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When is your Agent not your Agent? When they’re your Real Estate Agent!

When is your Agent not your Agent? When they’re your Real Estate Agent!

By Julie Barkla
January 11, 2017

The decision handed down by Justice Cameron on 11 March 2016, in the Victorian Supreme Court matter of Tan v Russell [2016] VSC 93, had many property lawyers scratching their heads. Her Honour ultimately found that the service of a termination notice (or a “cooling off notice”) on the real estate agent appointed by a vendor, was not service upon the vendor’s “agent” for the purposes of section 31 of the Sale of Land Act 1962 (Vic).

In that case, it had been agreed that the purchaser had sent a valid notice within the three clear business days allowed by section 31, but that by emailing the notice to the estate agent they had been dealing with throughout the negotiation process, rather than to the vendor directly (whose email address they presumably did not have) or the vendor’s solicitor or conveyancer named in the Contract, the purchaser had failed to comply with section 31 and had accordingly lost the deposit of $350,000 they had paid, plus a further $98,000 they owed under the contract, plus any further losses on resale of the property.

On 16 December 2016, the Court of Appeal of the Victorian Supreme Court overturned the decision of the judge at first instance, in Lo v Russell [2016] VSCA 323.

Whilst the Court of Appeal did not endorse the view that the reference in section 31(3) to a notice being given to the vendor “or his agent” was intended to include the vendor’s real estate agent, they did find that the contract signed by the vendor, namely (with little variation) the standard form contract of sale of real estate contained in the schedule to the Estate Agents (Contract) Regulations 2008 (Vic) (the “prescribed contract”), had the effect of authorising the vendor’s estate agent to receive a cooling off notice.

For myriad reasons, the prescribed contract is the contract of sale used in the vast majority of Victorian conveyances (with or without amendments and/or special conditions). Where a vendor was seeking to prevent a purchaser from validly serving a cooling off notice upon its appointed real estate agent, the contract could be drafted by the vendor’s solicitor in such a way as to affect this objective.

The legal position looks set to change further, however, as the Consumer Acts Amendment Bill 2016 (Vic), if passed, will change section 31 to provide that termination notices can be served on a vendor’s estate agent. Such a change would be retrospective and any notices served on estate agents before the amendment was enacted would be taken as having been validly served unless proceedings had been issued to challenge the service. These provisions will operate from the day after the Consumer Acts Amendment Act 2016 (Vic) receives royal assent.

For further information, please contact Julie Barkla.