1962-63
VICTORIA
REPORT
FROM THE
STATUTE LAW REVISION COMMITTEE
UPON THE
ESTATE AGENTS ACT 1958
TOGETHER WITH
AN EXTRACT FROM THE PROCEEDINGS
OF THE COMMITTEE
Ordered by the Legislative Assembly to be printed, 11th December, 1962.
By Authority:
A. C. BROOKS, GOVERNMENT PRINTER, MELBOURNE.
D.-No. 9.-10710/62.
Price Is. 3D.
EXTRACTED FROM THE MINUTES OF THE PROCEEDINGS OF THE
LEGISLATIVE COUNCIL.
WEDNESDAY, 5TH SEPTEMBER, 1962.
8. STATUTE LAw REVISION CoMMITTEE.-The Honorable G. L. Chandler moved, by leave, That the Honorables
W. 0. Fulton, W. R. Garrett, G. J. Nicol, A. Todd, D. J. Waiters and J. M. Walton be members of
the Statute Law Revision Committee, and that the said Committee have power to send for persons, papers,
and records.
Question-put and resolved in the affirmative.
EXTRACTED FROM THE VOTES AND PROCEEDINGS OF THE
LEGISLATIVE ASSEMBLY.
WEDNESDAY, 5TH SEPTEMBER, 1962.
9. STATUTE LAw REVI>liON CollfliHTTEE.-Motion made, by leave, and question-That Mr. Cochrane, Mr. Dunstan,
IYir. Evans (Gippsland East), Mr. Holland, Mr. Manson and Mr. Wilkes be members of the Statute Law
Revision Committee ; and that the Committee have power to send for persons, papers and records (Mr.
Rylah)-put and agreed to.
TIDJRSDAY, 29th NOVEMBER, 1962.
14. STATUTE LAw REVISION CoMMITTEE-Motion made, by leave, and question-That Mr. Evans (Gippsland East)
be discharged from attendance on the Statute Law Revision Committee and that Mr. Whiting be appointed
in his stead (Mr. Rylah)-put and agreed to.
REPORT
THE STATUTE LAw REVISION CoMMITTEE appointed pursuant to the provisions
of The Constitution Act Amendment Act 1958, has the honour to report as
follows:-
1. On the 29th May, 1962, the Parliamentary Draftsman, by direction, submitted
for the consideration of the Committee, the following matters relating to the Estate Agents
Act 1958:1. What should be the necessary qualification by examination and experience
for eligibility to be granted an estate agent's licence or a sub-agent's
licence 1
2. Upon what terms and subject to what conditions should companies or othm
corporations be eligible to be granted estate agent's licences or otherwise
to engage in the business of estate agents ?
3. Should any, and if so what, provisions of the Estate Agents Act 1958, be
extended to builders or subdividers of land or other persons, or alternatively,
should similar legislation be enacted in respect of builders, subdividers
or other classes of persons ?
4. Should the sole agency provisions of the Estate Agents Act 1958 extend and apply
to sales through multiple listing agencies and to auction sales conducted
by auctioneers, for what period should the sole agency relationship remain
in operation in respect of estate agents, multiple listing agencies and
auctioneers respectively, and in respect of which, if any, of these cases
should the period be capable of extension ?
5. After a person has applied unsuccessfully for the grant of an estate agent's
or sub-agent's licence should he be precluded from again applying for
such a licence to the same or any other Court for any and what period '?
On the 14th September, 1962, the Honorable the Assistant Attorney-General advised
the Committee that it appeared that certain vendors and business agents were inducing
persons to purchase small businesses by supplying incorrect statements as to turnover,
net profit, &c., It was suggested that the Committee should consider whether the Estate
Agents Act should be amended to require disclosure of certain essential information before
any contract was signed.
The Committee decided to undertake an inquiry and on 3rd October, 1962, commenced its investigations.
2. Appended* to this Report are the minutes of evidence of the following witnesses
who appeared before the Committee :-
Mr. I. F. McLaren, Chairman, Real Estate Agents Committee;
Mr. M. Synott, former Registrar of Estate Agents;
Mr. G. Press, Secretary, Discharged Servicemen's Employment Board;
Mr. G. V. Thomas, Secretary, the Federated Retail Confectionery Refreshment
and Mixed Business Association of Australia (Victorian Branch);
Mr. A. A. Burnside, and Mr. H. J. Franksen;
Mr. G. Scott Lang, Jr., Past President } representing the Real Estate and
Mr. Frank J. Foy, General Secretary
Stock Institute of Victoria;
Mr. A.
Jenkins} represent'mg th e R eal Et
. t.10n;
1\Ir.
