Connections and relationships are formed in the property sector all the time. It is part of regular practice for those working in the real estate industry to refer clients to other members of the industry for relevant services. However, where a real estate agent receives a benefit for referring their client, whether a buyer or seller, the agent has certain requirements on them to disclose certain referrals.
The real estate industry in the ACT is regulated by the Agents Act 2003 (ACT) (the Agents Act) and its associated Regulation, the Agents Regulation 2003. This legislation imposes obligations on real estate agents when making referrals to third party service providers. The Agents Act concerns, among other things, personal and commercial relationships real estate agents have with service providers.
What is a relevant relationship for the purposes of the Agents Act?
Types of agent relationships that need to be disclosed include:
- A relationship between the agent and the referrer, such as a family or business relationship;
- Whether the agent receives, or expects to receive a benefit from the person to which they refer the client;
- The amount, value or nature of any benefit received by the agent for providing the referral.
Relationships of complete independence do not need to be disclosed. An agent will not be considered independent of a service provider if they receive any benefit or commission or if the relationship is commercial or personal in nature.
What are the obligations?
The Agents Act imposes a number of disclosure obligations on agents; namely, agents must disclose to their clients:
- the nature and existence of a relationship between the agent and anyone who they refer the seller or buyer to for professional services relating to the sale or purchase;
- the amount or value of any benefit the agent receives or expects to receive for their referrals; and
- the amount or value of any benefit anyone else might receive for promoting or otherwise providing services for in relation to the sale.
Benefits are not always a monetary amount, they can include things such as commissions, rewards cards or marketing materials. Additionally, such benefits do not need to be certain. If an agent simply expects to receive a benefit, they must disclose this to their clients regardless of whether it is ever actually obtained.
There is an approved form under the Act that agents can use to disclose any benefits received, located at: https://www.legislation.act.gov.au/af/2003-28/
The obligations exist to promote transparency in relationships with clients and to ensure a buyer or seller knows the full extent of their transaction.
For more information on your obligations as an agent, or on how your agent should be conducting themselves throughout a sale, please contact us here.
