Many people may not have realised that, with the commencement of the Legal Profession Act 2007 on 1 July 2007, it became an offence for a real estate agent to add special conditions to a standard REIQ contract.
The new Act permits an agent to "fill in details in a pre-printed contract or other document as part of performing the work of a [real estate agent]".
If an agent does any more than this, it will be engaging in legal practice in contravention of s 24 of the Act. The maximum penalty for such a contravention is $22,500 or 2 years imprisonment.
Therefore agents cannot:
draft or add special conditions (even if they are from a standard clause bank prepared by a solicitor for use by the agent); or
provide advice to a buyer or seller about the effect of the details completed by the agent or any other provision of the agreement.
Previously an agent was permitted to "prepare or assist in the preparation of a contract for another person" so this is a significant change in the law, although the apparent change in policy did not rate a mention when the Act passed through Parliament.
The exemption doesn't apply to preparation of contracts by property developers or their staff. Generally we don't think a property developer is carrying on a legal practice where it simply completes the particulars in a contract. However, sales people who insert special conditions at a buyer's request may by implication be representing to the buyer that the wording will have the required legal effect. In these circumstances, the sales person could be regarded as engaging in legal practice.
Practically What Will It Mean?
It remains to be seen whether the Legal Services Commissioner, the person responsible for administering the Legal Profession Act 2007, intends prosecuting agents who continue to prepare contracts with special conditions.
The fact that a contract with special conditions is prepared by an agent does not affect the contract's validity but an agent may be liable if a seller or buyer suffers loss due to the agent's negligent preparation of the contract.
Many retail leases include a covenant to trade, requiring the tenant to open the premises for trade during certain hours.
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