48 Hour Clauses
• A Hotline Call:
An agent has had a firm of lawyers draw up a 48
hour clause that she has used on a deal. The 48
hour notice was issued and the Buyer did not
comply. The Seller has re‐sold the property and
writs are flying. The Buyer says the Seller treated
the contract as being at an end before the time
allowed by the notice expired. The Seller says the
Buyer was not using best efforts to sell her own
property.
48 Hour Clauses
48 Hour Clauses
The problems with “48 hours”.
The problems with “working days”.
Requiring a Buyer to act in good faith.
48 Hour Clauses
The Seller’s 2nd offer to be in good faith.
After the notice – does the contract become unconditional?
The date for settlement.
48 Hour Clauses
The REIWA 2 Business Days clause.
Stipulates a date
Buyer must use best endeavours to sell
Seller can still market the property
If the Seller receives another offer –may give the Buyer a Notice
The Finance Clause
Traps for young players!
The Standard Finance Clause
• A Hotline Call:
An agent has been given a bank’s letter but the
agent couldn’t tell whether the letter was an
approval or not. He got nowhere with the bank and
hoped for the best. The Buyer now says he doesn’t
want to settle and he told the agent this when he
sent the bank’s letter. The Seller’s lawyer has said
that the Buyer might be right and the agent should
have had the Buyer sign the standard REIWA finance
approval form. What’s an agent to do?
The finance clause…
The Standard Finance Clause
Leaving the amount/time/Lender blank!
Application must be made to Lender.
Need for “best endeavours”.
Need to provide information & evidence.
Approval Notices may be given by Lender or Buyer.
The Standard Finance Clause
Approval definition.
“Conditional approval” can suffice.
If conditions need to be met, consider extending time.
Non‐approval notice –contract ends.
The Standard Finance ClauseWhat if there is no notice?
Contract continues – DANGER!
No need for default notice before termination.
Waiver by the buyer.
Finance approval definition & the role of agents.
Buyer should make the call (REIWA Form).
The REIWA Finance Approval Form
Preparation of Special Conditions
• A Hotline Call:
An agent has sold a property and drafted a good
and proper working order clause. The property
has a new gas hot water system but the Buyer is
pulling out of the deal because the old solar
system is not working. Further, the Buyer says
the Seller can’t take the swimming pool
equipment with her.
Good & Proper Working Order Clauses
Good & proper working order clauses
The danger of short, vague clauses.
What does the clause cover?
Good & proper working order clauses
Seller’s Disclosure Statement
Take care in making any representations yourself
Good & proper working order clauses
When does the assessment occur?
What are the consequences of a fault?
Good & proper working order clauses
What chattels included in sale?
Must discuss with Sellers.
Danger of “implied” warranties.
• A Hotline Call:
An agent has sold a property and drafted a
simple white ant clause. The pest controller
has found white ant activity outside of the
house and borers under the house. The
agent talked the pest inspector into altering
his report. Now the buyer has found out and
wants to pull out of the whole deal.
White Ant / Timber Pest Clauses
White Ant / Timber Pest Clauses
The danger of ambiguous clauses.
When should the inspection occur?
Who should pay for the inspection?
What does the inspection cover?
What are the consequences of white ant / timber pest activity being found?
White Ant and Timber Pest Clauses
REIWA Clause
Allows a time for inspection to occur
Inspection at Buyer’s expenses
Australian Standards
Consequences of timber pest activity
White Ant and Timber Pest Clauses
Understanding inspections
Don’t interfere with report
Must discuss with Sellers.
Structural Inspections
Avoid vague clauses
When should the inspection occur?
Who should do the inspection?
Who should pay for the inspection?
Structural InspectionsWhat standard is required for the inspection?
What constitutes a defect?
What are the consequences if structural defects are found?
Rectification?
Termination?
Adjust the purchase price?
Structural Inspections
REIWA Form
Buyer to obtain report
Notice to remedy defects
Consequence if there is no rectification
Discuss with sellers
General Tips
Take care when drafting clauses
Check if there is a REIWA form available to use
Ensure that matters to be included in special conditions are not already included in the General Conditions
Don’t be afraid to call the Hotline!
Default notices and termination
Defaults and default notices• A Hotline call:
An agent has served a 10‐day default notice on a Buyer
who took possession before settlement, trashed the
property and hasn’t paid the purchase price. The notice
was signed by the agent and delivered by the agent to the
Buyer’s letterbox and sent by email to an address off
LinkedIn. The notice was also served by fax to a number
that the agent found on some correspondence. The Agent
has not kept the fax acknowledgment form. The Buyer’s
lawyer says there has not been effective service but the
agent is going to throw the Buyer off the land.
Default notices
• The need for clear drafting.
• Clauses 23 & 24 of the Joint Form.
• Beware of exceptions!
• Termination for deposits.
• Termination for finance.
Don’t forget!
Terms Contract
Early possession OR
2 or more payments
30 days notice
Termination of tenancy
Remember the new concept of a “Future Lot Contract”.
Time limits for termination within clause 13 for sub‐divisions.
Sub‐divisions
Time LimitsClause Requirement Time Limit
13.2 (a)(1) The application for subdivision of the lot must be lodged by the Registered Proprietor with the Planning Commission
3 months from Contract Date (cannot be extended even if parties agree)
13.2 (a)(2) The Planning Commission granting approval for the subdivision
6 months from Contract Date (or if a longer period is specified in the contract or a subsequent agreement in writing is made)
13.3 (a)(1) The Planning Commission endorsing its approval upon the Subdivision Plan (a deposited plan of the sub-division)
12 months from date of approval of the subdivision
13.3 (a)(2) The Subdivision Plan being In Order For Dealing at Landgate
3 months from date of endorsement of approval by Planning Commission
Changes to 13.3 – now Parties must give notice to terminate.
