Real estate agents (and vendors) under the hammer

Posted: 01/08/2009 The Trade Practices Amendment (Australian Consumer Law) Bill 2009 (Cth) (“Bill”) aims to reform the widespread practice of ‘underquoting’ in the real estate industry. The new laws will come into force on 1 January 2010. Underquoting occurs when a real estate agent and/or a vendor, in an effort to attract a larger number of bids, quotes a significantly lower price for a property going to auction than what the reserve is, or what the property is expected to sell for. Currently, under the Fair Trading Act 1999 (Vic) (“FTA”), vendors and real estate agents who deliberately underquote property prices can only be exposed to an order for costs and/or an injunction prohibiting them from engaging in similar conduct in the future. The FTA does not give the courts power to impose fines on vendors or real estate agents who underquote property prices. The Bill will address that shortcoming and will give the Australian Competition and Consumer Commission (“ACCC”) power to issue fines of up to $1.1 million for a company and up to $220,000 for individual agents who underquote property prices. The chairman of the ACCC, Mr Graeme Samuel, has said that new laws will also target vendors. A vendor (not being a company), will risk a fine of up to $220,000 if he or she underquotes the asking price for their property. Additionally, if the ACCC has reason to believe that a vendor or a real estate agent has a reserve price of, for example, $700,000 and that property has been advertised for sale at $550,000, the ACCC will have the power to issue a substantiation notice. This notice will compel the vendor and/or the real estate agent to provide evidence capable of substantiating the advertised price of the property. Earlier this week, Consumer Affairs Victoria raided 60 real estate agency offices around Victoria in a major offensive against underquoting. Files relating to more than 1,000 recent property sales are currently being inspected by up to 80 investigators.