Well, this has put the cat amongst the pigeons. As a timely reminder that buying and selling real estate is a serious, and complex, legal transaction, that everyone should get proper legal advice on from a qualified lawyer, we have the bomb shell Supreme Court of Victoria decision of Tan v Russell  VSC 93, handed down on 11th March 2016.
What happened was that in early 2014 the Vendor (Russell) appointed a real estate Agency to be his estate agent to sell his property. In April 2014 the Purchasers (Tan and Lo) negotiated through the Agent to buy the property and signed a contract of sale to buy the property for $4.48 million. They paid to the Agent a part deposit on signing of $350,000, with the balance of deposit of $98,000 due on 30 June 2014. So far, so normal.
But then three business days after signing the contract the Purchasers emailed the real estate Agent, advising that they had decided not to proceed with the purchase and purporting to exercise their ‘cooling off’ rights to end the contract. Section 31 of the Sale of Land Act 1962 (Vic) (the Act) says that a purchaser can in certain circumstances give the vendor “or his agent” notice that they wish to terminate the contact before the end of three clear business days after the purchaser signed the contract.
The Vendor however disputed that the contract was validly terminated by the Purchasers under the ‘cooling off’ laws and said that the Purchasers had wrongfully breached the Contract and that the Vendor was therefore entitled to be paid 10% of the sale price as forfeit by the Purchaser. The Purchasers disputed this saying that they were entitled to, and had, validly “cooled off”, and that they were entitled to a refund of the $350,000 part deposit they had paid the the real estate agent. The Purchasers sued the Vendor for the return of the deposit – and they lost!
At Court the main issue was whether the Purchasers’ email to the real estate agent had validly terminated the contract under the cooling off provisions.The Court decided that the email was invalid because, for the purposes of section 31 of the Act, the Vendor’s real estate was not an ‘agent’ of the Vendor with the necessary authority to receive the notice of termination. The court decided that the Vendor had not ‘held out’ that the real estate agent was the Vendor’s agent for all purposes. The Purchasers had assumed that real estate agent had authority to receive legal notices, such as a notice by the Purchasers exercising their right to cool off pursuant to the Act. The Purchasers failed to prove that the real estate agent had any authority of the Vendor, beyond “the usual authority granted to an estate agent by a vendor client.”
The Court said that although it is “a common occurrence in commercial life for parties to assume that a real estate agent is an agent for the vendor of a property for all purposes… that is not necessarily the case.” In seeking to exercise their cooling off rights the Purchasers mistakenly assumed that communicating with the Vendor’s real estate agent was sufficient. So the Court ordered that the Vendor was entitled to retain the $350,000 paid and the residue of the deposit of $98,000, plus any further losses on resale of the Property, including interest and costs. A big win for the Vendor, but a terrible loss for the Purchasers – and one we suspect many Vendors, Purchasers and real estate agents hadn’t given much thought to previously.
So the moral of the story is that: even though real estate agents are extensively involved in the marketing and sale of a property, they do not usually have authority to receive legal notices on behalf of the Vendor once the contract is executed. Purchasers wanting to exercise their cooling off rights should make sure that the notice is validly served on the vendor directly or an agent of the vendor (e.g. the vendor’s lawyer, whose contact details should appear on the Contract) with express authority to accept such notices. Purchasers should have a lawyer give the cooling off notice on their behalf, to make sure that it is done correctly.
For Vendors the lesson is that they should not just assume that a Purchaser has validly “cooled off” but rather they should first get legal advice from a lawyer before accepting that a purchaser has ended a contract of sale pursuant to section 31 of the Act and refunding any deposit paid.
And remember – the only persons able to give you legal advice about your real estate property problems is a qualified lawyer (like me 🙂 – Conveyancers are not lawyers, and they are not qualified to give anyone legal advice about property and conveyancing matters.