Caveat Emptor - Tread Carefully when buying

If you’re transacting in the property market one term you should really know is Caveat Emptor. It translates from the Latin basically as “let the buyer beware”. In simple terms, when selling a property in the absence of any specified agreement, fraud, or misrepresentation the seller isn’t liable for any defects in quality.

Notionally, caveat emptor raises some interesting scenarios that question where responsibility starts and ends in transactions of all different types. One such scenario springs to mind as I write this, and whilst it is related to the property industry, it doesn’t concern the buying and selling of house….directly.

You may have noted in recent months a few pieces in the print media concerning a 2017 County Court ruling against a Melbourne real estate agency. The court determined a section of their Consumer Affairs written, and Real Estate Institute of Victoria supplied ‘Exclusive Sale Authority’ was invalid. Accordingly, it was found the contract between agency and vendor was not enforceable. For those that aren’t aware, the ‘authority’ document is the standard agreement or contract between a vendor and estate agent. The framework of these agreements is generally templated and purchased by agencies from providers like the REIV.

Where the breakdown in the relationship between vendor and agent originated, I’m not sure. But the commission in dispute, some $300,000, was deemed forfeit based on the court’s determination on the validity of the authority document.

The agency, in turn successfully sued the REIV for damages, with some suggestion that figure could exceed $550,000.

Clearly, the court has articulated where it believes culpability lies. But, what of the other players in this debacle? It was Consumer Affairs’ wording that invalidated the authority. Did the REIV actually “misrepresent” the document?

And what of the agent? If you are earning $300,000 for a single transaction, where does your responsibility for comprehensive, or at least accurate understanding of the legislation under which you operate begin and end?

Caveat Emptor.