Long awaited changes to the selling of property by public auction have now been made with the enactment of the Estate Agents and Sale of Land Acts (Amendment) Act 2003. The Act outlines fairer procedures relating to vendor’s bids, price quoting by estate agents, and cooling-off rights for purchasers. At the time of writing, these amendments have received Royal Assent but have not yet come into operation. It is presently understood the amendments will begin operating in February next year.

VENDOR BIDDING

A new Division 4 has been inserted into Part 2 of the Sale of Land Act 1962 to prohibit ‘dummy bidding’ and related activities. Section 38 prohibits a vendor or a person on behalf of the vendor making a bid at public auction of the vendor’s land. Similarly, auctioneers are prohibited from accepting a vendor’s (or ‘dummy’) bid except in strict circumstances. An auctioneer may accept a vendor’s bid, or make one on the vendor’s behalf provided that, before bidding commences, the auctioneer orally declares that the auction conditions permit such a bid and that, when such a bid is made, he declares it to be a vendor’s bid. Similarly, if the last bid at an auction was a vendor’s bid, the auctioneer or any person acting on behalf of the vendor must disclose this fact (section 46). This includes the publication of auction sales results (s 46(5)). Conditions of auctions are to be made available for inspection by persons attending the auction, before it commences.

Opening up the whole area of vendor bidding makes the auction process far more transparent and genuine.

ACCURATE QUOTING OF PRICE BY ESTATE AGENTS

The amending Act also inserts new provisions into the Estate Agents Act 1980 prohibiting the underquoting and overquoting of property prices by estate agents and their representatives. Section 47A of the Act requires an estate agent to estimate the selling price of a property before obtaining a vendor’s signature on an agency agreement to sell the property. The estimated price may be expressed as a single amount or as a price range, but, if expressed as a price range, the difference between the upper and lower limits must not exceed 10% of the amount of the lower limit.

Once made, the estate agent cannot market the property by stating to a prospective purchaser a price for the property that is less than the estimated selling price or range. Similarly, an agent cannot falsely represent the estimated selling price of a property to a seller or prospective seller.

COOLING-OFF PROVISIONS

The Act amends section 30 of the Sale of Land Act 1962, by eliminating any reference to the purchase price of property in relation to the cooling-off provisions under the Act. Under the original Act, purchasers were denied the benefit of ‘cooling-off’ and withdrawing from the contract if they had purchased property over the sum of $250,000. This $250,000 cap has now been removed, but, again, the amendments are still to come into force (understood to begin operating in February 2004).

The cooling-off provisions will still not be available in circumstances where property is bought at public auction, where purchases are of commercial, industrial or farming properties, where purchases are made by bodies corporate, real estate agents, or by purchasers who have obtained prior legal advice about the property purchased.

The amendments made to the Sale of Land Act and the Estate Agents Act seek to clean up the public auction system and make the real estate industry more transparent and accountable to vendors and purchasers of property. Sizeable fines apply if estate agents and their representatives fail to comply with the provisions.

Buying and selling property is often stressful enough without having to deal with some of the hidden traps that the auction system has promoted in the past. When operational, these new measures will go some way towards redressing the imbalance for consumers at both ends of the property transaction.