The Queensland Government passed the highly anticipated Property Occupations Bill 2013 through Parliament on 6 May 2014. The Bill aims to simplify and reduce the level of regulation that the Property Agents and Motor Dealers Act 2000 currently imposes on the Queensland property industry. Senior Associate, Mark Askin, and Lawyer, Ryan Ainscough, review the implications of the Bill for buyers, sellers and real estate agents.
Summary of the Bill
The Bill is one of four Bills into which the Property Agents and Motor Dealers Act 2000 (PAMDA) is to be split, designed to facilitate increased industry standards, simplify compliance and increase consumer confidence in the property and development industries. Over the years, the Queensland property industry has seen a large amount of unnecessary litigation for failing to comply with the overly prescriptive requirements of PAMDA in regulated property transactions. The Bill aims at striking a balance between the need to regulate for the protection of consumers and the need to promote freedom of enterprise in the property market by attempting to make it easier to comply with legislative requirements surrounding residential property transactions.
Application of the Bill As with PAMDA the Bill will apply to “relevant contracts”, which are essentially contracts (including option agreements), for the sale of “residential property.” “Residential property” is defined in the Bill as real property that is used, or is intended to be used, for residential purposes but does not include real property that is used primarily for the purposes of industry, commerce or primary production.
Key changes for sellers and buyers
- Streamlining of contracts and prescribed forms Currently PAMDA prescribes an overly complex process requiring strict compliance when entering into residential real estate contracts, the failure to comply with which can result in the buyer having termination rights. The Bill repeals the need for the existing “warning statement” or “information sheet” and replaces it with a simple requirement for a prescribed statement to be included above where the buyer signs the contract. Failure to comply with this requirement does not entitle buyers to terminate the contract, but results in the seller or the seller’s agent (whoever gave the contract to the buyer) committing an offence and the imposition of a heavy penalty.
- Relaxations to the cooling off period The cooling off period currently afforded to buyers under residential contracts will still not to apply to contracts formed at auction. However, contracts resulting from the following will now also not have a cooling off period:
- A contract entered into with a registered bidder of an auction no later than 5pm on the second clear business day after the property was passed in at auction.
- A contract resulting because of the exercise of an option if the parties are the same (however, there is no mention of nominees).
- A contract where the buyer is a publicly listed corporation, the State or a statutory body.
- A contract under which the buyer is purchasing 3 lots at the same time (whether or not the in the one contract). The cooling off period can now also be waived or shortened by a buyer giving notice to the seller (without the need for a lawyer to give the notice). Buyers can now terminate under the cooling off period without having to specify the section under which the contract is being terminated, or date the notice.
Key changes for real estate agents
- Consolidation of the licence categories The nine categories of licence and four categories of registered employees are now consolidated into three licence categories – real estate agents, auctioneers and resident letting agents – and one category of registered employees.
- De-licensing of property developers The Bill now removes the requirement for property developers and their employees to be licensed bringing Queensland in line with other States. This is designed to generate employment growth, reduce barriers to entry into the property development market, encourage market entrants and in turn, increase market competition.
- Deregulation of real estate commission The cap on the charging of real estate agents’ commission is now removed – while maximum commissions under PAMDA were initially intended to protect consumers, it has been suggested that the maximum commission rates set by government have effectively become the rates that the majority of agents charge. The changes are designed to improve the choice of service providers for consumers and result in more competitive rates of commission between respective real estate agents.
- Agents commission allowed despite beneficial interest Agents are still required to disclose all beneficial interests to the seller, but amendments now allow an agent to obtain a commission when the seller has acknowledged and agreed to the agent’s beneficial interest in the transaction.
- Agent’s disclosure to buyer Agents will no longer have to disclose to a buyer the amount of commission the agent will receive from the seller, essentially due to privity of contract. It is considered that the amount of commission a seller has agreed to pay an agent is a matter between the seller and the agent, and it does not have an impact on prospective purchasers.
- Exemption for related entities On the premise that a true agency relationship does not exist when an entity is acting in relation to the property assets of a related entity, the consumer protection and other elements of the legislation, which largely protect land owners from an agent, are not necessary and will no longer apply to such transactions. This proposal will benefit industry by removing red tape for transactions involving ‘related’ entities and reduce the costs of compliance where there is no consumer risk.
- Exemptions for sophisticated parties Agents acting on behalf of sophisticated owners, for transactions in concerning non-residential and non-rural property are now exempt from obligations under the Act. Generally, real estate agents will still need to be licensed. However, when an agent is acting for the owner in the sale of non-residential property on behalf of a ‘sophisticated party’, and the total gross floor area of the property or value of the transaction is over a threshold amount (which will be prescribed by regulation) the agent will be exempt from the Act.
- Residential letting agents The Bill will now permit residential letting agents to manage more than one building complex and remove the requirement that they reside on-site.
The changes appear to be generally welcomed by the property industry, with the Property Council of Australia embracing the changes.