1962-63

VICTORIA

REPORT

FROM THE

STATUTE LAW REVISION COMMITTEE

UPON THE

ESTATE AGENTS ACT 1958

TOGETHER WITH

AN EXTRACT FROM THE PROCEEDINGS

OF THE COMMITTEE

Ordered by the Legislative Assembly to be printed, 11th December, 1962.

By Authority: A. C. BROOKS, GOVERNMENT PRINTER, MELBOURNE.

D.-No. 9.-10710/62. Price Is. 3D.

EXTRACTED FROM THE MINUTES OF THE PROCEEDINGS OF THE LEGISLATIVE COUNCIL.

WEDNESDAY, 5TH SEPTEMBER, 1962.

8. STATUTE LAw REVISION CoMMITTEE.-The Honorable G. L. Chandler moved, by leave, That the Honorables W. 0. Fulton, W. R. Garrett, G. J. Nicol, A. Todd, D. J. Waiters and J. M. Walton be members of the Statute Law Revision Committee, and that the said Committee have power to send for persons, papers, and records.

Question-put and resolved in the affirmative.

EXTRACTED FROM THE VOTES AND PROCEEDINGS OF THE LEGISLATIVE ASSEMBLY.

WEDNESDAY, 5TH SEPTEMBER, 1962.

9. STATUTE LAw REVI>liON CollfliHTTEE.-Motion made, by leave, and question-That Mr. Cochrane, Mr. Dunstan, IYir. Evans (Gippsland East), Mr. Holland, Mr. Manson and Mr. Wilkes be members of the Statute Law Revision Committee ; and that the Committee have power to send for persons, papers and records (Mr. Rylah)-put and agreed to.

TIDJRSDAY, 29th NOVEMBER, 1962.

14. STATUTE LAw REVISION CoMMITTEE-Motion made, by leave, and question-That Mr. Evans (Gippsland East) be discharged from attendance on the Statute Law Revision Committee and that Mr. Whiting be appointed in his stead (Mr. Rylah)-put and agreed to.

REPORT

THE STATUTE LAw REVISION CoMMITTEE appointed pursuant to the provisions of The Constitution Act Amendment Act 1958, has the honour to report as follows:-

1. On the 29th May, 1962, the Parliamentary Draftsman, by direction, submitted for the consideration of the Committee, the following matters relating to the Estate Agents Act 1958:-

1. What should be the necessary qualification by examination and experience for eligibility to be granted an estate agent's licence or a sub-agent's licence 1

2. Upon what terms and subject to what conditions should companies or othm corporations be eligible to be granted estate agent's licences or otherwise to engage in the business of estate agents ?

3. Should any, and if so what, provisions of the Estate Agents Act 1958, be extended to builders or subdividers of land or other persons, or alternatively, should similar legislation be enacted in respect of builders, subdividers or other classes of persons ?

4. Should the sole agency provisions of the Estate Agents Act 1958 extend and apply to sales through multiple listing agencies and to auction sales conducted by auctioneers, for what period should the sole agency relationship remain in operation in respect of estate agents, multiple listing agencies and auctioneers respectively, and in respect of which, if any, of these cases should the period be capable of extension ?

5. After a person has applied unsuccessfully for the grant of an estate agent's or sub-agent's licence should he be precluded from again applying for such a licence to the same or any other Court for any and what period '?

On the 14th September, 1962, the Honorable the Assistant Attorney-General advised the Committee that it appeared that certain vendors and business agents were inducing persons to purchase small businesses by supplying incorrect statements as to turnover, net profit, &c., It was suggested that the Committee should consider whether the Estate Agents Act should be amended to require disclosure of certain essential information before any contract was signed.

The Committee decided to undertake an inquiry and on 3rd October, 1962, com­menced its investigations.

2. Appended* to this Report are the minutes of evidence of the following witnesses who appeared before the Committee :-

Mr. I. F. McLaren, Chairman, Real Estate Agents Committee; Mr. M. Synott, former Registrar of Estate Agents; Mr. G. Press, Secretary, Discharged Servicemen's Employment Board; Mr. G. V. Thomas, Secretary, the Federated Retail Confectionery Refreshment

and Mixed Business Association of Australia (Victorian Branch); Mr. A. A. Burnside, and Mr. H. J. Franksen; Mr. G. Scott Lang, Jr., Past President } representing the Real Estate and Mr. Frank J. Foy, General Secretary Stock Institute of Victoria;

Mr. A. E. Jenkins} t' th R l Et t A t ' A . t. 1\Ir. G. L. Kellett represen mg e ea s a e gen s ssoma 10n;

• Minutes of Evidence and Appendices not printed.

