Sunset clawbacks under scrutiny
Purchasers of off-the-plan apartments who’ve been left high and dry by developers rescinding their contracts and reselling the near-finished properties for much higher prices (sunset clawbacks) are to be given fresh consumer protection.
At the moment developers can, quite legally, enact ‘sunset clawbacks’ when their building works run over a year behind schedule, in legislation which was originally introduced to safeguard purchasers having to wait an indeterminate time before completion.
But after a series of stories by Domain about buyers, just before settlement, losing their apartments in the new Surry Hills block East Central, NSW Minister for Innovation and Better Regulation Victor Dominello has announced he will be introducing new legislation to ensure this is never allowed to happen again.
“I hope no one has to face this kind of heartache in the future.”
Suzy Seale
“This is obviously a serious issue and my job is to protect the consumer,” he said. “Obviously, these contracts were intended to protect buyers but it’s too open to exploitation at the moment [by developers].
“We need to find a way of protecting people in this situation. That will be part of a suite of reforms to help prevent these problems.”
Mr Dominello decided to act after the heart-wrenching stories from four families about their devastation on having their contracts in the same building rescinded at the eleventh hour, and calls by lawyers to have the law tightened.
East Central developer Ash Samadi of the Samadi Group said delays in construction were caused by problems with council assents to plans, a blowout in building costs and a loss of guaranteed tenants. The builder, SX Projects, also took a case against Samadi to the NSW Supreme Court over unpaid costs. The recissions (unwinding of contracts) were “collateral damage”, Samadi said.
But for those enduring the collateral damage, the price has been high. Mum-of-two and migration consultant Tara Ende had bought a two-bedroom apartment off the plan in East Central in June 2013 for $890,000. But a few days before settling, and excited to notice another two-bed in the same 42-unit complex was now selling for $1.39 million, she was told the developer had cancelled her contract and was going to refund her deposit.
Similarly, Suzy Seale, 65, and her husband John, 74, bought two apartments, one to live in and the other as an investment. They returned to Australia from China where they’d been working as expats, to discover they no longer had either.
Another buyer who asked not to be named also bought – and lost – a two-bedroom apartment as one of the seven contracts that were rescinded. Reviewing the paperwork led to the discovery that those seven apartments were transferred to a third company the day before the contracts were rescinded, making it extremely difficult for a caveat to be lodged.
A fourth buyer Khek Mow Tan was also told of the recission of her two-bedroom apartment – an estimated two hours before it was resold at a considerably higher price. “Like Tara, we will not buy another property off the plan again, although we had done that a few times before,” she said.
The contract provisions allow a developer, legally, to rescind contracts when completion is delayed and triggers the sunset clause.
But now the group have congratulated Mr Dominello on his move. “I’m very happy to hear that he’s going to protect people in the future against this,” said Ms Ende. “That’s brilliant news and that’s a good reason for going public over this.
“It obviously doesn’t help us, but we’re happy it won’t happen again. We’re now meeting together with a lawyer to consider our options.”
Ms Seale agreed. “I really wouldn’t want this to happen to anyone else,” she said. We acted in good faith, we did our checks and everything seemed right. But then to lose the apartment – especially after waiting two and a half years.
“Because we were effectively out of the market for that time, we are now unable to afford to buy a two-bedroom apartment in the inner city as prices have gone up so much in the interim. It means we’ve been shut out of the market. We’ll have to buy a one-bed, or go to a different area.
“But I hope no one has to face this kind of heartache in the future.”
Written by Sue Williams for SMH Domain on 9 September 2015
Mosman Buyers Agent – What will your $ Buy?
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Negotiation
What Is Gazumping and how can you stop it happening?
Beecroft Buyers Agent-What a busy Saturday
Beecroft Buyers Agent
Acting for my client I’ve just exchanged on a Beecroft house at 10pm at home on a Saturday night, for a Canberra client relocating to Sydney.
Beecroft is a suburb in northern Sydney about 22km from the CBD. Beecroft offers great value, and there is a lot of interesting new retail and commercial development around the train station. Definitely a suburb to watch.
It’s not always bad to be the under bidder!
Auction Story – a good end result for the underbidder!
I was the underbidder last Saturday for a renovated art deco unit in Randwick, as profiled on the 7 News link below.
Randwick sales are performing strongly and currently there’s a 100% clearance rate in the suburb.
All was not lost though as an owner of one of the other units in the building approached me after the auction. She was thinking of selling and she showed me her unit which was more highly renovated and had more outdoor space than the one I had been bidding on at the auction.
My clients loved the apartment, we negotiated successfully and my happy clients exchanged contracts today!
