Real Estate Agents Act 2008
Obligation to provide specific information to sellers
The Real Estate Agents Act 2008 came into effect on 17 November 2009. The purpose of this legislation is to promote and protect the interests of consumers in real estate transactions, and to promote public confidence and transparency in the performance of real estate agency work. One aspect of Act is to increase the obligation on real estate agents to provide specific information to you when you are selling or leasing a property or business.
Real estate agency agreements
Before entering into a real estate agency agreement the agent must provide you with a copy of the Real Estate Institute of New Zealand’s ‘approved’ guide, and you must sign an acknowledgment that this has been done.
The agent must also ensure the agreement explains when their commission is payable, how it will be calculated and an estimate of the amount the commission is likely to be. The agreement must also state how the property will be marketed and advertised, and the likely costs of these activities.
(You are not obliged to agree to these additional expenses.)
The agent must also ensure you are aware that you can seek legal, technical or other advice and information before signing the agreement; the agent must allow you a reasonable timeframe to do this.
To be reimbursed any expenses from you, the agent is only entitled to this if the agreement identifies the source of all rebates, discounts or commission that the agent can receive in respect of those expenses. The agreement estimates the amount of those rebates, discounts or commission.
Once the agreement is signed by both parties, the agent must give you a copy within 48 hours.
It is only after the agreement has been signed that the agent you have engaged is entitled to be paid a commission or reimbursed any expenses.
Cancelling an agency agreement
If you sign a sole agency agreement, the agreement may be cancelled in writing to the agent before 5pm on the first working day after a copy of the agreement is given to you. However, the cancellation will not be effective if the agent has undertaken work in accordance with the agreement before the cancellation, and that work leads to the sale of your property.
Otherwise, you may cancel a sole agency at any time 90 days after the agreement is signed. This applies even if the sole agency agreement is for a term longer than 90 days.
Agent acquiring your property or business
A real estate agent may not directly, or indirectly, acquire the property or business that you are selling without your formal consent. Consent is also required when an agent is carrying out agency work for you when that agent knows, or should know, that the transaction could result in a person related to them acquiring the property or business.
As part of the consent process, the agent must obtain, at their own expense, an independent valuation of the property or business. Your consent must be obtained after you have been given the independent valuation, and it must be given to you in a specific form.
However, you can give provisional consent before you receive the independent valuation; that consent will be based on the agent’s provisional valuation for the property or business. If the actual valuation is greater than the agent’s provisional valuation, your provisional consent can be revoked.
If a sale agreement is signed that breaches either of these two obligations (the acquisition by an agent of the property or business that you are selling, or the agent carrying out agency work when a person related to the agent acquires the property or business) you are not liable to pay any commission regardless of whether you cancel the sale agreement or not.
This new legislation has been greeted with enthusiasm by consumers. We welcome the new transparency and accountability that it brings to real estate transactions.