4

Mr. A. V .• Tennings } representing the Master Builders' Association of Victoria; Mr. D. H. Murden Mr. L. P. Crockett, representing the Australian Society of Accountants; Mr. N. B. Boothby, representing the Law Institute of Victoria; Mr. A. H. Gray, representing the Health Inspectors' Association of Australia;

Victorian Branch ; and Mr. C. A. Hulls, Head, School of Accountancy, Royal Melbourne Institute of

Technology. Also appended* are memorandum received from­

Mr. L. L'Estrange, Barrister and Solicitor ; The Estate Agents Committee ; The Real Estate and Stock Institute of Victoria ; The Builders' and Allied Trades' Association ; The Federated Retail Confectionery Refreshment and Mixed Business

Association of Australia (Victorian Branch).

In addition the Committee had before it a copy of a submission by the Estate Agents Committee, dated 21st November, 1960, to the Honorable the Treasurer regarding licensing of corporations.

ELIGIBILITY OF AN INDIVIDUAL TO OBTAIN AN ESTATE AGENT'S LICENCE.

3. Section 11 of the Estate Agents Act 1958 provides inter alia that no person shall be eligible to apply for or be granted an estate agent's licence whether a new licence or a renewal or a transfer, unless-

( a) he has complied with the education standards and qualifications, or their equivalent, and passed any examinations prescribed by the rules ; or

(b) unless otherwise prescribed by the rules he has within the five years immediately preceding his application for a licence held a sub-agent's licence for at least three years

It was contended that instead of these qualifications being alternatives the require­ment should be that an applicant for a licence must have-(a) complied with any required educational standards and qualifications or their equivalent ; (b) passed any examinations prescribed by the rules ; (c) within the period of four years immediately before his applica­tion for a licence, held a sub-agent's licence ; and (d) have been wholly employed as a sub­agent for a period, or periods, aggregating not less than three years.

4. In support of this proposal it was claimed that as estate agents are in the position of advising people on what is probably in most cases, the largest single transaction in their lives-the purchase of their homes-it was reasonable to expect agents to be fully qualified both in practice and theory. At the present moment a person with no academic knowledge but who has held a sub-agent's licence for three years, is eligible to obtain an agent's licence, even 'though he may have been acting as a sub-agent on week-ends only, or may have been employed by an agent on purely clerical duties and obtained a licence merely to enable him to accept rental payments in the absence of the agent.

5. The educational standard required by the rules of the Estate Agents Committee is a pass in the second year of the Real Estate Management course conducted by the Royal Melbourne Institute of Technology. At the present time any person who possesses an Intermediate Certificate is qualified to undertake the course, but as from 1964 admission to the course wilJ be restricted to students of Leaving Certificate standard, and persons not of this standard will be required to complete a one year pre-qualifying course. It is understood that the Institute has adopted this policy because of the high rate of failure among students of Intermediate Certificate standard.

6. The Committee is of opinion that the course for students should be designed to give sub-agents a workable knowledge. of the practical and legal and accounting aspects of estate agency work. It considers that Intermediate Certificate is an adequate standard

• Minute8 of Evidence and Appendices not p1'inted.

5

at the moment, and should remain as the standard until such time as it ceases to be recog­nized as of any educational merit in the community in general. It is suggested that approaches should be made to other technical colleges with the view to their undertaking course~ at Intermediate Certificate standard. Should this approach fail, the Estate Agents Committee should consider conducting its own course. Should that Committee adopt this proposal it would then be possible for it to vary course admission qualifications as and when it was thought necessary, and it would not be placed in the possibly embarrassing situation of having pre-qualifications dictated to it by some other authority.

7. Subject to its comments in the preceding two paragraphs the Committee is in favour of the proposal contained in paragraph 3 and recommends that it be adopted.

8. It was also suggested that any person who-(a) ·within the past five years had held an agent's licence; or (b) within the four years before his application had held a sub-agent's licence and had been wholly employed as a sub-agent for a period or periods aggregating three years, should be eligible to become an agent without acquiring the required educational qualifications. As it is customary to exempt persons when they are qualified under existing legislation but become unqualified because of subsequent legislation, the Committee recommends that this suggestion be implemented.

9. Paragraph (d) of sub-section (1) of clause 11 provides that a person who is the executor administrator or trustee of a deceased estate agent is eligible to be granted an agent's licence. The Committee is of opinion that the holding of a licence for this particular purpose should not enable a person to obtain a licence under the provision of item (a) in paragraph 8 of this Report.

