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Estate agents' commissions under threat after Real Estate Institute of Victoria blunder

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Thousands of Victorian estate agents could be forced to pay back hundreds of millions of dollars in commissions after they used contractual documents sold by the Real Estate Institute of Victoria (REIV) and approved by Consumer Affairs Victoria (CAV) that did not comply with state real estate laws.

The 82-year-old industry body, which represents 5000 estate agents in Victoria, had for years sold Exclusive Sales Authority (ESA) forms – a legally binding contract giving the agent the authority to sell a vendor’s home and be paid commission and any other outgoings such as marketing and advertising costs.

Unbeknownst to many of its members, the REIV’s ESA form included an altered statement on rebates that was approved by state’s consumer watchdog, but was different from the exact wording of the Estate Agents Act.

In April, judges in the Supreme Court of Victoria’s Court of Appeal upheld a 2017 County Court decision whereby a Ray White agent lost his claim to a $385,000 commission because he used “one of two [ESA] forms approved by the Director of Consumer Affairs Victoria and available for download by real estate agents” that did not comply with section 49A of the Act.

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This ruling has now paved the way for a flood of potentially ruinous claims by venders against estate agents who used a non-compliant ESA form provided by the REIV, with lawyers already sharpening their pencils. 

With cases potentially going back six years, one Melbourne estate agent who asked not to be named said the claims by vendors could be in the billions. “For a few thousands dollars in legal fees, vendors could potentially claw back tens of thousands of dollars in commission payments,” he said.

Amy Sheggerud-Woods, a partner at Marsh & Maher Lawyers, said she was acting for an estate agent in proceedings involving the agent’s entitlement to commission “and/or third party indemnity in circumstances where the REIV Exclusive Sales Authority form was used”.

“Not only will the Supreme Court decision have far-reaching consequences for real estate agents who have used the Exclusive Sales Authority forms, but also for vendors, for the REIV (which has supplied the forms to real estate agents), and perhaps for Consumer Affairs Victoria (which approved the short form rebate statement),” Ms Sheggerud-Woods wrote on LinkedIn.

REIV chief executive Gil King said in a statement: “Upon being made aware of the issue late last year, the REIV took immediate steps to ensure all authorities were compliant. This involved specific communications with all REIV members.”

“At this stage, the extent of the issue is not clear,” Mr King said. He added that the REIV was “working with the Victorian government to ensure this matter is resolved”.

A spokesman for CAV said the Ray White St Albans decision in County Court “affirmed the responsibilities of agents to comply with all requirements of section 49A of the Estate Agents Act 1980 in order to claim commission in respect of a property sale”.

“CAV proactively highlighted the outcome of this case to real estate agents in Victoria, and reminded them to include all the requirements of section 49A of the Act,” he said.

Barrister Chris Twidale also highlighted the case’s ramifications on his website, and said estate agents, or landowners who appointed an estate agent should “seek legal advice about their options”.   

The April Court of Appeal ruling related to a case involving a Ray White St Albans agent who had unsuccessfully sued his vendors for a $385,000 commission payment following the $8.8 million sale in May 2016 of a six-hectare industrial site at 382 Greens Road in Keysborough.

Lawyers acting for the vendors successfully argued in the County Court last year that the agent was not entitled to the commission payment because the ESA form used “did not comply” with the Estate Agents Act.

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The best time to carry out your real estate search

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Although the real estate market is busy throughout the year, it’s important to decide when you’re going to search for, sell, or rent out a property. You’ll save time, energy, and in some cases, even money!

 

You’re looking for a home

If you’re looking to buy, it seems that winter is surprisingly the ideal time to purchase your new home: There are fewer potential buyers on the market, so you hold all the cards to negotiate prices.

Keep in mind that property owners usually work during the day, so they will likely post a real estate ad in the evening after getting home from work. On the other hand, real estate agencies are mainly open during the day, so they are likely to post an ad at any time.

A few words of advice for your search: Note that the available housing in the Grand Duchy is being snatched up faster and faster! Finding a home isn’t easy: Focus on your search for 2 or 3 consecutive weeks by making yourself as available as possible to answer the phone or go to an appointment so that you beat everyone else to the punch. You should also consider setting up email alerts so you will be notified as soon as a new real estate ad is posted!

 

You’re a property owner

Keep in mind, a real estate ad that’s been online for too long does not inspire confidence. Instead, it will make users suspicious, surely wondering about your home’s hidden flaws.

