Interview For EAC With Lisa Jemmeson | Restraints Of Trade

A business owner has the right to protect their legitimate business interests through the provision and enforcement of restraints of trade. However this happens very differently in the context of an employee, including commissions-only sales people, as to an independent contractor, which functions as a separate businesses operating in parallel to an agency.

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Fraud Prevention Guidelines

Many agents are receiving fines from NSW Fair Trading for failure to include proof of identity documents in their sales files. While the Fraud Prevention Guidelines are an adjunct to the Supervision Guidelines set out by the Commissioner of Fair Trading, and there are no specific rules of conduct, fines may be issued at Fair Trading’s discretion.

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Structure of a Business

One of the most important decisions business owners need to make is selecting the best legal structure for the business. Effective structuring of the business has many advantages, some being tax minimisation, asset protection and risk minimisation, operational efficiencies, efficient transition of ownership and most importantly maximisation of wealth.

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Handling Confidential Information

In recent decisions handed down by the courts it has been highlighted that the courts are now more willing to uphold and enforce restraint clauses in employment contracts. As a result both Employees and Employers need to be aware of the effects of a breach of these restraints and its consequences. Business owners need to regularly review the efficacy of their restraint clauses and employees need to be aware of the repercussions that arise from the misuse and mishandling of information which belongs to the business.

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Professional Indemnity

Under the Property Stock and Business Agents Regulations every Real Estate Business or Independent Contractor is required to hold Professional Indemnity Insurance. Fair Trading requires these entities to be indemnified against specific items eg professional negligence , misconduct etc and it is in the interests of the business to be indemnified against all future misadventures or any malfeasance that may put them at risk. For companies with multiple entities you will need to ensure that they are properly indemnified.

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Real Estate Contracting (Independent Contractors)

It is not uncommon for real estate agencies to hire contractors to perform duties for the business rather than hire employees. There are benefits to be derived by both parties in such arrangements for example, cost savings by the principal or flexibility and tax planning for the contractor. That being said, caution is still advised when considering such agreements. There are certain requirements that the Contractors need to be aware of when operating for themselves for example, Contractors need to be careful when signing agency agreements that they sign in conjunction with the Principal Agent as the Australian Taxation Office requires that 20 percent of the income must be derived from another source other than the principal agent.

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Handling Deposits

As a result of the role an agent plays in the sale and purchase of property they are given the authority to participate in the exchange of contracts and do so on a regular basis.  Incidentally they are also given the authorisation to act as a stakeholder and to receive and hold deposits. The importance of the role they play in this process places duties and obligations upon them which will need to be properly discharged. The contract for the sale of land requires a ten percent deposit and problems will arise where a lesser amount is received on exchange. This makes agents potentially liable to a damages claim in the situation where the Purchaser is unable to complete. As this is a common occurrence, there are things agents can do to ensure they are protected.

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Price substantiation & True estimates on Agency Agreements

Under the Fair Trading Supervision Guidelines, agents must be able to substantiate the selling price inserted on their agency agreements. Please click below to watch our short video on factors that agents should consider when substantiating price and the Best Practices to follow.

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Authority to sign a contract on behalf of a party

Often a situation will arise whereby all parties who are purchasing a property will not be able to all attend on the date of the auction. When circumstances like this arise, agents need to be aware that a written authority to bid on the property & to sign the contracts on the parties behalf must be obtained and kept as part of the documentation as part of the bidders register.

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