G. E.
L. Kellett
s a t e Agent s' Assoma
• Minutes of Evidence and Appendices not printed.
4
Mr.
Mr.
Mr.
Mr.
Mr.
Mr.
Mr.
The
The
The
The
A. V.•Tennings } representing the Master Builders' Association of Victoria;
D. H. Murden
L. P. Crockett, representing the Australian Society of Accountants;
N. B. Boothby, representing the Law Institute of Victoria;
A. H. Gray, representing the Health Inspectors' Association of Australia;
Victorian Branch ; and
C. A. Hulls, Head, School of Accountancy, Royal Melbourne Institute of
Technology.
Also appended* are memorandum received fromL. L'Estrange, Barrister and Solicitor ;
Estate Agents Committee ;
Real Estate and Stock Institute of Victoria ;
Builders' and Allied Trades' Association ;
Federated Retail Confectionery Refreshment and Mixed Business
Association of Australia (Victorian Branch).
In addition the Committee had before it a copy of a submission by the Estate Agents
Committee, dated 21st November, 1960, to the Honorable the Treasurer regarding licensing
of corporations.
ELIGIBILITY OF AN INDIVIDUAL TO OBTAIN AN ESTATE
AGENT'S LICENCE.
3. Section 11 of the Estate Agents Act 1958 provides inter alia that no person shall
be eligible to apply for or be granted an estate agent's licence whether a new licence or a
renewal or a transfer, unless(a) he has complied with the education standards and qualifications, or their
equivalent, and passed any examinations prescribed by the rules ; or
(b) unless otherwise prescribed by the rules he has within the five years
immediately preceding his application for a licence held a sub-agent's
licence for at least three years
It was contended that instead of these qualifications being alternatives the requirement should be that an applicant for a licence must have-(a) complied with any required
educational standards and qualifications or their equivalent ; (b) passed any examinations
prescribed by the rules ; (c) within the period of four years immediately before his application for a licence, held a sub-agent's licence ; and (d) have been wholly employed as a subagent for a period, or periods, aggregating not less than three years.
4. In support of this proposal it was claimed that as estate agents are in the position
of advising people on what is probably in most cases, the largest single transaction in their
lives-the purchase of their homes-it was reasonable to expect agents to be fully qualified
both in practice and theory. At the present moment a person with no academic knowledge
but who has held a sub-agent's licence for three years, is eligible to obtain an agent's licence,
even 'though he may have been acting as a sub-agent on week-ends only, or may have been
employed by an agent on purely clerical duties and obtained a licence merely to enable him
to accept rental payments in the absence of the agent.
5. The educational standard required by the rules of the Estate Agents Committee
is a pass in the second year of the Real Estate Management course conducted by the Royal
Melbourne Institute of Technology.
At the present time any person who possesses an
Intermediate Certificate is qualified to undertake the course, but as from 1964 admission
to the course wilJ be restricted to students of Leaving Certificate standard, and persons
not of this standard will be required to complete a one year pre-qualifying course. It is
understood that the Institute has adopted this policy because of the high rate of failure
among students of Intermediate Certificate standard.
6. The Committee is of opinion that the course for students should be designed to
give sub-agents a workable knowledge. of the practical and legal and accounting aspects
of estate agency work. It considers that Intermediate Certificate is an adequate standard
• Minute8 of Evidence and Appendices not p1'inted.
5
at the moment, and should remain as the standard until such time as it ceases to be recogIt is suggested that
nized as of any educational merit in the community in general.
approaches should be made to other technical colleges with the view to their undertaking
course~ at Intermediate Certificate standard.
Should this approach fail, the Estate Agents
Committee should consider conducting its own course. Should that Committee adopt this
proposal it would then be possible for it to vary course admission qualifications
as and when it was thought necessary, and it would not be placed in the possibly
embarrassing situation of having pre-qualifications dictated to it by some other authority.
7. Subject to its comments in the preceding two paragraphs the Committee is in
favour of the proposal contained in paragraph 3 and recommends that it be adopted.
8. It was also suggested that any person who-(a) ·within the past five years had held
an agent's licence; or (b) within the four years before his application had held a sub-agent's
licence and had been wholly employed as a sub-agent for a period or periods aggregating
three years, should be eligible to become an agent without acquiring the required educational
qualifications.
As it is customary to exempt persons when they are qualified under
existing legislation but become unqualified because of subsequent legislation, the Committee
recommends that this suggestion be implemented.
9. Paragraph (d) of sub-section (1) of clause 11 provides that a person who is the
executor administrator or trustee of a deceased estate agent is eligible to be granted an
agent's licence. The Committee is of opinion that the holding of a licence for this particular
purpose should not enable a person to obtain a licence under the provision of item (a) in
paragraph 8 of this Report.
