A new Code of Conduct comes into force for real estate agents on 8 April 2013.

Many of the changes respond to issues which have been the subject of repeated consumer complaints, including the licensee's responsibility to inform potential buyers about hidden or underlying defects in a property.

The Real Estate Agents Act (Professional Conduct and Client Care) Rules 2012 update and replace the 2009 Rules. They set minimum standards of conduct and client care that licensees are required to meet when carrying out real estate agency work – whether in the commercial or the residential market.

The new Rules, which apply to agents, branch managers and salespersons, further refine the consumer focus of the Real Estate Agents Act 2008. An underlying driver is that licensees should be knowledgeable about the products they are selling and a buyer should be well informed about all aspects of what is typically the biggest transaction they will ever enter into.

Investigations relating to events on or after 8 April will be dealt with under the 2012 Rules. Enquiries into events happening before 8 April will be dealt with under the 2009 Rules.

Key changes

Significant changes include:

  • a new requirement to explain to a client when an agency agreement ends
  • an obligation for licensees, when their agency agreement is cancelled, to identify to clients those customers whom they will be seeking to claim commission in respect of in the event that they buy the property
  • extension of the double commission rule beyond sole agencies to all types of agency agreements. This may require changes to an agency's systems
  • a requirement that licensees recommend to all parties entering an agency or sale and purchase agreement that they seek legal advice
  • a requirement for agents operating as a business to ensure that all their salespersons are properly supervised and managed
  • where there is no directly or semi-comparable sales data on which to base an appraisal, a requirement that the agent explain this to a client in writing
  • a requirement for agents to explain to clients, before any agency agreement is entered into, how decisions relating to the way in which the property is sold may affect the individual benefit to the licensee
  • new rules on what information must be explained before a client enters into a buyer's agency agreement, and
  • clarification (in Rule 10.7) of the test for when a licensee should know about a hidden or underlying defect in the property, and that the licensee cannot necessarily rely entirely on their client's word – expert evidence or advice may be required. Simply conveying in good faith information passed on by a vendor, without checking that it is correct, is inadequate.

The 2012 Rules may require operational changes as well as modifications to documents, including agency agreements, to reflect new obligations and to carry forward correct referencing of Rules because numbering will be different.

The Rules are to be read in conjunction with the Real Estate Agents Act 2008.

The Rules are not a code or an exhaustive list of what constitutes unsatisfactory conduct or misconduct. However, the Real Estate Agents Authority describes them as a "vitally important" reference point for Complaints Assessment Committees and the Disciplinary Tribunal.

Our thanks to Heather McKenzie for writing this Brief Counsel

The information in this article is for informative purposes only and should not be relied on as legal advice. Please contact Chapman Tripp for advice tailored to your situation.