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Do you have a signed agency agreement?

08/04/2021

We had an email from the REINZ (Real Estate Institute of New Zealand) yesterday with a warning to real estate professionals to ensure that they have a SIGNED AGENCY AGREEMENT with clients before showing properties. Unfortunately we do hear about this happening right here in our region too. If you are approached by a salesperson wanting to show someone through your place, by all means go ahead if you are interested but do make sure that the proper paperwork has been done first.

This is the email we received from the REINZ on 07/04/2021:

"PROPERTIES CANNOT BE SHOWN TO POTENTIAL PURCHASERS WITHOUT A SIGNED AGENCY AGREEMENT

Both REINZ and the REA have been made aware of a number of instances where agents have shown potential purchasers through a property (seeking to gain a listing) without an agency agreement. The fact these instances are on the rise suggests that there is some confusion in the profession at the moment.

In very rare circumstances, a buyer will contract a buyer’s agent to look for a property for them. The buyer’s agent could potentially knock on doors, but they must have a buyer’s Agency Agreement in place with the buyer before showing them properties, they must disclose to the seller that they are acting for the buyer, and they cannot act as a listing agent for the seller or obtain a commission in the same transaction. This would breach rule 9.14 of the REA Code of Conduct.

However in almost all cases, the agent knocking on the door is prospecting for a listing. To take prospective buyers through without a signed Agency Agreement is unethical and it breaches Rule 9.6 of the REA Professional Conduct and Client Care Rules 2012. Rule 9.6 states that:

"Unless authorised by a client, through an Agency Agreement, a licensee must not offer or market any land or business, including by putting details on any website or by placing a sign on the property.”

It also breaches the Anti-Money Laundering and Countering Financing of Terrorism Act 2009 (the AML/CFT Act). Section 16 (2) of the AML/CFT Act states that the customer’s (seller’s) identity must be verified ‘before’ or at the time of establishing a business relationship. By definition, the business relationship with the seller will almost always begin at the time of listing, prior to which AML must be completed. It may also breach the uninvited direct sale provisions in the Fair Trading Act 1986.

Breach of any of these rules attracts substantial penalties for non-compliance. If you are aware of this practice happening within your organisation, notify the REA. Should you have any questions on this, speak to your supervisor or compliance officer."

Any questions? Don't hesitate to contact us and ask advice.

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