By Phillip Leaman

10 October 2016

In a decision handed down this week by the Federal Court of Australia, Hocking Stuart Richmond was fined $330,000 for underquoting on 11 separate properties.

In a lesson which should be learned by all real estate agents, Consumer Affairs Victoria have put agents in the firing line.

The Court held that “Underquoting can arise in many forms including where the estate agent:
advertises or advises a prospective buyer that a property is available for sale at an amount that is less than the vendor’s asking price or auction reserve price;

advertises or advises a prospective buyer of a price that is less than the salesperson’s current estimate of the likely selling price;

advertises or continues to advertise a price that is less than a genuine offer or expression of interest by a prospective buyer that the vendor refused; and

gives an inaccurate appraisal of the current market price of a property.”

Whilst the order against Hocking Stuart Richmond was for $330,000, Consumer Affairs had been seeking $750,000 which was on the basis that the agent had received approximately $200,000 in commission from the practice concerning the relevant properties.

The Court stated that:

“The price representations made by Hocking Stuart Richmond in respect of each of the properties were intended to and apt to create a particular mental impression in the representee, namely the “illusion of a bargain”. Hocking Stuart Richmond’s business stood to benefit from creating such an impression, although the exact calculation of such a benefit in monetary terms is difficult…

Consumer Affairs did not contend that Hocking Stuart Richmond acted with an intention to mislead or deceive. However, the manipulation of the “agent’s estimate of selling price” for the properties did demonstrate the lengths that Hocking Stuart Richmond went to in creating its enticing (but illusory and misleading) marketing web. There was a conscious decision to engage in the conduct.”

In another scathing attack of Hocking Stuart Richmond, the Court stated that they had provided no evidence of any culture of compliance with or understanding of the obligations imposed by the Australian Consumer Law.

Lessons to be learned for Agents

Be very careful when advising prospective purchasers of the potential sale price. If you advertise a price less than the Vendor’s asking price, reserve price, agent’s current estimate or alternative offer already received then you may be ‘underquoting’.

Ensure all agents are aware of their obligations under the Australian Consumer Law. Undertake regular training and if you do not have the experience in-house, seek assistance from the REIV or have a lawyer attend and provide training to staff.

As officers in effective control/owners of agencies, make sure you have clear policies on how properties are advertised and spell out what can be considered underquoting.

Whilst the conduct complained of in this case was a couple of years ago, it is clear that Consumer Affairs is attempting to stamp out the practice of underquoting and is looking for its next target.

Related Articles

View All
Property & Development / Developments / Real Estate Agents

Property Law Changes – Land tax adjustments, vacant residential tax & windfall gains tax

A prohibition on the ability of a Vendor to pass on land tax liability assessment against a property The current...
Read More
Commercial Contracts & Agreements / Leasing & Lease Disputes / Property & Development

Exercising Options

If a lease is a retail lease, the provisions of the Retail Leases Act (Vic) (2003) will govern the exercise of option...
Read More
Construction / Owners Corporations / Planning

Occupancy permits – the ticking clock in defective building work

Where multiple occupancy permits are issued in relation to a building permit, which permit is the operative permit for...
Read More
Commercial Law / Property & Development / Developments

2023-2024 State Budget Recap

Acquisitions of Commercial and Industrial Properties From 1 July 2024, Land transfer duty (stamp duty) on commercial...
Read More
Adverse Possession / Commercial Law / Family Law

2024 Best Lawyers list out now

Tisher Liner FC Law are proud to announce that this year three of our Principals have been selected by their peers for...
Read More
Property & Development / Planning

The 1, 2, 3 of Property Law Reminders for NY2023

In so reflecting, reflecting on one’s property matters (current or proposed for the future) is also a worthwhile...
Read More
Planning / Property & Development / Construction

Section 9AC of the Sale of Land Act – What does ‘materially affect’ mean?

Throughout the registration period, a Plan of Subdivision may undergo many amendments from the proposed Plan which was...
Read More
Property & Development / Leasing & Lease Disputes / Real Estate Agents

CTRS protections has ended. What do you do now when a tenant defaults?

What can landlords do if a tenant breaches the lease If a tenant is in breach of a lease, the landlord may charge...
Read More
Property & Development

Early deposits. Your FAQ’s answered

This blog explores what is required in order for a Vendor to obtain their deposit prior to settlement and what a...
Read More
Property & Development / Real Estate Agents

Stamp Duty is now payable on late settlement and default penalty interest

The dutiable value of a property is the value in which stamp duty is determined to be due and payable at settlement by...
Read More
Property & Development / Commercial Contracts & Agreements

Market rent reviews under the Retail Leases Act 2003: Applying to the VSBC for the appointment of a Specialist Retail Valuer under the Act

In Part 1 of our blog series, we explored market rent reviews generally This is Part 2 of our 2 part blog series, in...
Read More
Property & Development

Market rent reviews under the Retail Leases Act 2003

The Retail Leases Act 2003 (Vic) (the “Act”) sets out certain rights and obligations in relation to rent reviews...
Read More