Underquoting
What is Underquoting?
Underquoting is when a selling agent states or publishes a price for a property that is less than their reasonable estimate of the property’s likely selling price contained in the agency agreement with the seller.
” quote them low, watch them go… quote them high, watch them die….”
This practice of underquoting can cause interested buyers to waste time and money on inspecting properties, getting reports and attending auctions based on misleading estimates of the selling price.
Buying a property is likely to be the biggest financial investment most people will ever make. It’s a stressful time and buyers have the right to expect that a real estate agent will market a property ethically and professionally.
Underquoting Reforms for NSW residential property
To better protect consumers from the practice of underquoting, on 1 January 2016 Fair Trading introduced new laws. These new laws require selling agents to draw on their skills to make a reasonable and fair estimate of the likely selling price.
They are required to have honest and fair dealings with all buyers and sellers. The role of the seller’s appointed agent to achieve the highest possible price on the property owner’s behalf does not mean they should manipulate buyer interest with false price information.
The reforms that were made to the Property Stock and Business Agents Act 2002 were designed to provide clarity for buyers, sellers and agents.
1. Clearer rules for agents. A key requirement is that agents must not give consumers understated or vague property prices (eg. promoting a property price as ‘offers above $450,000’)
2. Provision for more effective enforcement of the laws. During an inspection by a Fair Trading officer, agents must be able to provide appropriate documentation to show that they have complied with the new laws.
Agents who commit an underquoting offence may be fined up to $22,000 and could lose their commission and fees earned from the sale of an underquoted property.
Be aware that, simply because a property sells for more than expected, this does not mean underquoting has occurred. Sometimes competitive buyer behaviour can result in a much higher sale price than what an agent could have reasonably estimated. However, the law now requires an agent to be able to show that their estimate was reasonable, up-to-date and evidence-based.
How to protect yourself from Underquoting
What you should NOT do:
Engaging Homesearch Solutions Buyers Agent is a good way to protect you from underquoting. Our extensive experience and property databases ensure you will have the most up to date pricing and market information available.
Mosman Real Estate:What your $ will buy
Sunset clawbacks under scrutiny by Victor Dominello
Sunset clawbacks under scrutiny
Purchasers of off-the-plan apartments who’ve been left high and dry by developers rescinding their contracts and reselling the near-finished properties for much higher prices (sunset clawbacks) are to be given fresh consumer protection.
At the moment developers can, quite legally, enact ‘sunset clawbacks’ when their building works run over a year behind schedule, in legislation which was originally introduced to safeguard purchasers having to wait an indeterminate time before completion.
But after a series of stories by Domain about buyers, just before settlement, losing their apartments in the new Surry Hills block East Central, NSW Minister for Innovation and Better Regulation Victor Dominello has announced he will be introducing new legislation to ensure this is never allowed to happen again.
“I hope no one has to face this kind of heartache in the future.”
Suzy Seale
“This is obviously a serious issue and my job is to protect the consumer,” he said. “Obviously, these contracts were intended to protect buyers but it’s too open to exploitation at the moment [by developers].
“We need to find a way of protecting people in this situation. That will be part of a suite of reforms to help prevent these problems.”
Mr Dominello decided to act after the heart-wrenching stories from four families about their devastation on having their contracts in the same building rescinded at the eleventh hour, and calls by lawyers to have the law tightened.
East Central developer Ash Samadi of the Samadi Group said delays in construction were caused by problems with council assents to plans, a blowout in building costs and a loss of guaranteed tenants. The builder, SX Projects, also took a case against Samadi to the NSW Supreme Court over unpaid costs. The recissions (unwinding of contracts) were “collateral damage”, Samadi said.
But for those enduring the collateral damage, the price has been high. Mum-of-two and migration consultant Tara Ende had bought a two-bedroom apartment off the plan in East Central in June 2013 for $890,000. But a few days before settling, and excited to notice another two-bed in the same 42-unit complex was now selling for $1.39 million, she was told the developer had cancelled her contract and was going to refund her deposit.
Similarly, Suzy Seale, 65, and her husband John, 74, bought two apartments, one to live in and the other as an investment. They returned to Australia from China where they’d been working as expats, to discover they no longer had either.
Another buyer who asked not to be named also bought – and lost – a two-bedroom apartment as one of the seven contracts that were rescinded. Reviewing the paperwork led to the discovery that those seven apartments were transferred to a third company the day before the contracts were rescinded, making it extremely difficult for a caveat to be lodged.
A fourth buyer Khek Mow Tan was also told of the recission of her two-bedroom apartment – an estimated two hours before it was resold at a considerably higher price. “Like Tara, we will not buy another property off the plan again, although we had done that a few times before,” she said.