10. Sub-section (2) of clause 11 provides that no person who is disqualified from holding a licence or in relation to whom a claim has been allowed against the Estate Agent's Guarantee Fund and which he has not refunded, shall be eligible to apply for a licence. It was proposed that this section should be amended to provide also that any person who is an undischarged bankrupt should not be eligible to apply for a licence. As this is one of the grounds on which the renewal or transfer of a licence can be objected to, the Committee agrees that it is logical that it should also be a ground for ineligibility.

ELIGIBILITY TO OBTAIN A SUB-AGENT'S LICENCE.

11. The only qualification at present required of an applicant for a sub-agent's licence is that he be of good character and possesses a certificate from an agent that he proposes to employ him. The Committee considered whether an applicant should also possess any basic educational standard and came to the conclusion that it would be undesirable to lay down any mandatory standard and thus possibly restrict entry into the estate agency field. It considers that agents themselves would exercise discretion in employing sub-agents and would not employ as a sub-agent any person who because of a lack of education was incapable of carrying out the various duties allocated to him.

12. The Committee is perturbed by the faot that numerous sub-agents are employed on a part-time basis only. The Committee considers that sub-agents who are not wholly employed cannot receive adequate instruction in the many facets of estate agency work and therefore recommends that an application for a sub-agent's licence must be accompanied by a statutory declaration that it is the intention of the applicant to engage in full-time employment. Similarly an application for a licence renewal should be accompanied by a statutory declaration stating the period of employment, the name of the employer and the degree of employment. It is realized that there will be difficulties in policing this recommendation and as the Committee is adamant that sub-agents should be employed on a full-time basis, it is recommended that any agent who employs part-time sub-agents should be guilty of an offence under the Act and should have his licence renewal opposed on this ground.

13. The Committee recommends that the definition of " sub-agent " be amended to provide that .any person :vho is engaged on purely clerical du~ies should not be r~quir~d to obtain a hcence. Th1s amendment would overcome the difficulty already outlined m paragraph 4 of this Report.

6

CORPORATION LICENCES.

14. The Committee considered whether a corporation should be eligible to become a licensed estate agent and agreed that as there were legitimate reasons for the formation of estate corporations, they should be eligible for licences. Sub-section (2) of clause 9 of the existing Act provides that a corporation may carry on business as an estate agent if some person appointed by the corporation holds a licence on its behalf. As the Act now stands it is defective in that in the case of a corporation it is the character and qualifications not of the corporation's nominee but of the directors and shareholders which are of the utmost importance. The Act does not require a nominee to play any part in running the business of the corporation ; all he is required to do is hold an estate agent's licence. This means that the effective control of the corporation may be in the hands of persons who are not estate agents, or worse still, in the hands of persons who-(a) would be ineligible to hold licences ; or (b) have had licences revoked or renewals refused.

15. To obviate this defective feature of the Act it has been proposed that a corporation should not be eligible to obtain a licence unless at least 50 per cent. of the directors are licensed agents. There was general agreement to this proposal among witnesses, although the view was put that the same result could be achieved if instead of directors being required to hold licences they were merely eligible to hold licences. The Committee is in favour of the more positive approach and recommends that the proposal be adopted. Some witnesses stated that if corporation directors were required to hold licences, then as the corporation is also required to pay a licence fee, it would be reasonable to issue licences to the directors for a nominal fee. The Committee does not agree with this suggestion, and recommends that directors should pay the same fees as prescribed for individuals and that their licences should allow them to engage in agency work outside the corporation.

16. The Committee considered the application of its recommendation in respect to directors of corporations dealing in real estate, and decided that in relation to the Estate Agents Act, corporations should be classified into three separate categories, namely (a) public corporations-being those listed on any Australian Stock Exchange ; (b) private corporations-being those not listed on any Australian Stock Exchange ; and (c) pastoral or any other corporations in which estate agency work is a minor portion of the activities of the corporations. The Committee agreed that while it was essential that at least 50 per cent. of the directors of both public and private corporations should be licensed it was unreasonable to require this qualification of directors of corporations in category (c). It was also agreed that in order to ascertain whether the Committee's recommendation was being complied with it would be essential for the disclosure of a number of details by public and private corporations.

PUBLIC CORPORATIONS.

