What a Queensland agent must disclose to a buyer and to a seller

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Kooky

Builder of Shaka, the payment router that pays every agent their commission on closing date.

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An estate agent stands in an unusual position. The agent is paid by one side of a sale, spends most of the campaign talking to the other side, and is surrounded by businesses that would like a recommendation: mortgage brokers, building inspectors, conveyancers, marketing suppliers, developers. Occasionally the agent, or someone close to the agent, would like to buy the very property being sold.

Queensland law does not forbid most of these situations. It deals with them through disclosure. The seller who appoints the agent is told, in writing and at the start, what the agent will be paid and what else the agent may receive. The buyer is told, before signing, who stands to gain from a referral. And where the agent has a personal stake in the purchase, the seller must be told on a prescribed form before any contract exists.

This guide sets out those duties as the Office of Fair Trading, the regulator of property agents, describes them, and where they sit in the Property Occupations Act 2014 and its regulation. It is a description of the general rules. Whether a particular arrangement had to be disclosed, and what follows if it was not, depends on the facts and is a question for a solicitor.

Office of Fair Trading pages on appointing a property agent, disclosing interests in property transactions, and property industry breaches and penalties.

Who the agent works for

Every disclosure rule rests on one fact: in an ordinary sale, the agent acts for the seller. The seller appoints the agent, the seller pays the commission, and the agent's duty is to obtain the best result for that client. Queensland's law calls the seller the client and the appointment the document that creates the relationship.

The buyer is not the agent's client. A buyer is still protected, in two ways. General consumer law prohibits misleading conduct towards anyone, and the Office of Fair Trading's guidance for agents says they must not make any false or misleading claims about a property. On top of that, the Property Occupations Act gives buyers a specific right to be told about certain benefits and relationships before they commit.

The position is different where a buyer has engaged a buyer's agent. That agent is appointed and paid by the buyer, holds the same kind of licence, and owes the client-side duties to the buyer. The client-side duties described in this guide are then owed to the buyer.

Understanding who the client is explains why the two sets of disclosures differ. The seller is owed a full account of what the agent earns from the job and any conflict in doing it. The buyer is owed a warning about the money and relationships that sit behind anything the agent recommends.

What a seller is told at appointment

A Queensland agent cannot begin work for a seller on a handshake. The Office of Fair Trading's page on appointments says the agent must use the approved form, Form 6 for residential property and Form 6A for commercial property, that both parties must sign it, and that the client must receive a copy.

The form is the main disclosure document a seller ever receives from an agent. According to the regulator, it must state the services to be provided; any limits, restrictions or conditions on those services; the commission, fees and expenses; when payments fall due; and, for a sole or exclusive agency, the end date of the appointment.

The regulator's page on commission adds detail about the money. The agent has to tell the client, in writing, the fees, charges and any commission for each service, any other expenses such as advertising and marketing, the due dates for payment, and whether commission may still be payable if the sale does not go through, with the circumstances in which that would happen. The commission must be stated inclusive of GST. The same page says the arrangement has to be settled in writing at the time of appointment and cannot be modified afterwards, and that the appointment may not contain unfair contract terms.

There is no statutory ceiling on commission in Queensland; the regulator's page says the amount is a matter of negotiation. Disclosure is what the law relies on instead of a cap: the seller sees every figure before agreeing to any of them.

Rebates, discounts and benefits from suppliers

The line of the form that sellers most often skim is the one about benefits the agent receives from third parties. It is also the one that most directly concerns conflicts of interest.

The Office of Fair Trading describes it as a financial benefits declaration. The agent has to disclose rebates received for referring clients to other businesses; the regulator's example is a mortgage broker. In letting work, the agent has to disclose any surcharge, above the agent's own cost, that renters pay to access services such as pay television, linen or cleaning.

The principle reaches beyond those examples. An agency that buys a large volume of advertising may receive a discount or a rebate from the publisher or portal. If the seller is charged the full listed price for a campaign and the agency later receives part of it back, the agency has gained from the seller's spending. The appointment form exists so that the seller knows about that possibility before authorising the marketing budget.

