County Court holds the Real Estate Institute Victoria (REIV) accountable for invalid Exclusive Sales Authority forms.
As we reported in May, the Victorian Court of Appeal (VSCA) ruled that sales authority forms supplied by REIV were invalid because they did not contain language required by statute.
The matter is complicated by the fact that Consumer Affairs Victoria (CAV) approved the "shortened" forms in question for distribution by REIV.
The Estate Agents Act of 1980 requires the contract to contain the following explicit statement:
"The agent is not entitled to retain any rebate and must not charge the client an amount for any expenses that is more than the cost of those expenses."
But the forms instead contained this:
"The agent will not be, or is not likely to be entitled to any rebate. A rebate includes any discount, commission, or other benefit, and includes non-monetary benefits."
While the meanings are similar, VSCA found that the law requires the wording to be exact.
Now REIV has been sued and has lost in the County Court. The plaintiff, who lost a commission because of its form, is expected to be awarded as much as $550,000 in lost commission and damages.
In response to the VSCA ruling, REIV has of course changed the form they sell. But the old form was distributed for about 6 years.
And while the government has promised to fix the law, in the meantime other agents are waiting in the wings with their own lawsuits.
It is quite possible that CAV will also be dragged into future lawsuits for its part in the debacle.
John Gdanski of SLF Lawyers said the legislative changes that were proposed were done to help REIV and CAV, but agents were "hung out to dry".
"The REIV claimed that it would look after its members, but they are only compensating agents when compelled to do so by the courts."
Mr Gdanski said he received a memorandum of advice which stated the following:
"To put the allegation at its simplest, whomever approved the form on behalf of the director (CAV) did not properly read the Estate Agent Act. Further, whomever at the REIV had responsibility for preparing the pro forma, did not properly read the Estate Agent Act either."