Australian Consumer Law obligations for real estate agencies

Running a real estate agency means dealing with consumers every day. Home sellers, buyers, tenants and landlords all come to you with rights under the Australian Consumer Law (ACL), and those rights bind the way you market properties, run your client agreements and deliver your services.

The ACL is Schedule 2 of the Competition and Consumer Act 2010 (Cth) and operates as a national law in every state and territory, sitting alongside state fair trading and property licensing laws. For an agency, four duties matter most: you must not engage in misleading or deceptive conduct, you must not act unconscionably, you must supply services with due care and skill, and you must not put unfair terms into your standard form contracts. Breaching those duties can expose your business to pecuniary penalties of up to $100 million, damages claims, court orders and contracts that lose their effect.

Which dealings the ACL covers

Most of what an agency does happens in trade or commerce, which is the trigger for the ACL's general protections and consumer guarantees. A one-off private sale between two individuals is generally outside the ACL, but the conduct of a licensed agency is squarely within it.

The consumer guarantees for services apply when you supply services to a consumer. Under s 3 of the ACL, a person is a consumer if the amount paid or payable for the goods or services did not exceed $100,000. That figure is the amount prescribed under s 3(1)(a) by reg 77A of the Competition and Consumer Regulations 2010 (Cth). A person is also a consumer if the goods or services are of a kind ordinarily acquired for personal, domestic or household use or consumption.

A few points matter specifically in real estate:

• The guarantees attach to your services, not the land: The land itself is protected through the representation provisions discussed below, while the consumer guarantees apply to the services you supply to a client.
• The re-supply exclusion: Under s 3(2) of the ACL, a person does not acquire goods as a consumer if the goods are bought for re-supply, or for use or transformation in a process of production or manufacture. A developer buying fixtures to install in a project for sale is not protected the same way a homeowner is.
• Small businesses are protected too: The unfair contract terms regime covers not only consumer contracts but also small business contracts. Under s 23(4) of the ACL, a contract is a small business contract if at least one party employs fewer than 100 people or has a turnover of less than $10 million. The standard form agreements you use with small developers, investors and landlords can therefore fall within the regime.

Duty one: avoid misleading or deceptive conduct

Section 18 of the ACL is the core prohibition: a person must not, in trade or commerce, engage in conduct that is misleading or deceptive or is likely to mislead or deceive. It covers what you say and what you leave out. Silence can mislead where there is an expectation of disclosure, and a statement that is literally true can still mislead because of what it implies. A disclaimer buried in fine print will not necessarily save you; courts look at the overall impression an advertisement creates, including how prominent any qualifying statement is.

Two further provisions matter directly to property marketing. Section 29 prohibits false or misleading representations about services, including their standard, quality, value or grade, the price, and testimonials that purport to come from clients. Section 30 deals specifically with land: it prohibits false or misleading representations about the nature of the interest in the land, the price payable, the location, the characteristics of the land, the uses to which it can lawfully be put, and the existence or availability of facilities associated with the land.

For an agency this covers a large share of everyday activity: descriptions of a property in listing copy, statements about zoning or development potential, claims about rental yields or expected sale prices, photographs that misrepresent the state of a property, and testimonials from past clients. If you make a claim about a property or a projected return, you should be able to point to something that supports it. The ACCC and state fair trading agencies regularly take enforcement action against agents over misleading advertising.

Duty two: do not act unconscionably

Section 21 of the ACL prohibits unconscionable conduct in connection with the supply or acquisition of goods or services. Unconscionable conduct is conduct that offends good conscience: taking advantage of a client's vulnerability or disadvantage in a way that goes beyond sharp bargaining.

Section 22 lists the matters a court may consider when assessing whether conduct is unconscionable. They include the relative strengths of the parties' bargaining positions, whether the client was able to understand the documents involved, whether undue influence or pressure or unfair tactics were used, whether the supplier failed to disclose risks the client could not reasonably be expected to see, and whether the parties acted in good faith.

For agencies this most often arises in dealings with vulnerable clients: an elderly vendor who does not understand an exclusive agency agreement, a buyer with limited English, a tenant pressured to sign without time to read or ask questions. High-pressure tactics and refusing to take no for an answer are the kinds of conduct that attract scrutiny. Unconscionable conduct is a penalty provision under s 224 of the ACL, carrying the same maximum penalties as the misleading representation provisions.

Duty three: provide services with due care and skill

Part 3-2 of the ACL implies consumer guarantees into every supply of services to a consumer in trade or commerce. Section 60 guarantees that services will be rendered with due care and skill. Section 61 guarantees that services will be reasonably fit for the particular purpose the client made known, and will achieve the result the client wanted the services to achieve. Section 62 guarantees that services will be supplied within a reasonable time where no time is fixed.

Due care and skill is not defined precisely; it is the standard of a competent provider with average skills and experience in the field. For an agency, this means carrying out the tasks a competent agent would carry out: preparing marketing materials that accurately represent the property, keeping clients informed, following their instructions, and meeting the professional standards attached to your licence.

