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