Commercial Agents’ Obligations Revisited

Sales,  Salespeople

Real estate agents must be mindful of the duties they owe to their clients and not only ensure that those duties are fulfilled, but also that they do not act outside the scope of their duties or expertise. The duties owed by agents are not limited to those prescribed by the relevant PO Form 6, but also include duties which are prescribed by statute, common law and equity.

Agents should also be mindful that their appointment to act on behalf of a client gives rise to a fiduciary relationship between them. That is, a relationship whereby the client is in a position of vulnerability, having vested trust and confidence in the agent. The agent, as the client’s trusted servant or fiduciary, has undertaken to act for and on behalf of the client, and therefore has a duty of undivided loyalty to the client and must act entirely in the client’s best interests.

Section 22 of the Property Occupations Regulation 2014 (Qld) (the Regulation) also provides that an agent must act in accordance with a client’s instructions unless it is contrary to the conduct standards of the Regulation or otherwise unlawful to do so.

Many agents will have no doubt been in the situation where they have received instructions from a client that has caused them to question whether they were being asked to act outside the scope of their duties or expertise.

We set out below a situation that may have recently arisen for real estate agents involved in the sale of commercial property.

Agents will be aware that it is vital that they ensure their client’s instructions regarding the scope of their retainer are accurately recorded in writing at Part 4 of the PO Form 6. Agents need to ensure that they only perform these specified services and that they do not act outside the scope of their retainer.

Agents should also ensure that they complete and attach to the PO Form 6, the latest version of the Schedule for Commercial and Industrial Sales and Lease as well as the current terms and conditions approved by the REIQ. If an agent is asked by a client to provide an appraisal of the property, it is important to ensure that Item C of the Schedule is completed accurately.

SEE ALSO: Commercially Speaking, REIQ Submits Review for the Code of Conduct

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It is important for agents to be aware of the difference between appraisals and valuations. An appraisal is intended to be a guide to pricing and is often the estimate or opinion of an agent with knowledge of the local area and recent sale prices.

A valuation can only be conducted by a qualified valuer who takes into consideration all features and issues relating to the particular property. A valuation report is often obtained when a definitive value is required, such as to obtain finance to purchase a property.

The situation may have arisen recently for commercial agents where they have been asked by a client to provide a ‘letter of comfort’ or ‘market update’.  These requests are set out in such a way to suggest that there has been no change in the value of the property, without directly referring to a valuation amount.

If an agent was to provide the advice requested, it may be deemed to be expressing an opinion of value and therefore, a valuation.

Accordingly, if requested by a client to provide a ‘letter of comfort’ or ‘market update’, which may amount to a valuation, agents should make it clear to their client that they are not qualified to assist in providing a valuation, and are not able to provide any advice regarding the value of the property.

Insurance implications

In addition to acting outside the scope of their retainer, providing a ‘letter of comfort’ or ‘market update’, as requested by the client, may also impact on an agent’s professional indemnity insurance.

Most policy wordings for professional indemnity insurance for real estate agents are likely to include a valuation exclusion clause, which will exclude from cover any claim against an agent, directly or indirectly arising from the provision of real estate valuation activities.

However, the Valuation exclusion clause in the policy wording for the REIQ Professional Indemnity Insurance Scheme (brokered by Aon Risk Services and underwritten by CGU Insurance), does not apply in respect of market appraisals, estimates, or opinions of the selling price of a property (or business), as long as such advice is in writing and accompanied by a disclaimer to the effect that such advice does not constitute a valuation.

Conclusion

Agents involved in the sale of commercial property must accurately record the scope of their retainer and ensure that they only perform these specified services.  Agents should be familiar with the terms of their appointment and ensure that while acting in their client’s best interests, they do not act outside the scope of their retainer.

It is strongly recommended that agents advise their clients that they are unable to assist them in providing valuation activities and strongly emphasise to their clients that they ought to obtain independent valuation advice in respect of all matters pertaining to the value of a property.