If a service guarantee is breached, s 267 of the ACL gives the client a set of remedies. The client may require you to remedy the failure within a reasonable time, terminate the contract if the failure is a major one or cannot be remedied, recover compensation for any reduction in the value of the services, and claim damages for loss that was reasonably foreseeable.

Duty four: keep unfair terms out of your standard form contracts

The unfair contract terms regime in Part 2-3 of the ACL applies to standard form consumer contracts and small business contracts. An agency's client agreements are standard form in practice: the same printed agency agreement, property management agreement or buyer's agency agreement offered to every client on a take-it-or-leave-it basis. Under s 27 of the ACL, a contract alleged to be standard form is presumed to be one unless proved otherwise. The factors a court considers include whether one party held all or most of the bargaining power, whether the contract was prepared before any discussion occurred, and whether the other party had an effective opportunity to negotiate.

Under s 23 of the ACL, an unfair term in a standard form contract is void, and the contract continues to bind the parties if it can operate without the term. A term is unfair under s 24 if it causes a significant imbalance in the parties' rights and obligations, is not reasonably necessary to protect the legitimate interests of the party advantaged by it, and would cause detriment to the other party if it were applied or relied on. The party relying on the term must prove it is reasonably necessary; the presumption runs the other way. Courts also consider how transparent the term is, and look at the contract as a whole rather than the term in isolation.

Since 9 November 2023 the regime is stricter. Under s 23(2A) and (2C) of the ACL, proposing an unfair term in a standard form contract, or applying or relying on one, is itself a contravention that attracts pecuniary penalties under s 224, in addition to the term being void. The ACCC signalled ahead of the change that it expected businesses to review their standard form contracts and remove unfair terms.

The terms most likely to be challenged in an agency agreement are one-sided ones: a right to terminate or vary fees that sits only with the agency, automatic renewal clauses, indemnities that make the client liable for the agency's own defaults, and clauses that give the agency wide authority to bind the client. There is no formula; each contract is assessed as a whole. A term that is transparent, expressed in plain language, and reasonably necessary to protect a genuine interest of the agency is more likely to survive scrutiny.

The cost of getting it wrong

The maximum pecuniary penalty for a body corporate under s 224 of the ACL is the greater of $100 million, three times the value of the benefit obtained from the contravention, or 30% of the body corporate's adjusted turnover during the breach period. For an individual, the maximum is $2.5 million. Those caps apply to the provisions that matter most to agencies: misleading representations about services or land (Part 3-1, including ss 29 and 30), unconscionable conduct (Part 2-2) and unfair contract terms (s 23(2A) and (2C)). Section 18 itself is not a penalty provision; it is enforced through damages and injunctions rather than pecuniary penalties.

Beyond penalties, the ACL gives clients and regulators powerful remedies. Under s 236, a person who suffers loss or damage because of conduct that contravenes the ACL may recover damages by action against the wrongdoer, within six years of the conduct. Under s 232, a court can grant injunctions on the application of the regulator or any other person, including orders to stop conduct and to refund money. An unfair term is void, and a client who did not receive services with due care and skill can terminate the agreement and recover compensation under s 267.

Enforcement is shared between the ACCC and the fair trading regulator in each state and territory, and state laws also govern how agents are licensed and how sales and leases must be conducted. The ACL is not the only regime an agency deals with, but it is the one that carries the largest financial penalties.

A compliance checklist for your agency

Work through these steps to keep your agency on the right side of the ACL:

• Audit your advertising: review listing copy, floor plans and photographs for accuracy, and make sure price and yield claims can be substantiated.
• Check your testimonials: publish only genuine testimonials, and do not present them in a way that changes their meaning.
• Review your standard form agreements: agency agreements, property management agreements and buyer's agency agreements should be checked term by term against the s 24 test.
• Fix the terms that cannot be justified: automatic renewals, unilateral fee variation and one-sided indemnities are the usual suspects.
• Train your staff: sales and leasing staff should know how to recognise a vulnerable client and when to stop and seek advice before documents are signed.
• Keep records: note the basis for any claim you make about a property, a suburb or a projected return.
• Have a complaints process: respond promptly when a client raises a concern, and take legal advice before a dispute escalates.

When to involve a lawyer

Consumer law issues in real estate are fact-specific, and the assessments often turn on the details of a particular advertisement or contract. A lawyer can review your standard form agreements for terms that would not survive scrutiny under s 24, advise on whether a marketing claim is defensible under ss 18, 29 and 30, and help you respond if a client complains or a regulator starts asking questions. If a claim is already on foot, a lawyer can assess your exposure to penalties, damages and injunctions and negotiate a resolution before the matter reaches court.

Start with the agreements you reuse every day

The change most likely to catch an agency by surprise is the 2023 reform to unfair contract terms. Many agencies have used the same printed agreements for years; an unfair term in them was previously unenforceable at worst, but since 9 November 2023 proposing or relying on one is itself a contravention with penalties attached. Marketing claims can be corrected as they arise, but a standard form agreement that is unfair is a liability you carry into every client relationship. The first step is a practical one: collect every standard form document you use with clients, and work through each term against the s 24 test, with a lawyer where you are not sure.