From 1 December 2005, the Property Agents and Motor Dealers Act 2000 (‘the Act’) underwent substantial amendments to the relevant sections of the Act that deal with consumer warnings and directions required in residential property transactions. Failure to comply with these new requirements may mean that a buyer will have the right to terminate their contract or that the buyer is not bound by the contract (depending on the type of non-compliance).
Whilst the amendments to the Act were introduced in December 2005, we are finding that too often the requirements of the Act are not being complied with and sellers are exposed.
Accordingly, to reaffirm the rather onerous requirements of the Act, below is a brief summary of the new requirements relating to this area of law (for any residential contracts entered into after 1 December 2005). There are differing requirements for contracts formed or sent by mail (or in person) as opposed to contracts formed or sent by facsimile or email (ie by electronic communication).
Contracts sent by mail or personally delivered
If the contract is being sent in the mail (or delivered personally) then the seller or the seller's agent must also include a statement directing the attention of the buyer to the PAMD Form 30C Warning Statement, the BCCM Form 14 (if a community title or ‘strata’ lot) and the contract both prior to the contract being signed by the buyer and following the contract being signed by all parties. This means that TWO separate directions are required. Too often we are seeing that only one (or none) of the directions are being given.
There are consequences for not complying with either or both of the direction requirements. Failure to give the first pre-signing direction may mean that the buyer has a right of termination up until settlement. Failure to give the second post-signing direction may mean that the buyer is not bound by the contract and the cooling off period has not commenced.
Whilst it is acceptable for both of these directions to be given verbally, the more cautious and recommended approach is for these directions to be given in writing (for evidentiary purposes).
Contracts sent by facsimile or email
The amendments require that if a contract for the sale of residential property is being sent by electronic communication (ie facsimile or email) to a buyer (for signing or following signing), the facsimile or email must contain the following (in this order):
a single cover sheet that directs the buyer's attention to the PAMD Form 30C Warning Statement, the BCCM Form 14 (if a community title lot) and the contract (for sending by facsimile) OR an email message that directs the buyer's attention to the PAMD Form 30C Warning Statement, the BCCM Form 14 (if a community title lot) and the contract (for sending by email);
the Form 30c Warning Statement;
the BCCM Form 14 (if a community title lot);
the contract; and
any other documents (including agent's disclosures and the Disclosure Statement if a community title lot).
Furthermore, once the contract has been signed, the buyer must be directed again to the same documents (in a similar manner).
Further complicating the process is the requirement that prior to electronic communication being used in a residential transaction, both parties must first agree to use the same. Accordingly, if a contract is to be sent by fax or email, it will be necessary to obtain (by separate correspondence) the written consent of both parties prior to sending any documents for execution. A clause in the contract permitting electronic communication will not suffice.
We strongly resist the issuing of contracts by facsimile or by email, given that the area regarding faxing or emailing residential contracts is more complicated than simply mailing or delivering the same. Furthermore, some of the provisions of the Act are not clear and are open to multiple interpretations and therefore we have chosen to adopt the more cautious approach in this regard.
If you require further information, please contact any member of our Commercial Property and Transactions team: Don Battams, Tracey Rundle, Justin McInally, Angie Coleman or Kathleen Jennings
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