10. Sub-section (2) of clause 11 provides that no person who is disqualified from
holding a licence or in relation to whom a claim has been allowed against the Estate Agent's
Guarantee Fund and which he has not refunded, shall be eligible to apply for a licence. It
was proposed that this section should be amended to provide also that any person who
is an undischarged bankrupt should not be eligible to apply for a licence. As this is one
of the grounds on which the renewal or transfer of a licence can be objected to, the
Committee agrees that it is logical that it should also be a ground for ineligibility.
ELIGIBILITY TO OBTAIN A SUB-AGENT'S LICENCE.
11. The only qualification at present required of an applicant for a sub-agent's licence
is that he be of good character and possesses a certificate from an agent that he proposes
to employ him. The Committee considered whether an applicant should also possess any
basic educational standard and came to the conclusion that it would be undesirable to lay
down any mandatory standard and thus possibly restrict entry into the estate agency field.
It considers that agents themselves would exercise discretion in employing sub-agents and
would not employ as a sub-agent any person who because of a lack of education was incapable
of carrying out the various duties allocated to him.
12. The Committee is perturbed by the faot that numerous sub-agents are employed
on a part-time basis only. The Committee considers that sub-agents who are not wholly
employed cannot receive adequate instruction in the many facets of estate agency work
and therefore recommends that an application for a sub-agent's licence must be accompanied
by a statutory declaration that it is the intention of the applicant to engage in full-time
employment. Similarly an application for a licence renewal should be accompanied by a
statutory declaration stating the period of employment, the name of the employer and the
It is realized that there will be difficulties in policing this
degree of employment.
recommendation and as the Committee is adamant that sub-agents should be employed on a
full-time basis, it is recommended that any agent who employs part-time sub-agents should
be guilty of an offence under the Act and should have his licence renewal opposed on this
ground.
13. The Committee recommends that the definition of " sub-agent " be amended to
provide that .any person :vho is engaged on purely clerical du~ies should not be r~quir~d
to obtain a hcence. Th1s amendment would overcome the difficulty already outlined m
paragraph 4 of this Report.
6
CORPORATION LICENCES.
14. The Committee considered whether a corporation should be eligible to become a
licensed estate agent and agreed that as there were legitimate reasons for the formation of
estate corporations, they should be eligible for licences. Sub-section (2) of clause 9 of the
existing Act provides that a corporation may carry on business as an estate agent if some
person appointed by the corporation holds a licence on its behalf. As the Act now stands
it is defective in that in the case of a corporation it is the character and qualifications not
of the corporation's nominee but of the directors and shareholders which are of the utmost
importance. The Act does not require a nominee to play any part in running the business
of the corporation ; all he is required to do is hold an estate agent's licence. This means
that the effective control of the corporation may be in the hands of persons who are not
estate agents, or worse still, in the hands of persons who-(a) would be ineligible to hold
licences ; or (b) have had licences revoked or renewals refused.
15. To obviate this defective feature of the Act it has been proposed that a corporation
should not be eligible to obtain a licence unless at least 50 per cent. of the directors are
licensed agents. There was general agreement to this proposal among witnesses, although the
view was put that the same result could be achieved if instead of directors being required
to hold licences they were merely eligible to hold licences. The Committee is in favour of the
more positive approach and recommends that the proposal be adopted. Some witnesses
stated that if corporation directors were required to hold licences, then as the corporation
is also required to pay a licence fee, it would be reasonable to issue licences to the directors
for a nominal fee. The Committee does not agree with this suggestion, and recommends that
directors should pay the same fees as prescribed for individuals and that their licences should
allow them to engage in agency work outside the corporation.
16. The Committee considered the application of its recommendation in respect to
directors of corporations dealing in real estate, and decided that in relation to the Estate
Agents Act, corporations should be classified into three separate categories, namely (a) public
corporations-being those listed on any Australian Stock Exchange ;
(b) private
corporations-being those not listed on any Australian Stock Exchange ; and (c) pastoral or
any other corporations in which estate agency work is a minor portion of the activities
of the corporations. The Committee agreed that while it was essential that at least 50 per
cent. of the directors of both public and private corporations should be licensed it was
unreasonable to require this qualification of directors of corporations in category (c). It was
also agreed that in order to ascertain whether the Committee's recommendation was being
complied with it would be essential for the disclosure of a number of details by public and
private corporations.
PUBLIC CORPORATIONS.