The contract provisions allow a developer, legally, to rescind contracts when completion is delayed and triggers the sunset clause.
But now the group have congratulated Mr Dominello on his move. “I’m very happy to hear that he’s going to protect people in the future against this,” said Ms Ende. “That’s brilliant news and that’s a good reason for going public over this.
“It obviously doesn’t help us, but we’re happy it won’t happen again. We’re now meeting together with a lawyer to consider our options.”
Ms Seale agreed. “I really wouldn’t want this to happen to anyone else,” she said. We acted in good faith, we did our checks and everything seemed right. But then to lose the apartment – especially after waiting two and a half years.
“Because we were effectively out of the market for that time, we are now unable to afford to buy a two-bedroom apartment in the inner city as prices have gone up so much in the interim. It means we’ve been shut out of the market. We’ll have to buy a one-bed, or go to a different area.
“But I hope no one has to face this kind of heartache in the future.”
Written by Sue Williams for SMH Domain on 9 September 2015
NSW Office of Fair Trading Property Industry Reforms
NSW Office of Fair Trading Property Industry Reforms
Property Industry Reforms set to rule out understated property prices
Agents will have clearer requirements to adhere to as a result of underquoting reforms as part of the proposed property industry reforms. The proposed laws announced by the Minister responsible for Fair Trading seek to prevent prospective buyers wasting time and money on inspections because a property price has been underquoted.
The reforms will restrict agents from advertising or communicating (in writing or verbally) any price for a marketed property that is less than their evidence-based estimated selling price recorded in the agency agreement.
About the requirements
Under the new laws, agents will be required to:
Together, the requirements provide a level playing field for agents in a competitive market. They also preserve the vendor’s opportunity to work with the agent to gain the best price possible for their property. Fundamentally, they will enable true competition between buyers whose interest in a property is not solicited on the basis of an agent’s understated price assessment.
Next steps
The reforms to the Property Stock and Business Agents Act 2002 will be before Parliament in the coming weeks. They are expected to commence in early 2016. In developing the reforms, NSW Fair Trading assessed comparable laws in other jurisdictions and consulted with key representatives from the real estate sector.
To help address questions you may have about the reforms, we have included further details on our Underquoting reforms page. You should also refer to the Agents – questions and answers section on this page to gain a deeper understanding of the changes and how to comply.
We will be providing additional information to support agents and consumers in understanding the new requirements closer to when the reforms will commence.
You can read more about these reforms by visiting the Fair Trading website – click here.
Real estate agents risk losing commissions in under-quoting crackdown
Underquoting Real Estate
Written by Sean Nicholls for the Sydney Morning Herald on 4 September 2015
In moves to stop underquoting real estate, agents will be forced to nominate a property’s estimated sale price and adhere to that figure in advertising or face losing up to tens of thousands of dollars in fees and commissions.
The estimated selling price will be set in a formal agreement between the seller and the agent as part of a NSW government crackdown on the practice of under-quoting.
Advertisements containing the phrases “offers over” or “offers above” or any similar phrase will also be prohibited, and a hotline will be established for complaints.
The new rules are contained in amendments to the Property Stock and Business Agents Act due to be introduced to parliament next week as the spring property market gets under way.
The Minister for Better Regulation, Victor Dominello, said the new laws – which fulfil an election promise – would provide “clarity” for agents, sellers and buyers and strengthen consumer protection. “Under-quoting is illegal and misleads potential buyers looking for their dream home,” he said. “This legislation will help NSW Fair Trading identify and catch the rats in the ranks.”
The Department of Fair Trading defines under-quoting as making “a statement in the course of advertising a residential property for sale that is less than the agent’s true estimated selling price as recorded on the agency agreement”.
Fines of up to $22,000 already apply to agents who deliberately “falsely understate the estimated selling price” of a property. Only one under-quoting prosecution is now under way, against Bresic Whitney in Darlinghurst. There have been no successful prosecutions under the current act.
Data released by Mr Dominello’s office shows 263 complaints about under-quoting were lodged against agents in the past two financial years.
The most complained about areas were Castle Hill with 18 complaints, Epping with 14 and Neutral Bay with 13.
The small numbers are believed to be a consequence of consumers not being aware of what constitutes under-quoting and therefore not contacting Fair Trading.
Malcolm Gunning, president of the Real Estate Institute of NSW, said the government had consulted the industry to ensure the new rules would be “clear and, we think, effective”.
Written by Sean Nicholls for the Sydney Morning Herald on 4 September 2015