Monday, November 12, 2012

Real Estate Agents Act - Increased Disclosure And More Scrutiny Between Employees And Contractors

With the introduction of the Real Estate Agents Act 2008 the transactional relationship between the agent and buyer or seller has been altered.
Under the new act, the obligations salespeople owe to vendors and purchasers has changed. One big change is that the amount of information that has to be supplied and disclosed by the salesperson to the vendor and purchaser has now significantly increased.
Real Estate Agents Approved Guide
The sales person now has to provide more information in writing in regards to payment structures for the salesperson. Sales agents can obtain the approved guides in relation to the changes from the Real Estate Agents Authority (REAA).
Agents, salespeople and branch managers must also now disclose if they receive any other benefit from a sale. When a property is being sold, the vendor will be asked to sign a declaration stating that they have received the Approved Guides. These declarations provide protection to both the vendor and the sales person.
In regards to purchasers, salespeople and the agency also have obligations to provide the REAA Approved Guide relating to sale and purchase agreements to any purchaser at the time of their signing any offer to purchase a property. The purchaser will also be asked to sign a declaration that they have received a copy of this.
These obligations on the salesperson are in the interest mostly of information sharing and should ensure that vendors and purchasers feel more secure in their dealings with salespeople. The need to comply with these further obligations ideally should be incorporated into the agreements between the salesperson and the agent. Agents and salespeople should also check their work contracts with their insurers for insurance purposes.
Employee or independent contractor?
Under the old act of 1976, real estate agents could be engaged as an independent contractor. This caused a lot of uncertainty of who was a contractor and who was an employee. The Employment Relations Authority, regularly had to intervene to ascertain which one it was. The new act defines real estate agents as salespeople. Section 51 states that in the contract between the sales person and their employers, it needs to specifically state whether they are contractor or employee.
The agreement between the agency and the salesperson needs to be carefully drafted with unambiguous language. Taking a dispute to the Employment Relations Authority to determine the relationship between agency and sales person can be a costly affair.
An agency still has the same liabilities for the actions of the sales person whether they are a sales person or contractor. The major difference between employee and contractor is that that the relationship with employee is governed by the Employment Relations Act 2000 and the Holidays Act 2003
In summary
The wider effect of the 2008 Act should still filter down to the public, and should serve to provide further protection of the interests of both sides of the transaction. In the meantime, it is a good time for agencies to review their internal processes when engaging both employees and contractors.

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