Two property purchasers in Richmond, Victoria, have learned the hard way that giving notice to the real estate agent, rather than the vendor, to terminate their residential purchase contract during the cooling off period, was not sufficient.
What you need to know
- Read all contracts carefully, especially in relation to how to serve notices.
- Giving notice to a real estate agent is not necessarily sufficient as termination in the cooling off period. When serving a notice, serve it in the manner and on the person contemplated by the contract.
- Do not assume that a real estate agent will legally be considered the vendor’s agent in all matters relating to the property.
On 4 April 2014 Mr Tan and Dr Lo signed a contract to purchase a property in Richmond for $3.695 million. They paid $369,500 deposit to the real estate agent.
In the afternoon Mr Gibbons (the real estate agent) called them to say that another purchaser was interested and that they would hold a private auction. Mr Tan and Dr Lo agreed to attend the private auction.
Ultimately Mr Tan and Mr Lo were successful at the private auction and the contract was amended to a purchase price of $4.48 million with the remainder of the deposit ($99,000) due to be paid at the end of June 2014. The vendor accepted their offer and entered into the contract on those terms. The purchasers then had a three-day cooling-off period. The auction exception to cooling-off periods did not apply to this case, because this was a private, not a public, auction.
On 9 April 2014 at 5:56pm, Mr Tan sent an email to the real estate agent stating that they exercised their right to withdraw from the contract pursuant to the cooling off period. He says he also sent a text message and left a voicemail for the real estate agent which was disputed.
Mr Tan and Dr Lo demanded a return of their deposit. The deposit was not returned.
On 1 July 2014 the vendor’s solicitor’s served a notice of default on Mr Tan and Dr Lo for failure to pay the remainder of the deposit.
The Court’s findings
In the Victorian Supreme Court (Tan v Russell  VSC 93), Mr Tan and Dr Lo had to demonstrate to the Court that the real estate agent had authority that went beyond the established authority that a vendor provides a real estate agent. The Court held they did not establish this.
The Court therefore held that the real estate agent had no authority to receive a notice of termination.
The vendor’s notice of default on the contract was valid and the vendor was entitled to the full deposit, damages and interest from the purchasers.
In reflecting on this case, Catherine Ballantyne comments: “This case is significant because it outlines the limits of a real estate agent’s agency, and dispels the commonly held view that the real estate agent is the vendor’s agent for all matters relating to their property. It further illustrates the importance of carefully reading the contract and ensuring that you have the right legal advice to act according to the requirements of the contract.”