The Fair Trading Amendment Act (the Act) changes came into force on 16 August 2022. Real estate agencies should review their business-to-business contracts and trading practices to ensure they do not fall on the wrong side of the law.
To provide new protections for consumers and small businesses, there are three significant new protections to address unfair practices, including:
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Strengthening the ability of consumers to request uninvited direct sellers to leave their property — including using written notices
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Extending the existing protections against unfair contract terms in standard form consumer contracts to also apply to business-to-business contracts valued under $250,000 per year
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Introducing a prohibition against unconscionable conduct in trade.
Additional authority for consumers to require uninvited direct sellers to leave their property
Under section 36RA of the Act, residents or someone with the authority of a property resident will now be able to direct people to either leave or not enter their property if the individual is there, uninvited, in the hopes of negotiating a listing or a sale.
Directions include:
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Anything verbal, written or in any other visual form
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Directions audible or visible
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It may be a general standing direction (e.g., a notice on a gate or front door directing salespeople not to call) or be a specific direction (e.g., a face-to-face spoken direction).
If the direction is specific — such as a resident telling a real estate agent not to return as they are not interested in the sale — the agent must not enter or re-enter the premises for two years. This is if their purpose is to negotiate an uninvited direct sale agreement. Upon receiving specific directions to leave the property, the real estate agent must do so as soon as possible.
A breach of section 36RA could result in a fine of up to $10,000 for an individual or up to $30,000 for a Body Corporate. On top of these penalties, civil remedies will also remain available such as the court ordering a contract to be cancelled, varying a contract or directing the payment of compensation.
Real estate agents should keep a record for two years of any property residents who direct them to leave. This is to ensure they do not breach the Act. If a real estate agent has allegedly breached the Act, they will need to prove the person who gave the direction no longer resides at the property, or that they received express permission to enter the property.
Agencies should take this opportunity to remind salespeople that if there is a sign on the letterbox or front door saying, ‘do not knock’ or ‘do not call’, agents must follow these instructions.
Unfair contract terms provisions extended to cover small trade contracts
The jurisdiction for a court to hold that a clause is unfair and should not be binding, will now be extended to apply to all small trade contracts in standard form.
To be eligible as a small trade contract:
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each party to the contract must be engaged in trade on the same or
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substantially similar terms;
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it must not be a consumer contract, and
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the contract must not form part of a trading relationship that exceeds the $250,000 annual threshold when the trading relationship first arises.
However, despite the change, real estate agencies can rest assured that the legal test for what is defined as unfair is fundamentally the same.
A term is considered unfair if:
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it would cause a significant imbalance in the parties’ rights and obligations under the contract
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it would cause detriment to a party if it were enforced, and
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it is not reasonably necessary to protect the legitimate interest of the party.
Prohibition against unconscionable conduct
Section 7 of the Act stated that a person must not engage in unconscionable conduct. There is no clear definition of unconscionable conduct in the Act, as Parliament did not want to limit the circumstances in which this protection could be relied upon.
However, unconscionable conduct is assumed to mean conduct that would be unfair, oppressive, and goes beyond what is commercially necessary. In this sense, the courts may consider whether there was good faith in the negotiations, a power imbalance, or if the parties acted to protect the other parties’ interests.
It is vital when conducting negotiations and auctions, that real estate professionals ensure the parties have understood the terms of the contract and no unfair pressure has been placed on the parties.