17. A proposal was advanced that adequate details would be disclosed if a director
or the secretary of a corporation applying for a licence were required to lodge a statutory
declaration containing the following information and exhibiting the following details :(a) the names and addresses of all directors and the secretary of the corporation
and the officer of the corporation in bona fide control of the real estate
agency business of the corporation ; and
(b) the current memorandum and articles of association of the corporation,
certified by the person making the statutory declaration as being the
current memorandum and articles of association of the corporation.
It was proposed that these documents would be lodged with the Registrar of Estate
Agents prior to any application being made to the court and the Registrar would, if satisfied,
issue a certificate to the corporation stating that it had complied with these provisions.
This certificate would then become a document to be supplied to the court to prove the
eligibility of the corporation to apply for a licence.
It was further proposed that any change in the memorandum or articles of association,
directorate or control of the corporation subsequent to the issue of any licence would have
to be notified by statutory declaration to the Registrar.
18. The Committee is in favour of these proposals and recommends that the Act be
amended accordingly.
7
PRIVATE CORPORATIONS.
19. These corporations are in a different category to public corporations in that
there would be a small number of shareholders, some of whom may be able to influence the
affairs of the corporation by having special voting rights conferred on them by the
memorandum and articles. Others could be persons who are ineligible to hold licences or
who have had either licences revoked or renewals refused, but could control private corporations by their shareholding or through some other person holding the shares on their
behalf.
20. The Committee therefore recommends that in addition to the factors recommended
to be disclosed by public corporations, private corporations should also be required to submit
details of the names and addresses of all shareholders and the shareholders should be required
to submit statutory declarations stating that they hold the shares on their own behalf or,
when shares are held on behalf of some other person, stating the name of that person.
PASTORAL AND OTHER CORPORATIONS.
21. In the case of pastoral and other corporations the Committee recommends that
these corporations should be eligible to be granted a licence if the officer in bona fide control
of the real estate business of any such corporation holds an estate agent's licence.
To avoid any doubt as to which corporations are pastoral or other corporations the
Committee recommends that such corporations be declared by order of the Estate Agents
Committee published in the Gavernment Gazette.
22. As the Committee has already recommended that persons who are undischarged
bankrupts should be ineligible to apply for a licence, it is recommended that corporations
in liquidation should also be ineligible.
LICENCES GENERALLY.
23. A number of other proposals relating to the issue of new licences or the renewal
of licences was considered by the Committee.
24. It was proposed that no person should be eligible to apply for a licence unless
he was a resident of Victoria or resided within 30 miles of the Victorian border.
The Committee is not in favour of non-Victorian residents being licensed, but agrees
that agents within a limited distance of the border who, in the normal course of their business
would probably become involved with real estate transactions in neighbouring Victorian
towns should be eligible to be granted licences.
It is therefore recommended that this proposal be implemented.
25. The present Act does not require an applicant for a new licence to attend before
the court when his application is being considered. The Committee agrees with a suggestion
that the applicant, or, in the case of a corporation, a responsible officer, should be present
in the court to answer such questions as the court may put or allow to be put to him.
26. Sub-section (6) of clause 10 of the Valuation of Land Act 1960 provides :" (6) If the Board is of the opinion that any applicant for a certificate of
qualification is capable of carrying out valuations for all statutory purposes
but only within a certain part or certain parts of Victoria it may grant
a certificate of qualification to that person limited to such part or parts
of Victoria as are described in the certificate and the certificate shall
have effect accordingly."
It was contended that a somewhat similar provision should be inserted in the Estate
Agents Act to allow the issue of licences restricted to certain areas to persons who would
have to have qualifications commensurate with the requirements of the area for which the
licence was sought.
27. The reason for this suggestion was that areas which could not support the services
of a full-time agent should not be denied agency facilities altogether.
The Committee
understands that the restricted valuer's licences are issued only to persons who have acted
as valuers in the past. As persons who were not licensed would not have been acting as
estate agents in the past five years the Committee is not in favour of inserting a similar
provision into the Estate Agents Act.
8
28. Sub-section {3) of clause 17 of the Estate Agents Act provides a number of grounds
on 'Yhich objections may be taken to the granting of a licence. Paragraph {e) of this subsectiOn reads " that the applicant has become bankrupt in circumstances which involve moral
turpitude or fraud on his part ".
As it may be difficult to prove the circumstances
surrounding the bankruptcy the Committee recommends that paragraph {e) be amended to
provide " that the applicant is an undischarged bankrupt ".
The Committee agrees with the suggestion that the grounds listed in clause 17 {3)
should be rearranged in order of their seriousness, and it is recommende(l that items {d), {e)
and {j), be transposed to become items {.f), (d), and (e), respectively.
29. The provisions of clause 17 {3) relate only to objections to the issue of lioences
to individuals. In view of the Committee's recommendations regarding public and private
corporations it will be necessary to modify the clause and apply its provisions to the directors
and officers of both these types of corporations and to the members of private corporations.