17. A proposal was advanced that adequate details would be disclosed if a director or the secretary of a corporation applying for a licence were required to lodge a statutory declaration containing the following information and exhibiting the following details :-

(a) the names and addresses of all directors and the secretary of the corporation and the officer of the corporation in bona fide control of the real estate agency business of the corporation ; and

(b) the current memorandum and articles of association of the corporation, certified by the person making the statutory declaration as being the current memorandum and articles of association of the corporation.

It was proposed that these documents would be lodged with the Registrar of Estate Agents prior to any application being made to the court and the Registrar would, if satisfied, issue a certificate to the corporation stating that it had complied with these provisions. This certificate would then become a document to be supplied to the court to prove the eligibility of the corporation to apply for a licence.

It was further proposed that any change in the memorandum or articles of association, directorate or control of the corporation subsequent to the issue of any licence would have to be notified by statutory declaration to the Registrar.

18. The Committee is in favour of these proposals and recommends that the Act be amended accordingly.

7

PRIVATE CORPORATIONS. 19. These corporations are in a different category to public corporations in that

there would be a small number of shareholders, some of whom may be able to influence the affairs of the corporation by having special voting rights conferred on them by the memorandum and articles. Others could be persons who are ineligible to hold licences or who have had either licences revoked or renewals refused, but could control private cor­porations by their shareholding or through some other person holding the shares on their behalf.

20. The Committee therefore recommends that in addition to the factors recommended to be disclosed by public corporations, private corporations should also be required to submit details of the names and addresses of all shareholders and the shareholders should be required to submit statutory declarations stating that they hold the shares on their own behalf or, when shares are held on behalf of some other person, stating the name of that person.

PASTORAL AND OTHER CORPORATIONS. 21. In the case of pastoral and other corporations the Committee recommends that

these corporations should be eligible to be granted a licence if the officer in bona fide control of the real estate business of any such corporation holds an estate agent's licence.

To avoid any doubt as to which corporations are pastoral or other corporations the Committee recommends that such corporations be declared by order of the Estate Agents Committee published in the Gavernment Gazette.

22. As the Committee has already recommended that persons who are undischarged bankrupts should be ineligible to apply for a licence, it is recommended that corporations in liquidation should also be ineligible.

LICENCES GENERALLY. 23. A number of other proposals relating to the issue of new licences or the renewal

of licences was considered by the Committee.

24. It was proposed that no person should be eligible to apply for a licence unless he was a resident of Victoria or resided within 30 miles of the Victorian border.

The Committee is not in favour of non-Victorian residents being licensed, but agrees that agents within a limited distance of the border who, in the normal course of their business would probably become involved with real estate transactions in neighbouring Victorian towns should be eligible to be granted licences.

It is therefore recommended that this proposal be implemented.

25. The present Act does not require an applicant for a new licence to attend before the court when his application is being considered. The Committee agrees with a suggestion that the applicant, or, in the case of a corporation, a responsible officer, should be present in the court to answer such questions as the court may put or allow to be put to him.

26. Sub-section (6) of clause 10 of the Valuation of Land Act 1960 provides :-" (6) If the Board is of the opinion that any applicant for a certificate of

qualification is capable of carrying out valuations for all statutory purposes but only within a certain part or certain parts of Victoria it may grant a certificate of qualification to that person limited to such part or parts of Victoria as are described in the certificate and the certificate shall have effect accordingly."

It was contended that a somewhat similar provision should be inserted in the Estate Agents Act to allow the issue of licences restricted to certain areas to persons who would have to have qualifications commensurate with the requirements of the area for which the licence was sought.

27. The reason for this suggestion was that areas which could not support the services of a full-time agent should not be denied agency facilities altogether. The Committee understands that the restricted valuer's licences are issued only to persons who have acted as valuers in the past. As persons who were not licensed would not have been acting as estate agents in the past five years the Committee is not in favour of inserting a similar provision into the Estate Agents Act.

8

28. Sub-section {3) of clause 17 of the Estate Agents Act provides a number of grounds on 'Yhich objections may be taken to the granting of a licence. Paragraph {e) of this sub­sectiOn reads " that the applicant has become bankrupt in circumstances which involve moral turpitude or fraud on his part ". As it may be difficult to prove the circumstances surrounding the bankruptcy the Committee recommends that paragraph {e) be amended to provide " that the applicant is an undischarged bankrupt ".

The Committee agrees with the suggestion that the grounds listed in clause 17 {3) should be rearranged in order of their seriousness, and it is recommende(l that items {d), {e) and {j), be transposed to become items {.f), (d), and (e), respectively.

29. The provisions of clause 17 {3) relate only to objections to the issue of lioences to individuals. In view of the Committee's recommendations regarding public and private corporations it will be necessary to modify the clause and apply its provisions to the directors and officers of both these types of corporations and to the members of private corporations.