Further, as a matter of best practice, agents should ensure that they comprehensively and contemporaneously document all of their dealings with their clients and retain these records on the sales file.

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Here’s what others have to say

I found the REIQ Real Estate Licence Online Training Course was very good, easy to access, with brilliant course materials to read and assignments that really checked on your understanding of the details of every aspect of real estate practise. I enjoyed the course even though it took a few months due to working full time and found the support of the trainers and assessors very helpful and encouraging. Thanks REIQ Training team for helping me through!
Lindy Lear
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10:47 18 Oct 20
Gerry MacKenzie
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06:53 12 Oct 20
Good course. Materials and tools given to finish the course easily. Was no problem to finish. Support is there if needed it.
Jade Dodds
Jade Dodds
09:11 09 Oct 20
I would like to share with you our experience that we have recently had through the REIQ Professional Development Team.We have had an awesome start to 2020 thanks to the great service provided by the REIQ Professional Development Team. Congratulations to Liz who started and finished her Certificate of Registration Course with the REIQ in December 2019. She loved the training, particularly the fact the trainers are experienced and still walk the talk and are active in real estate. Fast turnaround for marking of the assessments with help on hand by way of tutoring if needed meant she could get the Application to Office of Fair Trading for her registration happening quickly. We are thrilled, from start to finish with the course and application to Fair Trading she had her Certificate of Registration within 5 weeks. Really impressed with the training, help and support team REIQ gave Liz and the quick processing time by the Office of Fair Trading.We also regularly use the Property Management Support Service and General Agency Advice Service and believe it offers great value for our membership. The PMSS team provide practical advice by practising property management professionals who can relate to the everyday challenges property managers face.Keep up the good work Team REIQ,
RE/MAX Ignite
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I cannot recommend REIQ enough. The training, environment & staff were beyond my expectations. A special mention for Rachael who is a trainer at REIQ. Rachael knows her stuff. Her knowledge of the industry and style of delivery helped me get across the line and score my dream job.
Paul Conway
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05:11 15 Jan 20
I wasnt sure that I would get through the Agents and Licence course with everything I had on, made an attempt a year ago with another provider that went totally pear shaped but the REIQ course is structured in a way that made sense. While all of their trainers are experts in their field, they offer onsite student support on Tuesdays with Rachel providing the right advice and reassurance to get you there, even if you havent studied for a while. If you've ever wanted a career in Real Estate this is where you get started!
Lynette Nitson
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Shannon Goldsworthy
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04:34 23 Oct 19
Recently completed my Licence course and thoroughly enjoyed the in-class tutorials taught by highly professional trainers with many years of industry experiences. The student support that is available every Tuesday is an extremely helpful resource, again with very experienced trainers to ensure you get the right advice the first time. REIQ has really structured the entire full Licence course end to end thoughtfully, especially when you’re new to this industry. Highly recommended!
Julian Phua
Julian Phua
07:01 02 Oct 19
Recently I completed the Real Estate Licensing course at REIQ and was blown away by the help and support provided by Ms. Connie McKee who is a trainer at REIQ. Connie is very professional and has years of knowledge and work experience in the Real Estate Industry.I am glad I chose REIQ as my pathway into the Real Estate Industry.
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Just done two days interactive training with Melissa Sullivan. Sensational! Such a great presenter and electric delivery of material. Quick paced and hands-on!Very glad to have been in this class!!! Awesome
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Jason Bond
10:29 19 Jun 18
Welcoming and friendly staff, always available to support their members. The Property Management Support Team is particularly helpful. Well worth the subscription fees just to have access to advice from these experienced practitioners.
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Liam Hanlon
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Had Melissa Sullivan conducting the sales registration course for the past two days I have to say I think this woman is inspiring she kept the class focused and engaged throughout the two days. I dont normally complete surveys but felt that I wanted to share that this lady has inspired me to give sales ago and I never thought i would say that as i have been a PM and honestly never thought I could see myself as a sales agent... Thanks Mel for such a great two days
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