For a seller, the useful questions at appointment follow from the form. Is the marketing cost the amount the supplier actually charges the agency? Does the agency receive anything from the businesses it recommends, such as a conveyancer, a stylist or a finance broker? The agent is required to answer in writing on the form, not from memory at the kitchen table.

Money that changes hands between two agencies on one sale, known as a conjunction or referral arrangement, is a related subject. It divides a commission the seller has already agreed to, and it has its own conventions; the disclosure point is the same, in that the client should be able to see who is being paid out of the sale.

When the agent wants to buy the property

The strictest disclosure rule applies when the agent's own side of the family, or the agent personally, is the buyer. The law calls this a beneficial interest.

The Office of Fair Trading's page on disclosing interests defines it widely. An agent or salesperson has a beneficial interest when the buyer is the agent personally; an associate, which includes a family member; someone acting for the agent or the associate; a corporation of which the agent or an associate is a member, where the corporation has 100 members or fewer; a corporation of which the agent is an executive officer; or a business partner who shares profits with the agent.

Such a purchase is not banned. The regulator sets four conditions. The agent must not obtain an option to purchase from the client. The agent must complete the approved form, titled Disclosure of beneficial interest to the seller, before a contract is entered into. The agent must act fairly and honestly. And the client must receive a fair market price.

Each condition answers a specific risk. An option would let the agent lock in today's price and profit from a later rise at the client's expense. The form makes the seller's consent informed. The fair-price condition addresses the plain conflict: the person advising the seller on what the property is worth is the person who gains if the price is low.

The consequences of ignoring the rule are the heaviest in this area. The regulator's list of breaches and penalties puts failure to disclose a beneficial interest among the offences that carry a possible term of imprisonment, with a maximum of three years. The page on disclosing interests adds that a court may order the agent to repay the commission to the client, and may record a criminal conviction.

What a buyer must be told about benefits and relationships

The buyer's protection is aimed at referrals. During a sale an agent may suggest a finance broker, a solicitor, a building and pest inspector or, in new developments, a builder or a property manager. The buyer is entitled to know whether the suggestion is disinterested.

The Office of Fair Trading's guidance says agents must disclose to buyers any benefits involving third parties in connection with the sale, including fees, commissions or other benefits, whether in money or otherwise. The approved form is titled Disclosure to potential buyer. It has to give the third party's full name, the third party's relationship to the agent, and the details of the benefit.

Two words in that description carry the weight: relationship and benefit. A relationship can be personal or commercial. If the recommended conveyancer is the agent's sister, or the recommended broker is a business in which the agency's principal holds shares, the buyer is told. A benefit covers a payment for each referral, a share of a fee, or something that is not cash at all.

The regulator's examples of third parties are mortgage brokers, inspectors, marketing agencies and other agents. The disclosure is made before the buyer signs the contract, so that it can influence the decision to use the recommended business or to choose independently.

None of this prevents an agent from recommending people. Local agents usually know which inspectors are thorough and which solicitors answer the telephone. The rule only requires that a recommendation which pays the agent is labelled as one.

Developers and house-and-land packages

The buyer disclosure rule was written with investment marketing in mind, and the Office of Fair Trading's page makes two points about new property.

First, the duty applies to property developers who sell their own stock without holding an agent's licence, as well as to licensed agents. A developer's sales staff cannot avoid the rule on the ground that no agent is involved.

Second, in a house-and-land package the disclosure covers both contracts, the one for the land and the one for the building. A package is often sold by one marketer who is paid by the land developer, the builder and sometimes a finance provider. The buyer signs two contracts and may assume the two sellers are unrelated.

The same page records a threshold for developers: a person who holds an interest of at least 15 per cent in the property must disclose it. The purpose is to stop an owner or part-owner from presenting as an independent adviser on a property in which that person has a substantial stake.

For a buyer of new property, especially an investor buying from another city, these forms can be the clearest view available of how the price is divided among the people who recommended the purchase.

Price opinions and what the agent may say about value

A disclosure regime would mean little if the agent could be loose about the most important number of all. Queensland therefore regulates how an agent expresses an opinion of value.

