Restraints of Trade In Light of Toop & Toop Case | Lee Woodward Interview with Greg & Lisa Jemmeson

Leaving a real estate business for another and operating in the same area will never be the same again.

Many laws have changed and the courts are very clear about confidential information, business springboarding, the ownership of databases, property management and the enforcement of restraints.

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Exchanging Contracts

Agents are authorised under the Property, Stock and Business Agents Act 2002 to participate in the exchange of contracts for the sale and purchase of land. This authority is not absolute and is limited and excluded in certain circumstances. Agents need to be aware of their rights and where the limitations lie in order to avoid the risk of any potential litigation. An example of a particular situation where issues may arise is where a party is represented by a solicitor or conveyancer. 

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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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Checking Contracts For Sale

When receiving contracts of sale for marketing purposes, agents have a duty to check that the contracts they have received are complete documents and they must not market the property until a complete contract is received. Legislation requires specific documents to be annexed to the contract of sale otherwise the purchaser will have the option to withdraw from the contract within 14 days of exchange.

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Exchanging Contracts Without The Full Deposit

In the current property market, it is not always possible for purchasers to have the full 10% deposit required to be paid on the exchange of contracts. In these circumstances a part deposit can be agreed upon, however, Agents need to be careful that they do not go beyond the scope of the authority given to them in making these changes in the contract. In doing so they may place themselves in a position where they may be made liable.

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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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