30. There is no provision in the Act to prevent any agent who has been refused a licence by a court from immediately lodging another application to the court. These agents could in fact continuously lodge applications for a period of five years. The Registrar of Estate Agents is the person who usually objects to the issue of a licence, and when there are continuous re-applications, all the evidence tendered originally in each case must be re-submitted by him to the court. As this procedure is cumbersome and time-consuming it has been proposed that an agent should not be allowed to re-apply for four years unless the court reduces such period.

31. The Committee agrees that there must be a time limit between re-applications but considers that a period of four years is too long. Because an agent must have held a licence within the five years immediately preceding his application, a four-year disqualification would mean that he would be given only one opportunity to re-apply before becoming ineligible altogether. The Committee considers that an applicant should be given two opportunities to re-apply and therefore recommends that the time limit between applications be two years.

32. The suggestion that courts be given authority to reduce the prescribed time limit was put forward to give the court a discretion if it thought that the grounds for objection were for purely technical or minor offences.

This proposal is not recommended, as it appears to the Committee that clause 17 (3) already gives a court discretion depending on the circumstances of several of the grounds of objection, in deciding whether a licence should not be granted.

BUILDERS AND SUBDIVIDERS.

33. The Committee considered whether builders and subdividers should be controlled in any manner under the provisions of either the Estate Agents Act or a similar new Act.

While it was agreed that when a builder or subdivider was selling his own property he could not properly be described as an agent, the Committee was of opinion that some form of control was necessary in relation to any representations as to finance given by these persons to prospective purchasers.

35. Section 34 of the Estate Agents Act specifies a number of details which must be given in writing to a purchaser by an agent before any contract is signed or deposit accepted.

The Committee is of opinion that the Estate Agents Act should be amended by defining " builder " and " subdivider " and applying the provisions of section 34 of the Act to these persons. The Committee does not consider that these persons should be required to hold estate agent's licences.

SOLE AGENCY.

35. Sub-section {1) of clause 36 of the Estate Agents Act reads-

" 36 {1) An estate agent shall not accept or undertake any appointment or engagement to act as sole agent in respect of any transaction {other than the collection of rents or management of a property) for a period that is or may be greater than 30 days from the date of the appointment or engagement, but an agent may accept extensions of any appointment or engagement to act as sole agent from time to time for a period not exceeding in the case of any such extension 30 days."

9

Under this provision a vendor who agrees to a sole agency agreement is required to pay the agent commission on the sale of the property within the period of the sole agency, irrespective of whether such sale is effected by the vendor himself, the agent or some other person. There is no limit to the number of extensions obtainable and the Committee understands that it is not uncommon for extensions to be obtained by an agent at th(' same time as the original 30-day agreement is signed.

36. To avoid the possibility of a property being tied up on an extended sole agency agreement for too long a period it was suggested that section 36 be amended to provide for a 60-day sole agency with extensions permitted only on application by both agent and vendor to the Registrar.

37. While the Committee is opposed to the present unlimited number of extensions it considers that the suggested 60-day period is too long. It is recommended that the existing 30-day period remain in section 36 and that an extension of 30 days be permitted, provided that such extension is not to be obtained within less than 21 days from the date of the signing of the original sole agency agreement. Thereafter any additional extension should require the approval of the Registrar. The Committee is of opinion that its recommendation will allow a vendor to terminate his agreement with the agent within the reasonable period of 30 days if he is dissatisfied with the agent's services.

MULTIPLE LISTING. 38. A multiple listing agency agreement is an agreement between a vendor and an

agent whereby in consideration of the agent forwarding details of the vendor's property for listing amongst a group of agents, the vendor agrees to grant an agency for a specified period-usually a minimum of 60 days. The agreement is couched in the terms of a sole agency agreement although it has been held that multiple listing is not a sole agency within the provisions of section 36.

39. The Committee agrees with the proposition that multiple listing should be brought within the sole agency provisions of the Act. Because it usually takes at least 21 days before details of a property are circulated to agents participating in this type of scheme the Committee considers that its recommendation.> in paragraph 37 of this Report are too restrictive and would not give an agency sufficient time to effect a sale. It is therefore recommended that in respect of a multiple listing, section 36 should provide for a sole agency period of 60 days with no extension except with the approval of the Registrar.