30. There is no provision in the Act to prevent any agent who has been refused a
licence by a court from immediately lodging another application to the court. These agents
could in fact continuously lodge applications for a period of five years. The Registrar of
Estate Agents is the person who usually objects to the issue of a licence, and when there
are continuous re-applications, all the evidence tendered originally in each case must be
re-submitted by him to the court. As this procedure is cumbersome and time-consuming
it has been proposed that an agent should not be allowed to re-apply for four years unless
the court reduces such period.
31. The Committee agrees that there must be a time limit between re-applications but
considers that a period of four years is too long. Because an agent must have held a licence
within the five years immediately preceding his application, a four-year disqualification
would mean that he would be given only one opportunity to re-apply before becoming
ineligible altogether.
The Committee considers that an applicant should be given two
opportunities to re-apply and therefore recommends that the time limit between applications
be two years.
32. The suggestion that courts be given authority to reduce the prescribed time limit
was put forward to give the court a discretion if it thought that the grounds for objection
were for purely technical or minor offences.
This proposal is not recommended, as it appears to the Committee that clause 17 (3)
already gives a court discretion depending on the circumstances of several of the grounds
of objection, in deciding whether a licence should not be granted.
BUILDERS AND SUBDIVIDERS.
33. The Committee considered whether builders and subdividers should be controlled
in any manner under the provisions of either the Estate Agents Act or a similar new Act.
While it was agreed that when a builder or subdivider was selling his own property
he could not properly be described as an agent, the Committee was of opinion that some
form of control was necessary in relation to any representations as to finance given by these
persons to prospective purchasers.
35. Section 34 of the Estate Agents Act specifies a number of details which must be
given in writing to a purchaser by an agent before any contract is signed or deposit accepted.
The Committee is of opinion that the Estate Agents Act should be amended by defining
" builder " and " subdivider " and applying the provisions of section 34 of the Act to these
persons. The Committee does not consider that these persons should be required to hold
estate agent's licences.
SOLE AGENCY.
35. Sub-section {1) of clause 36 of the Estate Agents Act reads" 36 {1) An estate agent shall not accept or undertake any appointment
or engagement to act as sole agent in respect of any transaction {other than the
collection of rents or management of a property) for a period that is or may be
greater than 30 days from the date of the appointment or engagement, but
an agent may accept extensions of any appointment or engagement to act as sole
agent from time to time for a period not exceeding in the case of any such extension
30 days."
9
Under this provision a vendor who agrees to a sole agency agreement is required to
pay the agent commission on the sale of the property within the period of the sole agency,
irrespective of whether such sale is effected by the vendor himself, the agent or some other
person.
There is no limit to the number of extensions obtainable and the Committee
understands that it is not uncommon for extensions to be obtained by an agent at th(' same
time as the original 30-day agreement is signed.
36. To avoid the possibility of a property being tied up on an extended sole agency
agreement for too long a period it was suggested that section 36 be amended to provide for a
60-day sole agency with extensions permitted only on application by both agent and vendor
to the Registrar.
37. While the Committee is opposed to the present unlimited number of extensions it
considers that the suggested 60-day period is too long. It is recommended that the existing
30-day period remain in section 36 and that an extension of 30 days be permitted, provided
that such extension is not to be obtained within less than 21 days from the date of the signing
of the original sole agency agreement. Thereafter any additional extension should require
the approval of the Registrar. The Committee is of opinion that its recommendation will
allow a vendor to terminate his agreement with the agent within the reasonable period of
30 days if he is dissatisfied with the agent's services.
MULTIPLE LISTING.
38. A multiple listing agency agreement is an agreement between a vendor and an
agent whereby in consideration of the agent forwarding details of the vendor's property for
listing amongst a group of agents, the vendor agrees to grant an agency for a specified
period-usually a minimum of 60 days. The agreement is couched in the terms of a sole
agency agreement although it has been held that multiple listing is not a sole agency within
the provisions of section 36.
39. The Committee agrees with the proposition that multiple listing should be brought
within the sole agency provisions of the Act. Because it usually takes at least 21 days before
details of a property are circulated to agents participating in this type of scheme the
Committee considers that its recommendation.> in paragraph 37 of this Report are too
restrictive and would not give an agency sufficient time to effect a sale. It is therefore
recommended that in respect of a multiple listing, section 36 should provide for a sole agency
period of 60 days with no extension except with the approval of the Registrar.
AUCTION SALES.
