Under the Fair Trading Act 1986, a buyer suffers loss because the listing agent concealed a known defect. What is the buyer's most likely remedy?
Correct Answer
A) Compensation ordered by a court for the loss, such as the repair cost or lost value
A buyer is not the listing agent's client, so the Consumer Guarantees Act gives them no remedy against the agent. Concealing a known defect is misleading conduct in trade under the Fair Trading Act 1986 (ss 9 and 14), and under s 43 a court can order compensation for the loss it caused. The agent also faces a complaint for breaching rule 10.7 of the Client Care Rules.
Why This Is the Correct Answer
The buyer is not the agent's client, so the claim lies under the Fair Trading Act, not the Consumer Guarantees Act. Concealing a known defect is misleading conduct in trade (ss 9 and 14), and under s 43 a court can order the person responsible to pay the loss it caused, such as the repair cost or the drop in value.
Why the Other Options Are Wrong
Option B: Automatic cancellation of the sale agreement once the defect comes to light
A court can cancel or vary a contract under s 43, but only on application and in its discretion; nothing happens automatically when a defect is found.
Option C: A full refund of the price plus every legal fee, whatever the actual loss was
Orders under s 43 are aimed at the loss or damage the misleading conduct caused. A refund of everything regardless of the actual loss is not the measure.
Option D: A claim on the agent's professional indemnity policy, transferred into the buyer's name
Indemnity insurance may fund an agent's liability, but a policy is never transferred to a claimant; the buyer's claim is against the agent.
Deep Analysis of This Compliance Question
This question is about choosing the right statute. The Consumer Guarantees Act protects consumers who acquire services, so it helps the agent's own client, usually the vendor. A buyer is a customer, not a client. What protects a buyer from an agent who hides a defect is the Fair Trading Act: s 9 prohibits misleading or deceptive conduct in trade and s 14 prohibits false representations about land. Section 43 lets a court make orders to put right the loss caused, most often compensation measured by the repair cost or the reduction in value.
Background Knowledge for Compliance
Fair Trading Act 1986: s 9 (misleading or deceptive conduct in trade), s 14 (false representations and misleading conduct about land), s 43 (orders including compensation, variation or cancellation of a contract). Licensees are also bound by rule 10.7 of the Real Estate Agents Act (Professional Conduct and Client Care) Rules 2012, which requires known defects to be disclosed to customers.
Memory Technique
The agent's client (usually the vendor) buys the agent's services, so the Consumer Guarantees Act can help them. The customer (the buyer) buys nothing from the agent, so their route is the Fair Trading Act.
When a buyer is harmed by what an agent said or hid, reach for the Fair Trading Act and a court order for the actual loss.
Exam Tip for Compliance
Check who is complaining before choosing the Act. A buyer's claim against the listing agent for a hidden defect is a Fair Trading Act claim, and the usual remedy is compensation for the actual loss.
Real World Application in Compliance
A listing agent knows the basement floods but tells buyers it is dry. After settlement the buyers face $40,000 of drainage work. They can apply to the court under the Fair Trading Act for compensation for that loss and complain to the Real Estate Authority about the breach of rule 10.7.
Common Mistakes to Avoid on Compliance Questions
- •Using the Consumer Guarantees Act for a buyer who is not the agent's client
- •Thinking cancellation happens automatically
- •Expecting a refund of every cost regardless of the actual loss
Related Topics & Key Terms
Key Terms:
More Compliance Questions
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- → An international client buying a $2.8 million commercial property provides a copy of their overseas passport but refuses any further identity checks or information, claiming diplomatic immunity. How should the agent proceed under AML/CFT requirements?
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- → What is the primary purpose of the Consumer Guarantees Act 1993 in relation to real estate services?
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- → A real estate agency's trust account shows a shortage of $5,000 during a routine audit. What is the most serious disciplinary order available under the Real Estate Agents Act 2008?
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Under the Anti-Money Laundering and Countering Financing of Terrorism Act 2009, what is the minimum threshold for conducting customer due diligence when establishing a business relationship in real estate transactions?
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