AUCTION SALES. 40. Like multiple listing, auction sales do not come within the ambit of section 36

of the Act and agents sometimes obtain auction authorities on properties for periods of up to six months on a sole agency basis. It was contended that in many cases these agents obtained auction authorities for excessive periods-having no intention of auctioning-to enable them to sell the property privately or to obtain commission in the event of a sale by some other person.

41. To eradicate this practice it was proposed that auction sales should be brought within the sole agency provisions of the Act and that the period of agency should be restricted to 60 days prior to the auction, with no extension unless approved by the Registrar, and a further period of 30 days after the auction to give the agent an opportunity to sell privately in the event of an unsuccessful auction.

42. The Committee favours the extension of section 36 to include auction sales and agrees with the suggested period of 30 days after auction date. However, it considers that its recommendations in paragraph 37 of this Report should apply in relation to the period prior to any auction. Should the vendor refuse to sign a 30 day extension it is recommended that he be required to pay the agent only those expenses incurred in arranging or cancelling the auction.

10

RESTRICTION OF SOLE AGENCY TO RESIDENTIAL PROPERTIES AND BUSINESSES.

43. As it has been stated that industrial, commercial and rural properties take considerably longer to sell than other properties, the Committee is of opinion that these types of properties should be exempted from the recommendations in paragraphs 37, 39 and 42. The Committee agrees with the statement that vendors of these classes of property would probably be well acquainted with business practice and would not enter into long sole agency agreements unless it was in their best interests.

SALE OF SMALL BUSINESSES.

44. The Discharged Servicemen's Employment Board-a body charged with the responsibility of investigating small businesses on behalf of discharged servicemen-recently drew attention to the methods being used by certain vendors and business agents to effect sales of these businesses. It was claimed that in many cases incorrect statements were being made, sometimes innocently, but at other times fraudulently, concerning items such as turnover, net profit, outgoings, &c., and as a consequence many persons have been induced to purchase on an uneconomic basis.

45. The Board suggested that steps might be taken-

(a) to make it a legal necessity to include the vendor's claims of turnover, net profit and other material factors in the contract of sale ; and

(b) to ensure that the vendor and the purchaser are each given a written copy of the claimed turnover, net profit, loan repayment terms and tenancy conditions before any deposit changes hands.

The Board cited cases to the Committee where after investigation it was shown that the probable net profit from a busine&"l was far below that claimed by agents or vendors.

In some cases the businesses were actually netting losses. Reference was also made to cases where the weekly loan repayments of the purchasers were higher than the weekly net profits of the businesses.

46. On the evidence before it the Committee is strongly of opinion that drastic action is necessary to prevent purchasers, who are usually inexperienced or gullible, from being supplied with incorrect, misleading, or insufficient particulars.

47. It is therefore recommended that there be enacted a new section in the Estate Agents Act similar in context to the present clause 34 requiring that, before any vendor or agent obtains any signature on a contract or accepts any deposit money for the sale of a small business, a written statement shall be given to the purchaser incorporating the following details :-

(a) Average weekly sales as disclosed by account books for the preceding three years;

(b) Gross profit-excluding stock taken for personal use as disclosed by state­ments certified by an accountant for the preceding three years;

(c) A statement of overhead costs as disclosed by Profit and Loss Statements certified by an accountant for the preceding three years ;

(d) The terms of any tenancy agreement;

(e) The terms of any hire-purchase agreement, bill of sale or other document in existence on any equipment, fixtures, or fittings.

(f) The terms of any repair or structural alteration order issued by the local municipality against the premises ; and

11

(g) A summary in the following form :­

(i) Purchase price Plus stock

Total price :

( ii) Deposit by purchaser

£ £ £

£

(iii) Amount owing by purchaser £

(iv) Method of financing balance owing by purchaser Loan of £.............................. for years at Interest £ ............................. . Second mortgage of £.............................. for years at Interest £ ............................. .

Total repayments£ ............................. .

(v) gross profit as disclosed per Per Annum. Per Week.

item (b) .. £ £

less-Overhead costs as

disclosed per item (c) .. £

Any additional wages estimated to be pay­able in excess of those disclosed by vendor .. £

Loan and mortgage re-payments .. £

Net balance to purchaser £

£

£

£

£

%p.a.

%p.a.

It is considered by the Committee that even the most inexperienced person would be in a position to decide, on the details supplied in the above summary, as to whether the business was an economic proposition to him.

48. The Committee further recommends that if any details required under items (d) (e) and (f) of the preceding paragraph are inaccurate or are not given, the purchaser be given the right to avoid any contract or agreement within three months of entering into same. Upon avoidance of the contract any moneys paid by the purchaser to the vendor or to an agent should be repayable to the purchaser.