40. Like multiple listing, auction sales do not come within the ambit of section 36
of the Act and agents sometimes obtain auction authorities on properties for periods of up
to six months on a sole agency basis. It was contended that in many cases these agents
obtained auction authorities for excessive periods-having no intention of auctioning-to
enable them to sell the property privately or to obtain commission in the event of a sale by
some other person.
41. To eradicate this practice it was proposed that auction sales should be brought
within the sole agency provisions of the Act and that the period of agency should be
restricted to 60 days prior to the auction, with no extension unless approved by the Registrar,
and a further period of 30 days after the auction to give the agent an opportunity to sell
privately in the event of an unsuccessful auction.
42. The Committee favours the extension of section 36 to include auction sales and
However, it considers
agrees with the suggested period of 30 days after auction date.
that its recommendations in paragraph 37 of this Report should apply in relation to the
period prior to any auction. Should the vendor refuse to sign a 30 day extension it is
recommended that he be required to pay the agent only those expenses incurred in arranging
or cancelling the auction.
10
RESTRICTION OF SOLE AGENCY TO RESIDENTIAL
PROPERTIES AND BUSINESSES.
43. As it has been stated that industrial, commercial and rural properties take
considerably longer to sell than other properties, the Committee is of opinion that these
types of properties should be exempted from the recommendations in paragraphs 37, 39
and 42. The Committee agrees with the statement that vendors of these classes of property
would probably be well acquainted with business practice and would not enter into long
sole agency agreements unless it was in their best interests.
SALE OF SMALL BUSINESSES.
44. The Discharged Servicemen's Employment Board-a body charged with the
responsibility of investigating small businesses on behalf of discharged servicemen-recently
drew attention to the methods being used by certain vendors and business agents to effect
sales of these businesses. It was claimed that in many cases incorrect statements were
being made, sometimes innocently, but at other times fraudulently, concerning items such
as turnover, net profit, outgoings, &c., and as a consequence many persons have been induced
to purchase on an uneconomic basis.
45. The Board suggested that steps might be taken(a) to make it a legal necessity to include the vendor's claims of turnover, net
profit and other material factors in the contract of sale ; and
(b) to ensure that the vendor and the purchaser are each given a written copy
of the claimed turnover, net profit, loan repayment terms and tenancy
conditions before any deposit changes hands.
The Board cited cases to the Committee where after investigation it was shown that
the probable net profit from a busine&"l was far below that claimed by agents or vendors.
In some cases the businesses were actually netting losses.
Reference was also made
to cases where the weekly loan repayments of the purchasers were higher than the weekly
net profits of the businesses.
46. On the evidence before it the Committee is strongly of opinion that drastic action
is necessary to prevent purchasers, who are usually inexperienced or gullible, from being
supplied with incorrect, misleading, or insufficient particulars.
47. It is therefore recommended that there be enacted a new section in the Estate
Agents Act similar in context to the present clause 34 requiring that, before any vendor or
agent obtains any signature on a contract or accepts any deposit money for the sale of a
small business, a written statement shall be given to the purchaser incorporating the
following details :(a) Average weekly sales as disclosed by account books for the preceding three
years;
(b) Gross profit-excluding stock taken for personal use as disclosed by statements certified by an accountant for the preceding three years;
(c) A statement of overhead costs as disclosed by Profit and Loss Statements
certified by an accountant for the preceding three years ;
(d) The terms of any tenancy agreement;
(e) The terms of any hire-purchase agreement, bill of sale or other document in
existence on any equipment, fixtures, or fittings.
(f) The terms of any repair or structural alteration order issued by the local
municipality against the premises ; and
11
(g) A summary in the following form :(i) Purchase price
Plus stock
Total price :
£
£
£
£
(iii) Amount owing by purchaser
£
(iv) Method of financing balance owing by purchaser
£.............................. for years at
Loan of
Interest
£............................. .
Second mortgage of £.............................. for years at
Interest
£............................. .
Total repayments£..............................
(ii) Deposit by purchaser
(v) gross profit as disclosed per
item (b)
.. £
Per Annum.
%p.a.
%p.a.
Per Week.
£
lessOverhead costs as
disclosed per item
(c)
.. £
Any additional wages
estimated to be payable in excess of
those disclosed by
vendor
.. £
Loan and mortgage re.. £
payments
Net balance to purchaser £
£
£
£
£
It is considered by the Committee that even the most inexperienced person would be
in a position to decide, on the details supplied in the above summary, as to whether the
business was an economic proposition to him.
48. The Committee further recommends that if any details required under items
(d) (e) and (f) of the preceding paragraph are inaccurate or are not given, the purchaser
be given the right to avoid any contract or agreement within three months of entering into
same. Upon avoidance of the contract any moneys paid by the purchaser to the vendor
or to an agent should be repayable to the purchaser.
