HOMEBUYERS TO HAVE WARRANTIES
Proposed ACT laws avoid the mistakes in other states
Article originally published on JUNE 26, 2003 –Reviewed and approved.
by Neil Jenman
If reports from Canberra are correct, the ACT Attorney-General, Jon Stanhope, could become the hero of Australian real estate consumer protection.
Mr Stanhope will today introduce proposed legislation to eradicate gazumping, the bane of ACT consumers.
However, in tackling this complex ethical issue, the legislation avoids a problem caused in many other jurisdictions where governments give much of the control of the legal process to agents. As the ACT government seems to realise, giving agents the power to be involved with legal contracts is a recipe for disaster that creates far more problems than gazumping.
Perhaps the worst example occurs in Queensland which carries the dubious title of ‘Australia’s real estate rip-off state’ because it allows thousands of unskilled, untrained, unethical, and commission-hungry salespeople to sign-up consumers to legally binding contracts.
In Queensland, contracts are altered, deposits are shrunk, conditions are added and then, finally, the sorry messes are dumped on lawyers’ desks by salespeople. Despite repeated calls for lawyers to handle the legal side of real estate, the Queensland government has failed to act, thereby placing thousands of consumers at risk. It has failed to realise that its lengthy warnings on contacts advising consumers to seek legal advice are no match for canny salespeople salivating over commission.
The ACT proposals seek to avoid the Queensland-style farce. When a home is offered for a sale, a contract must first be prepared by a lawyer. Attached to the contract will be essential documents which will include a building inspection report, a pest report, full title searches and approval for any renovation work.
These measures will save homebuyers from wasting money on needless or duplicate inspection reports. If the information in the contract or any of the reports is incorrect, the homebuyers will be entitled to compensation. Mr Stanhope said the ACT will be the first place in Australia where “mandatory warranties” apply for residential properties. He’s correct. These are indeed ground-breaking proposals.
There will be a five-day cooling-off period for homebuyers, although they will lose 0.25 per cent of the purchase price if they cancel the sale. In Queensland, the government succumbed to pressure from the Real Estate Institute when it allowed agents to share in the deposit losses of homebuyers. Hopefully, the ACT government will not allow agents to profit from the losses of homebuyers.
While agents will be permitted to obtain signatures from buyers and sellers, the only parts of the contract the agents can fill-in will be the price, the address and the names of the sellers and buyers. They must then deliver the contracts to lawyers for the legal work to continue.
If these reforms go-ahead the ACT will have the best real estate consumer protection in the country.
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