49. The Rules of the Estate Agents Committee prescribe the form of printed contract which is to be used by agents in effecting the sale of a busines~:< and the details of the lease of the premises are required to be incorporated in this contract. The Committee recommends that in addition items (a) (b) (c) (e) and (/) of paragraph 47 of this Heport should be prescribed for insertion in the contract.

50. The Committee considered whether the figures of the average weekly turnover should be guaranteed by a vendor, with the contract being voidable if the purchaser's turnover did not come within a certain percentage of the guaranteed figures. This idea was discarded when it was pointed out that sales would in most cases be dependent on the personality and business acumen of a small business proprietor and that any substantial drop in takings could be caused through defects in the personality and business method<; of a purchaser.

51. It is realized that because of the high rate at which small businesses change hands, in a large proportion of cases vendors will not be in a position to supply details of the businesses for the preceding three years. The Committee suggests that where a business has not been in existence for a period of three years or where the vendor cannot supply figures for the required period then the requirement will be complied with if certified figures for the period of occupation are supplied. It is envisaged that in future when a business is sold within a period of three years a vendor will be required to produce the statements showing the representations made by earlier vendors.

12

52. It appears to the Committee that many persons have been lured into purchasing businesses by accepting figures of gross profits as being net profits. The Committee considers that its recommended summary will dispel doubts as to this particular aspect but, it is further recommended that only gross profit figures, specifically described as such, should appear in any advertisements.

53. For the purposes of its recommendations the Committee proposes that a "small business " should be defined as one in which the selling price of the plant, equipment, fittings and goodwill does not exceed £15,000.

54. The Committee's attention has been drawn to the high rate of commission payable to agents on the sale of businesses-a rate far in excess of that prescribed for the sale of residential property. In addition agents receive a further commission on stock sold with the business. The Committee appreciates that to dispose of certain businesses may take con­siderable time and effort on the part of the agent. However, in view of the evidence of the high turnover in small businesses- usually milk bars and mixed businesses-the Committee concludes that these can be sold without any great effort by an agent.

Accordingly it is recommended that the rates of commission on small businesses be reduced to the same rate as that applying to the sale of residential property. As the Committee can see no reason why an agent should also be entitled to commission on stock, it is recommended that the stock of small businesses cease to be an item subject to commission.

55. Attention has already been drawn to the fact that some persons have purchased businesses and subsequently found that their loan repayments have been in excess of their income. As the majority of loans are issued by hire-purchase companies the Committee considers that these companies in the interest of themselves and the purchaser should con­duct a more detailed examination into the ability of a purchaser to meet commitments from the expected profits of the business. During the course of this inquiry the Committee developed a suspicion that some business agents were either receiving commission from, or had interests in, various organizations through which they arranged finance for purchasers. The Committee views any such practice with complete disfavour and recommends that the Estate Agents Act be amended to provide that any commission received by an agent from any finance organization should be an improper commission.

56. The Committee was greatly impressed by the services being rendered to discharged servicemen by the Discharged Servicemen's Employment Board. It was unanimously of the opinion that the Board's services should be available to all persons seeking advice on the purchase of small businesses. It appears to this Committee that the services of the Board are not well known to the public and it is suggested that the activities of the Board should be more widely publicised.

57. In view of the volume of evidence the Board has regarding the unscrupulous practices of certain business agents it is the unanimous opinion of the Committee that the Board and the Estate Agents Committee should confer and jointly oppose the renewal of the licences of a number of business agents at the earliest possible opportunity.

ADVERTISING.

58. Sub-section (3) of clause 29 of the Estate Agents Act provides-

" (3) Any estate agent who knowlingly publishes (whether in a newspaper or otherwise) as part of any advertisement any false statement or representation concerning any property or business which is or is stated or represented to be for sale shall be guilty of an offence against this Act."

The view was put that this sub-section was inadequate and no action could be taken against agents who publishe~ misl~adir;g advertisements. "As an ~~ample ~f this, one recent advertisement was quoted m whiCh It was stated that electnc1ty Is right through the estate ". This statement was not false in that power lines did run through the estate, but was misleading because the State Electricity Commission advised that no connexions would be made until some future time when the power supply was increased.

59. The Committee recommends that the sub-section be strengthened by the insertion of the words " or misleading " after the word " false ".

13

60. The Estate Agents Committee advised that it was difficult in many cases to prove who published a false or misleading advertisement. On several occasions when that Committee was prepared to take action against agents, these agents have disclaimed responsibility and have claimed that the errors were the fault of their advertising agencies or the vendors.