49. The Rules of the Estate Agents Committee prescribe the form of printed contract
which is to be used by agents in effecting the sale of a busines~:< and the details of the lease
of the premises are required to be incorporated in this contract. The Committee recommends
that in addition items (a) (b) (c) (e) and (/) of paragraph 47 of this Heport should be
prescribed for insertion in the contract.
50. The Committee considered whether the figures of the average weekly turnover
should be guaranteed by a vendor, with the contract being voidable if the purchaser's
turnover did not come within a certain percentage of the guaranteed figures. This idea
was discarded when it was pointed out that sales would in most cases be dependent on the
personality and business acumen of a small business proprietor and that any substantial
drop in takings could be caused through defects in the personality and business method<;
of a purchaser.
51. It is realized that because of the high rate at which small businesses change hands,
in a large proportion of cases vendors will not be in a position to supply details of the
businesses for the preceding three years. The Committee suggests that where a business has
not been in existence for a period of three years or where the vendor cannot supply figures
for the required period then the requirement will be complied with if certified figures for the
period of occupation are supplied. It is envisaged that in future when a business is sold
within a period of three years a vendor will be required to produce the statements showing
the representations made by earlier vendors.
12
52. It appears to the Committee that many persons have been lured into purchasing
businesses by accepting figures of gross profits as being net profits. The Committee considers
that its recommended summary will dispel doubts as to this particular aspect but, it is further
recommended that only gross profit figures, specifically described as such, should appear in
any advertisements.
53. For the purposes of its recommendations the Committee proposes that a "small
business " should be defined as one in which the selling price of the plant, equipment, fittings
and goodwill does not exceed £15,000.
54. The Committee's attention has been drawn to the high rate of commission payable
to agents on the sale of businesses-a rate far in excess of that prescribed for the sale of
residential property. In addition agents receive a further commission on stock sold with the
business. The Committee appreciates that to dispose of certain businesses may take considerable time and effort on the part of the agent. However, in view of the evidence of the
high turnover in small businesses- usually milk bars and mixed businesses-the Committee
concludes that these can be sold without any great effort by an agent.
Accordingly it is recommended that the rates of commission on small businesses
be reduced to the same rate as that applying to the sale of residential property. As the
Committee can see no reason why an agent should also be entitled to commission on stock,
it is recommended that the stock of small businesses cease to be an item subject to commission.
55. Attention has already been drawn to the fact that some persons have purchased
businesses and subsequently found that their loan repayments have been in excess of their
income. As the majority of loans are issued by hire-purchase companies the Committee
considers that these companies in the interest of themselves and the purchaser should conduct a more detailed examination into the ability of a purchaser to meet commitments from
the expected profits of the business. During the course of this inquiry the Committee
developed a suspicion that some business agents were either receiving commission from,
or had interests in, various organizations through which they arranged finance for purchasers.
The Committee views any such practice with complete disfavour and recommends that the
Estate Agents Act be amended to provide that any commission received by an agent from
any finance organization should be an improper commission.
56. The Committee was greatly impressed by the services being rendered to discharged
servicemen by the Discharged Servicemen's Employment Board. It was unanimously of the
opinion that the Board's services should be available to all persons seeking advice on the
purchase of small businesses. It appears to this Committee that the services of the Board
are not well known to the public and it is suggested that the activities of the Board should
be more widely publicised.
57. In view of the volume of evidence the Board has regarding the unscrupulous
practices of certain business agents it is the unanimous opinion of the Committee that the
Board and the Estate Agents Committee should confer and jointly oppose the renewal of the
licences of a number of business agents at the earliest possible opportunity.
ADVERTISING.
58. Sub-section (3) of clause 29 of the Estate Agents Act provides" (3) Any estate agent who knowlingly publishes (whether in a newspaper
or otherwise) as part of any advertisement any false statement or representation
concerning any property or business which is or is stated or represented to be for
sale shall be guilty of an offence against this Act."
The view was put that this sub-section was inadequate and no action could be taken
against agents who publishe~ misl~adir;g advertisements. "As an ~~ample ~f this, one recent
advertisement was quoted m whiCh It was stated that electnc1ty Is right through the
estate ". This statement was not false in that power lines did run through the estate, but was
misleading because the State Electricity Commission advised that no connexions would be
made until some future time when the power supply was increased.
59. The Committee recommends that the sub-section be strengthened by the insertion
of the words " or misleading " after the word " false ".
13
60. The Estate Agents Committee advised that it was difficult in many cases to
prove who published a false or misleading advertisement. On several occasions when that
Committee was prepared to take action against agents, these agents have disclaimed
responsibility and have claimed that the errors were the fault of their advertising agencies
or the vendors.