The Office of Fair Trading's page on valuations says that if an agent offers an estimate of a property's value, it must take the form of a comparative market analysis. The analysis compares at least three properties that are of a similar standard or condition, sold within five kilometres of the property, and sold in the past six months. Where three such sales cannot be found, which is common for rural or unusual property, the agent must give the advice in writing and explain how the figure was reached.

For a seller, this means the price discussed at the listing presentation should come with its evidence. For both sides, the regulator's wider statement applies: an agent must not make false or misleading claims about a property, including about its estimated value. The Office of Fair Trading's guidance on advertising treats giving buyers a false impression of the price a seller will accept as bait advertising.

An agent's comparative market analysis is not a valuation by a registered valuer, and the law is careful about the difference. The standard warning that buyers see in a residential contract recommends that they obtain an independent valuation.

The conduct standards behind the forms

Forms are the visible part of the system. Behind them sit conduct standards in the Property Occupations Regulation 2014, which apply to every property agent whether or not a form covers the situation.

Section 18 of the regulation states the central rule: a property agent must not accept an appointment, or continue to act, for a client if doing so would place the agent's duty or interests in conflict with the client's interests. The neighbouring sections require an agent to verify the ownership and description of a property before acting, to find out the material facts about it, to check whether the client has an existing appointment with another agent, and to follow the client's lawful instructions.

The conflict rule is broader than the beneficial interest rule. An agent acting for two sellers of near-identical neighbouring homes, or for a seller and a buyer who is also a long-standing client, has to consider it even though no approved form addresses those cases.

The duty to check for an earlier appointment protects sellers from a specific loss: being liable for two commissions on one sale because a second agent was appointed while an exclusive agency was still running. The duty to verify ownership has become more prominent with concern about identity fraud; the regulator's guidance tells agents to take reasonable steps to confirm who truly owns a property and that the person giving instructions has authority to sell.

The warning every buyer sees above the signature

One disclosure is so standard that buyers rarely notice it. The Office of Fair Trading's page on warning statements says a contract for the sale of residential property must carry a statement directly above the place where the buyer signs, on the same page, in clear and legible wording.

The statement tells the buyer that the contract may be subject to a statutory cooling-off period of five business days, that a termination penalty of 0.25 per cent of the purchase price applies if the buyer terminates during that period, and that the buyer is recommended to obtain an independent property valuation and independent legal advice before signing.

The regulator's page says omitting the statement is an offence, and that the seller, or the seller's agent who hands the buyer the unsigned contract, can be prosecuted. In practice the standard contract used across Queensland has the statement printed in position, and the agent's task is to make sure the buyer signs the right page of the right document.

The warning is a form of disclosure about the agent's own role. It reminds the buyer, at the moment of commitment, that the person presenting the contract is not the buyer's adviser.

If something was not disclosed

The remedies depend on which duty was breached and on what the lack of disclosure caused.

For the agent, the Office of Fair Trading's list of breaches shows that warning and disclosure offences carry fines set in penalty units, with imprisonment available for an undisclosed beneficial interest. The regulator's page on disclosing interests says a court may order commission to be repaid to the client. Licensing consequences can follow separately, because the regulator may suspend a licence where property legislation has been breached.

For a seller or buyer who has lost money, several routes exist: a complaint to the agency, a complaint to the Office of Fair Trading, a claim against the property industry claim fund in the circumstances the fund covers, or a civil claim. Which one fits, and within what time, is a matter for legal advice on the particular facts.

It is worth keeping the scale in view. Most sales involve an appointment form completed properly, a buyer disclosure where a referral pays the agent, and no personal interest at all. The rules matter because the sums are large and the parties meet only once.

In Queensland the agent's side of a sale is meant to be visible on paper: what the agent earns, who else gains, and whether the agent stands to benefit from the purchase itself.

A seller who reads the appointment form line by line, and a buyer who asks whether a recommended business pays the agent, are using the system in the way it was designed.

Kooky, from Shaka

Kooky edits Queensland Estate and builds Shaka, the payment router he made for Queensland property professionals. One payment comes in, and every agent, agency and party in the deal receives their signed share on closing date.

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