Question

You work for a real estate agency in a small country town. Your office principal recently listed a small hobby farm. Your father had been looking for a country property, and you thought that this farm would be ideal for him. You persuaded him to come and inspect the property, and he has now made an offer to buy the farm which has been accepted by the seller. Your father lives in the city, has no knowledge of the local marketplace, and has never purchased a rural property before. He asks to be referred to a local solicitor, but the only solicitor in town is the husband of the agency's property manager.

a) Outline the 2 legal issues that are evident in this scenario (refer to Sections 55 of the Estate Agents Act 1980).
b) Outline any ethical issues that you should be aware of.
c) Explain the actions you need to take to ensure that you are compliant with your state or territory legislation.
d) State the penalties that may be imposed both on you personally and the agency as a business if you fail to comply with the legislation.

Answer 1

The main legal issues involve potential conflict of interest and ethical concerns due to familial and professional relationships influencing a real estate transaction. Actions for compliance include full disclosure and adherence to fiduciary duties. Penalties for non-compliance can include fines or licensure implications for both the individual and the agency.

Step-by-step explanation:

The scenario presents two legal issues as per Section 55 of the Estate Agents Act 1980. First, there is a potential conflict of interest since the real estate agency employee has a familial relationship with the buyer (father), which can compromise the impartiality of the transaction. Second, when referring business to a local solicitor who is the husband of the agency's property manager, there can be an ethical concern regarding the preferential treatment and a lack of disclosure about the relationship.

The ethical issues in this scenario involve the obligation to act in the best interest of the client (in this case, the father), to disclose any potential conflicts of interest, and to maintain a high level of transparency when conducting business. The agency must ensure that the client is making an informed decision, which includes knowing about the relations between the agency's staff and the referred solicitor.

To remain compliant with state or territory legislation, the actions to be taken would include disclosing all potential conflicts of interest in written format to all parties involved, ensuring the client has access to independent advice if needed, and following all fiduciary duties to act in the best interest of the client. All procedures should adhere to the legal framework governing real estate transactions and professional conduct.

Should there be a failure to comply with the legislation, penalties can vary from fines to suspension or revocation of the real estate agency or individual employee's license. These penalties depend on the severity of the infraction and can greatly affect both the professional and financial standing of the real estate agency and the individual involved.