People generally like to schedule their move for over summer vacation because it’s more practical. As an owner, therefore, it is in your best interest to start advertising your property for sale or rent in the spring, particularly during the month of May. You’ll then have a greater chance of getting a better price since the demand is higher.

For owners looking to rent out their property, keep in mind that the type of property is important. Of course, properties of a more modest size, from studios to two-bedroom units, are more likely to be sought out by students and are therefore dependent on the school schedule: Searches will take place from June to September, taking procrastinators into account. For apartments and houses with more than two bedrooms, your property will be sought out during the spring. However, more and more students in the Grand Duchy are seeking housing with roommates, thus requiring larger homes, so your property will potentially be dependent on the school schedule as well if you are accepting this type of lease.

Nevertheless, don’t forget that you have no control over falling in real estate love, so it can happen at any time, whether it’s the ideal time or not!

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CRA finds nearly $600 million in unpaid taxes in BC and Ontario real estate sector

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VANCOUVER—The Canada Revenue Agency has found nearly $600 million in unpaid taxes in Ontario and British Columbia’s real estate sector over the past three years. It has levied $47 million in penalties for the same period.

In B.C. alone, $169 million in unpaid taxes were related to real estate transactions and income tax, the agency found. In Ontario, whose population is three times greater than B.C.’s, that number was $423 million.

A condo building is seen under construction surrounded by houses as condo towers are seen in the distance in Vancouver, B.C., on Friday March 30, 2018.  (DARRYL DYCK / The Canadian Press File)

“I am delighted,” said Richard Kurland, a Vancouver immigration lawyer who for years has lobbied for more scrutiny of real estate transactions, as well as several immigration programs that were directed toward wealthy investors.

“It’s a reasonable representation,” he said of the amount of unpaid taxes, “but I don’t think it tells the whole picture at all.”

The federal agency began examining real estate transactions more closely starting in 2015, and says there continue to be “compliance risks” in real estate transactions in the heated Vancouver and Toronto markets.

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In British Columbia, CRA auditors found that 54 per cent of the unpaid taxes came from not paying GST, while 45 per cent was from income tax.

In Ontario, 90 per cent of the unpaid taxes were related to homebuyers not paying the GST, which is required on all newly built homes in Canada, as well as GST on other real estate transactions.

In a statement, CRA staff said a number of factors increase the risk of tax evasion in the country’s two hottest real estate markets, including a questionable source of funds to buy properties, property flipping, unreported GST, unreported capital gains and unreported worldwide income.

Read more:

CRA conducts simultaneous Panama Papers raids in the GTA, Calgary and Vancouver

British Columbia to require anonymous land owners to reveal their true identities

A mismatch between reported income and lifestyle (such as owning a multimillion-dollar home) can trigger a closer look from CRA auditors to discover whether income is not being reported or being earned illegally.

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Kurland said he believes a new tax information-sharing agreement that will come into effect in September between Canada and 60 other countries will reveal more tax evasion. That’s because even though residents of Canada (who may or may not be citizens) must report their worldwide income to the CRA, the system was not well enforced, resulting in something of an “honour system,” he said.

“It’s what I call the show-me game,” Kurland said of the new agreement between countries. “You show me what this person declared to you … as global income and property, and we will show you what this person declared to us as global income and property holdings.

“It puts people who have not exactly been open with their property transactions in a quandary.”

While in Vancouver much of the scrutiny has been on the impact that buyers from Mainland China may have on the market, Kurland emphasized: “It is not a one-stop China shop at all. This issue cuts across all jurisdictions internationally.” China is one of the 60 countries included in the new agreement.

The information-sharing agreement is part of an effort led by the Organisation for Economic Co-operation and Development to tackle global tax evasion, including secretive offshore banking.

In its February budget, the B.C. government announced it would require land owners to reveal their identity in the province’s land registry, instead of shielding property ownership behind numbered companies.

“Lack of transparency in the land registry means it is not clear who owns nearly half of Vancouver’s more expensive properties. This is wrong,” the provincial budget document stated. “The concealment of beneficial ownership can be part of international webs used to facilitate tax evasion, money laundering, corruption and other criminal activities.”

It added, “Having a registry means we’ll know who owns what.”

With files from Marco Chown Oved and Robert Cribb

Jen St. Denis is a Vancouver-based reporter covering affordability and city hall. Follow her on Twitter: @jenstden

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Real estate market is totally different than stock market now, says Robert Shiller

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  1. Real estate market is totally different than stock market now, says Robert Shiller  CNBC
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