61. To avoid this disclaiming of responsibility by agents the Committee recommends that a new sub-section be added to clause 29 requiring that advertisements are to be accom­accompanied by an averment statement. It is believed that this provision will put full responsibility on the agent advertising and will be of great value in reducing the numbers of extravagant claims made in relation to the potential of small businesses.

SUNDAY TRADING.

62. In the course of its inquiry the Committee considered whether the sale of real estate should be banned on Sundays. Opinion of witnesses on this aspect was sharply divided. On one hand it was stated that a ban would be in the best interests of agents and the public. It was claimed that to give service on seven days a week an agent had to employ part-time staff who could not be properly trained or qualified. On the other hand it was claimed that an estimated 70 per cent. of real estat.e sales were made on Sundays-mainly because Sunday was the one day of the week on which prospective purchasers had sufficient time available to make inspections.

63. The Committee considered that if sales were to be banned on Sundays it would follow that inspections of property on Sunday must also be banned, otherwise the sale prohibition would be avoided by contracts entered into immediately following Sunday inspections, being post dated. As any ban on Sunday inspections would have to apply to the numerous demonstration homes which are on display at week-ends, the Committee considers that such a curtailment would be unreasonable.

64. The objectionable feature of Sunday trading in the eyes of the Committee is that prospective purchasers are receiving, in many cases, advice from sub-agents who are employed on a part-time basis only and are probably completely unqualified. This undesirable element will cease to exist if the Committee's recommendation that sub-agents must be employed on a full-time basis is implemented.

ESTATE AGENTS COMMITTEE.

65. Clause 5 of the Estate Agents Act provides for the constitution of the Estate Agents Committee but no provision is made for the appointment of any administrative officer to assist the Committee. Since the inception of the Committee, the Registrar of Estate Agents has acted unofficially as Secretary, attending meetings and carrying out any correspondence or action following such meetings.

The Committee considers that its recommendations, if implemented, would involve the Registrar in a greater number of duties than at present and would not give him sufficient time to render adequate secretatial assistance to the Committee. This Committee is of opinion that the Estate Agents Committee should have the services of a secretary and accordingly recommends that clause 5 of the Act be amended to provide for the appointment of a secretary.

CODE OF ETHICS.

66. Estate Agents who are members of the Real Estate and Stock Institute of Victoria or the Real Estate Agents' Association of Victoria-the two representative bodies of estate agents-are required to adhere to a code of ethics. Any unethical conduct on

14

the part of these agents can result in disciplinary action being taken against them by their organizations. Approximately 60 per cent. of estate agents are members of these organi­zations. The remaining agents not being members of any organization, are not required to subscribe to any ethical code whatsoever.

67. The Committee is of opinion that all agents should observe some form of ethical behaviour, and therefore recommends that the Estate Agents Committee be empowered to prescribe a code of ethics to be followed by agents. It is considered that any such code, which should be subject to the approval of thE> Minister, should be similar in essence to the present codes of the two estate agents' organizations.

It is also recommended that the Estate Agents Committee and the Registrar should be given statutory authority to reprimand, discipline or fine any agent who does not conform to the prescribed code. The imposition of any such penalty should not in any way abrogate the right of either of the existing organizations to impose any additional penalty on any member.

Committee Room, 6th December, 1962.

15

DIVISION.

The following extract from the Minutes of the Proceedings of the Committee shows a Division which took place during the consideration of the Draft Report :-

THURSDAY, 6TH DECEMBER, 1962.

DRAFT REPORT. Paragraph 63.

The Committee considered that if sales were to be banned on Sundays it would follow that inspections of property on Sunday must also be banned, otherwise the sale prohibition would be avoided by contracts entered into immediately following Sunday inspections, being post dated. As any ban on Sunday inspections would have to apply to the numerous demonstration homes which are on display at week-ends, the Committee considers that such a curtailment would be unreasonable.

Question---That paragraph 63 stand part of the Report-put.

The Committee divided

Ayes, 7

Mr. Cochrane, Mr. Dunstan, The Hon. W. 0. Fulton, Mr. Manson, The Hon. G J Nicol, The Hon. A. Todd, Mr. Wilkes.

And so it was passed in the aifumative.

Noes, 5

The Hon. W. R. Garrett, Mr. Holland, The Hon. D. ,J. Waiters, The Hon. J. M. Walton, 1\Ir. Whiting.

By Authority: A. C. BII.OOli:S, Government Printer, Melbollrn'l.