A real estate agent discovers that a property they are marketing has a significant structural defect that the vendor has not disclosed. Under the Real Estate Agents Act 2008, what should the agent do?
Correct Answer
C) Make sure prospective buyers are told about the defect the agent knows of
Under rule 10.7 of the Real Estate Agents Act (Professional Conduct and Client Care) Rules 2012, a licensee must disclose known defects to customers, and rule 6.4 bars misleading customers or withholding information that should in fairness be provided. If the vendor instructs the agent to hide the defect, rule 10.8 requires the agent to stop acting for that vendor.
Why This Is the Correct Answer
Rule 10.7 of the Client Care Rules requires a licensee to disclose known defects to a customer, and rule 6.4 bars withholding information that should by law or in fairness be provided. If the vendor directs that the defect be kept quiet, rule 10.8 says the licensee must not continue to act.
Why the Other Options Are Wrong
Option A: Keep marketing without comment, since the defect is the vendor's issue to disclose
Rule 10.7 requires a licensee to disclose known defects to customers; it is not left to the vendor.
Option B: Withdraw the listing at once without first raising the defect with the vendor
The agent should raise it with the vendor and disclose it. Rule 10.8 requires the agent to stop acting only if the vendor directs that it be withheld.
Option D: Mention the defect only if a prospective buyer asks about the structure
Waiting to be asked is withholding. Rule 6.4 bars withholding information that should in fairness be provided, and rule 10.7 requires disclosure of known defects.
Deep Analysis of This Property Law Question
This question tests understanding of the fundamental duty of care and disclosure obligations under the Real Estate Agents Act 2008. The scenario presents a conflict between vendor preferences and professional obligations, which is common in practice. The agent's discovery of a structural defect creates a material fact that could significantly impact a purchaser's decision and the property's value. The Act establishes that agents must exercise care, diligence, and skill, and cannot mislead or deceive clients or customers. This extends beyond simply repeating vendor information to actively ensuring material facts are disclosed. The principle reflects consumer protection objectives and maintains market integrity by ensuring informed decision-making. This obligation exists regardless of vendor wishes, as the agent's duty extends to all parties in the transaction, not just the vendor.
Background Knowledge for Property Law
The disclosure duties sit in the Professional Conduct and Client Care Rules 2012. Rule 10.7 requires disclosure of known defects and, where hidden defects are likely, either evidence from the client that the land is not affected or making sure the customer knows of the risk. Rule 10.8 forbids continuing to act for a client who directs that such information be withheld, and rule 6.4 prohibits misleading or withholding information. Section 72 defines unsatisfactory conduct; it does not itself impose a disclosure duty.
Memory Technique
Remember DISC: Discover, Investigate, Share, Comply. When you Discover material facts, you must Investigate their significance, Share them with all relevant parties, and Comply with your professional obligations regardless of vendor preferences.
When facing disclosure questions, apply DISC to determine the correct action. If you've discovered something material, you must share it - the vendor's wishes don't override your professional duty.
Exam Tip for Property Law
Look for questions involving material facts and vendor preferences. Remember that agent duties under the Act always override vendor wishes when it comes to disclosure of material information that affects purchaser decisions.
Real World Application in Property Law
An agent marketing a 1960s home discovers during a routine inspection that the foundation has significant cracking and potential structural issues. The vendor, eager to sell quickly, asks the agent not to mention it as they believe it's minor. The agent must disclose this structural defect to all prospective purchasers as it's clearly material - affecting safety, value, and potential repair costs. Failure to disclose could result in disciplinary action, legal liability, and damage to professional reputation.
Common Mistakes to Avoid on Property Law Questions
- •Believing vendor instructions override professional obligations
- •Thinking withdrawal from market satisfies disclosure duties
- •Assuming passive disclosure (only when asked) is sufficient
Related Topics & Key Terms
Key Terms:
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- → Under the Unit Titles Act 2010, who is responsible for insuring the common property of a unit title development?
- → A client complains to a salesperson about the service they received. Under the Client Care Rules, what must the licensee make sure the client knows?
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- → A registered owner disagrees with a decision the Registrar-General of Land made about their record of title. After any review by the Registrar, where can they appeal under the Land Transfer Act 2017?
- → Under the Unit Titles Act 2010, owners of what share of the principal units can require an extraordinary general meeting to be held?
- → A licensed real estate agent has been convicted of a serious criminal offence unrelated to their real estate work. Under the Real Estate Agents Act 2008, what disciplinary powers does the Real Estate Agents Disciplinary Tribunal have in relation to the concept of 'fit and proper person'?
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