61. To avoid this disclaiming of responsibility by agents the Committee recommends
that a new sub-section be added to clause 29 requiring that advertisements are to be accomaccompanied by an averment statement.
It is believed that this provision will put
full responsibility on the agent advertising and will be of great value in reducing the numbers
of extravagant claims made in relation to the potential of small businesses.
SUNDAY TRADING.
62. In the course of its inquiry the Committee considered whether the sale of real
estate should be banned on Sundays. Opinion of witnesses on this aspect was sharply divided.
On one hand it was stated that a ban would be in the best interests of agents and the public.
It was claimed that to give service on seven days a week an agent had to employ part-time
staff who could not be properly trained or qualified. On the other hand it was claimed that
an estimated 70 per cent. of real estat.e sales were made on Sundays-mainly because
Sunday was the one day of the week on which prospective purchasers had sufficient time
available to make inspections.
63. The Committee considered that if sales were to be banned on Sundays it would
follow that inspections of property on Sunday must also be banned, otherwise the sale
prohibition would be avoided by contracts entered into immediately following Sunday
inspections, being post dated. As any ban on Sunday inspections would have to apply
to the numerous demonstration homes which are on display at week-ends, the Committee
considers that such a curtailment would be unreasonable.
64. The objectionable feature of Sunday trading in the eyes of the Committee is
that prospective purchasers are receiving, in many cases, advice from sub-agents who are
employed on a part-time basis only and are probably completely unqualified.
This
undesirable element will cease to exist if the Committee's recommendation that sub-agents
must be employed on a full-time basis is implemented.
ESTATE AGENTS COMMITTEE.
65. Clause 5 of the Estate Agents Act provides for the constitution of the Estate
Agents Committee but no provision is made for the appointment of any administrative
officer to assist the Committee. Since the inception of the Committee, the Registrar of
Estate Agents has acted unofficially as Secretary, attending meetings and carrying out any
correspondence or action following such meetings.
The Committee considers that its recommendations, if implemented, would involve
the Registrar in a greater number of duties than at present and would not give him sufficient
time to render adequate secretatial assistance to the Committee. This Committee is of
opinion that the Estate Agents Committee should have the services of a secretary and
accordingly recommends that clause 5 of the Act be amended to provide for the appointment
of a secretary.
CODE OF ETHICS.
66. Estate Agents who are members of the Real Estate and Stock Institute of
Victoria or the Real Estate Agents' Association of Victoria-the two representative bodies
of estate agents-are required to adhere to a code of ethics. Any unethical conduct on
14
the part of these agents can result in disciplinary action being taken against them by their
organizations. Approximately 60 per cent. of estate agents are members of these organizations. The remaining agents not being members of any organization, are not required to
subscribe to any ethical code whatsoever.
67. The Committee is of opinion that all agents should observe some form of ethical
behaviour, and therefore recommends that the Estate Agents Committee be empowered to
prescribe a code of ethics to be followed by agents. It is considered that any such code,
which should be subject to the approval of thE> Minister, should be similar in essence to the
present codes of the two estate agents' organizations.
It is also recommended that the Estate Agents Committee and the Registrar should
be given statutory authority to reprimand, discipline or fine any agent who does not conform
to the prescribed code. The imposition of any such penalty should not in any way abrogate
the right of either of the existing organizations to impose any additional penalty on any
member.
Committee Room,
6th December, 1962.
15
DIVISION.
The following extract from the Minutes of the Proceedings of the Committee shows a
Division which took place during the consideration of the Draft Report :THURSDAY, 6TH DECEMBER, 1962.
DRAFT REPORT.
Paragraph 63.
The Committee considered that if sales were to be banned on Sundays it would follow that inspections
of property on Sunday must also be banned, otherwise the sale prohibition would be avoided by contracts entered
into immediately following Sunday inspections, being post dated. As any ban on Sunday inspections would have
to apply to the numerous demonstration homes which are on display at week-ends, the Committee considers that
such a curtailment would be unreasonable.
Question---That paragraph 63 stand part of the Report-put.
The Committee divided
Ayes, 7
Mr. Cochrane,
Mr. Dunstan,
The Hon. W. 0. Fulton,
Mr. Manson,
The Hon. G J Nicol,
The Hon. A. Todd,
Mr. Wilkes.
Noes, 5
The
Mr.
The
The
Hon. W. R. Garrett,
Holland,
Hon. D. ,J. Waiters,
Hon. J. M. Walton,
1\Ir. Whiting.
And so it was passed in the aifumative.
By Authority: A. C. BII.OOli:S, Government Printer, Melbollrn'l.