The need for agents to explain time limits.
Strata contracts.
Town Planning Approval
Warning to Buyers.
Vendor’s Conditions.
Need to give Notices.
Deposits to be paid to Deposit Holders.
Future lot contracts
Ramifications of getting it wrong.
Inadvertent repudiation.
Deposits dispute process.
Avoid acting as a lawyer.
Default notices and termination
Service of notices
Notices must be in writing and signed by party or rep, not agent.
Service on a person & by post – no letter boxes.
Service of notices
Service by facsimile – 4pm & acknowledgment form.
Change of service details.
Need for care in service.
Now can serve by email.
• Can serve Notices by email.
• Address must be specified in Contract or Representative’s correspondence.
• Served when sent if before 5pm on Business Day.
• Not served if bounces back.
• Can change address by notice.
Service of notices
Use the shotgun technique!
Boundary Disputes
Boundary Disputes
Common cause of dispute
What happens when fences are not on the boundary?
What are the obligations on the seller and agent?
Boundary Disputes ‐ Representations
Representations about boundaries
Encroachments
Dividing fences and walls and boundaries
Adverse Possession
Implied Representations
Disclosure Statements
Adverse PossessionWhat is Adverse Possession?
Elements of adverse possession:
Actual Possession
Continuous and Uninterrupted
Hostile
Exclusive
Open and Notorious
Adverse PossessionSeries of adverse possessors
Adverse possession vs. easements
Adverse Possession
Consequences of adverse possession
Disclosure to Buyers
Regularise the position
Landgate application
Need to prove possession
Can be opposed.
What is the seller’s neighbour has the claim?
Adverse Possession
Errors and Misdescriptions
Errors and misdescriptions
Clause 15 of the General Conditions
Applies to:
A physical structure or feature of the Property
A boundary of the Property
An area of land
Errors and Misdescriptions
Consequences of Errors and Misdescriptions
No right to terminate
Right to demand compensation by serving notice
Compensation to be determined by arbitration if not agreed
Contractual term only
Mortgagee Sales – Risks for Agents
Mortgagee Sales
Risks for agents – the commission
When acting for the registered proprietor
When acting for the mortgagee
Mortgagee Sales
Risks for agents –representations
Mortgagee not familiar with the property
Common to amend General Conditions
Mortgagee Sales
Bear in mind obligations under Code
Need to take reasonable steps
Mortgagee Sales
Risks for agents – who are you acting for?
Possession of property – need for Court order
Bear in mind rights of tenants
False & Misleading Statements
There is a way out!!
The liability of real estate agents for misrepresentations
• A Hotline call:
An agent has been sued by the buyers of 4 townhouses.
The buyers are alleging that they were misled into
thinking that the properties were worth more than the
sale price. Further, one of the buyers is suing because she
has found out a child molester is living next door. No
numbers were put on the value of the property by the
agent, one of the buyers was a sophisticated investor, the
agent didn’t mention anything about pedophiles and he
had a bulletproof disclaimer clause in his brochure. Now
DMIRS and the ACCC are involved!
Sellers’ representations
Contained within the Joint Form.
Can also arise orally & in writing.
The Law – a refresher
Misleading conduct under ACL.
No intent needed.
Innocent mistakes.
• Implied representations.
• Silence can mislead.
• Some conduct attracts fines.
Predictions in real estate
Can you be held liable for crystal‐ball gazing?
Predictions must be based on reasonablegrounds.
Loose promises actionable.
Can be liable for entirety of damages claim.
Australian Consumer Law
Must disclose when “reasonably expected”.
Dangers of hiding defects.
Traps for Agents.
Dangers of half truths.
Duty to disclose everything?
What is a material fact?
Is there a need to disclose facts that affect value?
Australian Consumer Law & Code
Psychological defects
• Murder.
• Suicide.
• Death.
• Violent neighbours.
• Ghosts.
RISKS TO AGENTSLiability of real estate agents for misleading conduct
Liability of real estate agents for misleading conduct
Damages.
Fines – some recent examples.
Action by DMIRS & ACCC.
Disclaimers – a silver bullet?
Not by themselves.
Fine print is an issue.
Can’t write one thing and say another!
So what can I do?!
Merely passing information on.
What the High Court has said.
Look at the agent’s conduct as a whole.
The “conduit” defence.
What type of things are looked at?
The nature of the parties.
The character of the transaction.
The contents of the representations (eg brochures).
What is in a disclaimer and how it is given.
The problems with half truths.
Holding yourself out as an “expert”.
“Hard physical facts”.
The expression of opinions (eg investments).
Tip – disclose the specific source.
Dangers for Agents
Tip – keep written records.
Tip – use the Seller’s disclosure form.
Tip – link disclaimers to specific facts where appropriate.
A conduit does not amplify or endorse.
Liability will depend on the circumstances.
Dangers for Agents
Liability for damages
• Damages dependent on reliance & causation.
What if the buyer is an idiot?
The Code
• Misleading conduct.
• Unconscionable conduct.
• Price Advertising.
• Material facts.
• The need to act “reasonably”.
What can you do to minimise stress?
Make it work for you!
Presented by Paul Donovan & Helen Burnsideof MDS Legal
THE OFFER & ACCEPTANCE
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