Article, 2 August 2004 

A real estate office selling a salesperson’s property – The Appointment

An agent can sell their own property (ie privately) without a listing authority.  Obviously enough, the agent does not have to give themselves a document appointing themselves to act.

On the other hand, when an agent’s property is sold by the office where they work, an agency appointment must still be signed.  This is according to section 133 of the Property Agents and Motor Dealers Act 2000.

An office selling an agent’s property – The Disclosure (Part 1)

The Government has passed laws requiring disclosure of agent’s commissions and benefits received from sales and from referrals.  It seems likely this is designed as a way of reducing the chance of buyer’s getting “ripped off”.

The Government’s laws do not, however, change the agent’s obligations to act for a seller.  The agent must get the highest possible price for a seller, without acting dishonestly or unfairly.   This means that the agent’s objectives will be the same whether they are acting for a seller, or selling their own property.

From a logical point of view, therefore, there is nothing to be gained from the agent disclosing that they are selling a property for a “friend” or a business associate or a relative, or one of their own properties.  Their duty to obtain the highest price will be the same.

What does the law say about disclosure ?  When an agent’s property is sold through the office they work at, the usual requirement for disclosure (section 138) applies.  This section requires disclosure: “… of the amount … any person … expects to receive in connection with the sale”.  The section gives examples, and includes the seller.

The literal meaning of this section is extraordinarily wide.  If it is taken literally, the agent would have to disclose, for example, the amount the seller will receive, the amount the seller’s bank will receive, all commission the bank pays its staff, all council search costs, all stamp duty, and so on.

Obviously, this cannot have been the intention of the Government when they passed this law. 

Since passing this law, the Government has approved a form for use under this section.  The form itself restricts the information required to be disclosed.  The form specifically states:  “You NEED NOT disclose: … vendor’s profit or net proceeds of sale”.

It would therefore seem clear that this section, as modified by the Government’s own form, does not require the disclosure of the vendor’s profit or net proceeds of sale.  It does not, therefore, require the disclosure of the vendor’s details (over and above the obvious disclosure on the contract itself).  Therefore, this section does not require specific disclosure to a Buyer that the property is owned by someone who works in the office.

NEXT WEEK – Is there any other requirement that an agent disclose to a Buyer that the property belongs to the agent, or to some other agent “in the office” ?

Kindest regards,        Michael Hains 2/8/2004

"No problem can stand the assault of sustained thinking."   Voltaire
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