It happens! Agents do get attracted to the properties of their Vendors. In the off the plan real estate world, Agents are encouraged to buy their Vendors stock and sell it to their friends and relatives. Developers love it
Section 49 of the Property and Stock Agents Act 2002 states:-
(1) A real estate agent who is retained by a person (
“the client” ) as an agent for the sale of property must not obtain or be in any way concerned in obtaining a beneficial interest in the property.
: Maximum penalty–200 penalty units or imprisonment for 2 years, or both.
Clearly, an agent is prohibited from buying the property of their Vendor and/or receiving a commission. Sub clause 4 of Section 49 goes onto state the agent includes their family, their business associates and associated entities. In other words, if you are close to the person selling the property to you, Section 49 applies. There is a procedure to make the purchase, and this is discussed below.
In the case of WENDY RYDER & STEPHEN DOUGLAS RYDER -V SRI’S RADHE PTY NCAT determined that a breach of Section 49 did not affect an Agent’s right to obtain commission.
The applicant, the Vendor of a property, Wendy Ryder, made application to NCAT stating that they should not have to pay the commission of the Agent, because the Agent’s business partner had become a Shareholder in the development. The Respondent successfully argued that, Section 49 only relates to a criminal breach. NCAT determined that, Section 49 goes to discipline and not anything to do with the payment of commission.
Leverage was asked to assist half way through this case and took over the matter before NCAT. It was always our belief that, Section 49 can never be used as a means of taking away an Agent’s right of have commission. It should be noted that, NCAT also found the agent had not breached any of his other obligations in relation to the sale of the property.
If you are going to buy your Vendors property or sell it to your friends or relatives, get the Section 49 form off the Office of Fair Trading’s website and complete it and give it to your Vendor to execute. Although our client has kept their commission, it does not mean that they are not going to wrestle with the office of Fair Trading in the future.