The recent case of Tan v Russel  VSC 93 has
highlighted the unfortunate consequences of what happens when a
purchaser fails to recognise the distinction between an
'Agent' and a 'Real Estate Agent' when exercising
their cooling off rights.
In short, 'Agency' is a legal relationship created by
contract whereby one party, the Principal, authorises another
party, the Agent, to act on their behalf. Once this relationship
has been formed, the actions of the Agent bind the Principal.
Confusion arises amongst many purchasers who, when dealing with
their 'real estate agent', mistakenly believe that, given
their title, they're agents for the purchaser. So what happened
to the unfortunate Mr Tan? Read on to find out...
In 2014, Mr Russel, the vendor, engaged Marshall White Real
Estate as the real estate agent to market and sell his property.
After the property was inspected, Mr Tan and Dr Lo decided to
purchase the property through Marshall White, signing the contract
and paying a deposit of $350,000. Three days after signing, Mr Tan
and Dr Lo emailed the real estate agent, exercising their cooling
off rights and ending the contract. Mr Russel however, believed
otherwise and denied that the contract was terminated validly.
Who was in the right?
Under the Sale of Land Act 1962 (VIC), a purchaser can
end a contract of sale via the cooling off provisions, provided
they give the vendor, or their agent, notice that they wish to
terminate the contract before the end of the cooling off period. In
this instance, it was held that the real estate agent wasn't
authorised to receive the notice from Mr Tan and Dr Lo regarding
exercising their cooling off rights.
The Court held that an 'agent' at law and a 'real
estate agent' are two very separate categories and as such have
different relationships with the vendor. The real estate agent
wasn't acting in their capacity as an agent for Mr Russel, but
rather, was in the capacity to market and sell the property and as
such, their actions (receiving the notice) were not binding on the
Vendor. In addition, it was found that the real estate agent
didn't engage in conduct of any kind which would suggest to the
purchaser that the real estate agent was acting as an agent for Mr
Russel – who should have been sent the notice directly. As
such, it was held that the contract was not terminated and Mr
Russel was entitled to keep the full deposit.
If you're buying a property, as the purchaser, you have an
obligation to know who notices should be served upon - in this
case, the vendor, Mr Russel - and to ask whether the real estate
agent has instructions to accept notices on the vendor's
behalf. Failure to ask this simple question means you risk your
deposit. In the case of Mr Tan and Dr Lo, it was a $350,000 mistake
that could have been avoided.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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Warranties can be risk-shifting mechanisms when the party giving the warranty is not the party at fault for the defect.
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