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Legislative fix: Laws covering commissions payable to real estate agents set to change

14 June 2018

#Dispute Resolution & Litigation

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Legislative fix: Laws covering commissions payable to real estate agents set to change

The State Government of Victoria has now announced that amendments will be made to the Estate Agents Act 1980 (Vic) which stipulates the circumstances in which commissions are payable to real estate agents. The amendments have been foreshadowed by Consumer Affairs Victoria and the Real Estate Institute of Victoria (REIV) to be released in the coming weeks. The REIV has stated that the ‘legislative fix’ is an excellent result for the REIV and its members. However, the result will be to the detriment of consumers who will presumably no longer be able to claim the return of commissions paid under the industry standard exclusive sales authority, which was issued by the REIV to its members, as approved by the Director of Consumer Affairs. 

You may recall previously we identified there were potentially significant claims which could be made against the REIV and/or the Director of Consumer Affairs by consumers or agents as a result of the non-compliant pro forma sales authority. The form was made compliant in November 2017, but commissions flowing from every real estate transaction in the recent times prior to that date were potentially susceptible to claims and at risk. Some industry insiders had even tipped a class action by affected consumers and/or agents against the REIV and/or the Director of Consumer Affairs. It is anticipated that the legislation, if passed, will put an end to this.

We are yet to see the changes proposed to the Act, but if the changes are not passed, the potential claims against the Government arising from the commissions would be significant.

In a broader sense however, this case presents an interesting and real time example of the operation and dichotomy of the separation of powers between the Judiciary and the Parliament. 

While it is arguable that many consumers affected by the non-compliant form have not suffered any real ‘loss’ as a result of the error, there are those who don’t agree that a Government should be entitled to pass retrospective legislation to excuse errors made by its own government agencies. As citizens we are all subject to the operation of the law, and if we drive through a red light but don’t cause an accident, we are still required to pay the fine for driving through the red light. 

Here, once legislation is passed, there will be no consequence to the Director or the REIV for the non-compliant form being issued and relied upon by hundreds, if not thousands, of consumers selling their properties. It will be interesting to see whether the Opposition gives the Government the ‘green light’ and waives the amendments through. The REIV and Director of Consumer Affairs, and real estate agents across the State, will be breathing a sigh of relief for now. 

Author: Alexandra Tighe

Alexandra Tighe, Partner 
T: +61 3 9321 9997

Greg Wrobel, Partner 
T: +61 2 8083 0411 

Toby Boys, Partner 
T: +61 7 3135 0649


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