What effect does the Act have on agency agreements?
The 2008 Act provides for disclosure of information and other new requirements to protect consumers when they enter into an agency agreement.
An agent is not entitled to receive commissions or expenses for real estate agency work unless:
- the work is done under a written agency agreement; and
- the agency agreement is signed by, or on behalf of, the client and the agent; and
- a copy of the agency agreement is given to the client within 48 hours after it was signed by, or on behalf of, the client.
The agency agreement will also have to disclose the source of all rebates, discounts or commissions that the agent will receive and specify the estimated amount of those rebates, discounts or commissions.
An agent will not be entitled to receive any expenses from a client for real estate agency work if information about such rebates and discounts in respect of those expenses is not included in the agency agreement.
If the agency agreement concerns a residential property, the agent must give the client a copy of the relevant approved guide before the client signs the agency agreement. The client must give the agent a signed acknowledgement that they have received the guide.
Why does the Act require that an agency agreement must disclose all rebates, discounts and commissions?
This measure aims to promote transparency in the dealings between agent, client and other parties, where the agent incurs expenses in relation to any real estate agency work undertaken for the client. To take some examples:
- A client agrees to pay for the placement of several large size full colour advertisements in a newspaper. If the agent receives a rebate or discount on the cost of the advertising from the newspaper, the agent must disclose this to the client.
- A client authorises an agent to hire the services of a home staging service to make the property more attractive to buyers. The agent receives a commission from the home staging service for generating this work. The agent must disclose the commission received to the client.
Note that disclosure is not limited to only these examples.
All disclosures of rebates, discounts and commissions must be made in writing and attached to the agency agreement.
The REINZ has developed a new sale and purchase agreement form, as an alternative to the form developed some years ago by the REINZ and Auckland District Law Society. What role does the Authority have in relation to these forms?
We do not have any role in approving sale and purchase forms and these forms are not directly regulated by the Act. The choice of form is for individual real estate companies to make, and subject to the acceptance of sellers and buyers.
