Buyer Beware: Is a Real Estate Agent an agent for the purposes of a Notices under the Sale of Land Act?

A 2016 decision of the Victorian Supreme Court examined whether a purchaser validly exercised their cooling off rights to terminate a contract of sale in circumstances where the notice was served on the vendor’s real estate agent.

Facts

Thomas John Russell (“Vendor”) engaged Marshall White Real Estate to sell his property at 43 Erin Street, Richmond (“Property”). In April 2014, Eng Kiat Tan and Cheng Lo (“Purchasers”) entered into a contract to purchase the Property for $4.48 million. The Purchasers paid a deposit of $350,000, with the balance of deposit, being $98,000 due in June 2014. 

Within three clear business days after signing the contract, the Purchasers gave notice to the Marshall White Real Estate that they did not wish to proceed with the purchase.

On 1 July 2014, the Vendors solicitors served a notice of default on the Purchasers as the Vendor did not agree that the contract had been terminated validly. The Vendor claimed that the Purchasers had repudiated the contract and as such, the Vendor resold the Property and made a loss of $4.07 million. 

The Purchasers commenced proceedings to obtain the recovery of the deposit, whilst the Vendor counterclaimed seeking the balance of the deposit and the loss suffered on the resale of the Property. 

Findings

The Purchaser argued that the expression “agent” in section 31 of the Sale of Land Act 1962 (Vic) (“Act”) extended to the Vendors real estate. Alternatively, the Vendor contended that the real estate agent’s role was merely confined to a marketing and sale mandate and that the real estate agent did not have authority to receive a termination notice.

The Court agreed with the Vendor and held that section 31 of the Act, did not create a statutory authority in a real estate agent to accept a termination notice. As a result, the Court found that the contract had not been validly terminated and the Purchasers’ failure to pay the balance of the deposit when due and payable, amounted to repudiation of the contract.

Legislative Amendments

To deal with the ramifications of this decision, sub-section 31(3) of the Act was replaced and section 31A was introduced in the Act. This legislative amendment, makes it clear that real estate agents are “agents” for the purpose of section 31 of the Act.

It should be noted that the Court of Appeal overturned the original decision.

For further information on cooling off rights and termination of contracts, please contact us at info@centralhighlandsconveyancing.com.auor on 5303 0281

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 The information on this website is of a general nature only. It is not, nor is it intended to be, legal advice. You should consult a lawyer for individual advice about your particular circumstances.

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