What can't you do w/o a BA licence?

Discussion in 'Legal Issues' started by datageek, 17th Jan, 2020.

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  1. datageek

    datageek Well-Known Member

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    What activity is illegal without a Buyers Agent's licence?

    Background: I'm thinking of doing joint ventures (for want of a better term) with other investors. I want to clarify if it's contravening any laws or whether I need a BA licence.

    The idea is to "source" my JV partner a property using my research. My JV partner will own the property 100%.

    It's not like a spotter or finder, since I won't get paid a fee for my recommendations. Instead, my JV partner will pay me a proportion of the performance of the property for the first year or two - assuming it outperforms a certain benchmark.

    If the property fails to beat the benchmark, I lose an amount of money which I pay to my JV partner as compensation for stuffing up.

    There'll be some inspecting of properties. There'll be some negotiating with selling agents. But the JV partner will technically buy and own the property. Not sure yet about how auctions will work. It's similar to what a BA does except with a completely different profit model.

    Although it would be good to have the BA training, I've bought 16 investment properties for myself across a number of different states and countries for the last couple of decades. So, I kinda know what I'm doing already. I don't want to go to the trouble of getting licences for every state and territory.

    Does anyone have experience, advice or 2c worth they'd like to contribute in this area?
     
  2. Paul@PAS

    [email protected] Tax, Accounting + SMSF + All things Property Tax Business Plus Member

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    I can see a range of tax issues with the proposal 1. GST ?, 2. Non-deductibility for owners as the payment is capital in nature. That said I would expect that it is a payment for BA services and requires licensing. That may be the state you are in AND the property state - Dunno. See a lawyer.

    So you likely need tax and legal advice. Each states laws may vary or may be largely uniform ? Most dont allow you to show property to anyone or sell or facilitate a sale without a license. eg QLD requires paperwork etc. Fair Trading and other BAs are on the hunt for rogues. That last link also provides guidance on BA licensing requirements for all states.

    And there is the Corporations Act if you were thinking of running unlicensed managed trusts or selling without a prospectus is some instances.
     
    Last edited: 17th Jan, 2020
  3. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker in Sydney Business Member

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    licencing is state based laws so you will need to seek legal advice concerning the states where you want to do this.

    Start off by reading the relevant legislation.
     
  4. Scott No Mates

    Scott No Mates Well-Known Member

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    By the sound of it you will be acting in the capacity of a buyers agent regardless of how you are paid.
     
  5. Jacque

    Jacque Jacque Parker Premium Member

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    @[email protected] makes some valid points here, though the Property Observer article I was quoted in above back in 2014 is less relevant now, given that some states have changed the requirements for buyers agents. This includes NSW which is seeing a raft of reforms coming in March this year, including the conglomeration of some licences. This includes buyers agent licences which will no longer be separate but instead rolled under the same banner as "real estate agent" In other words, to obtain a BA licence after the March reforms you will need to obtain the entire qualification Cert IV not just the relevant components that used to make up the BA licence (which is a good thing for the industry and will raise the standards)

    @datageek licensing is very much regulated differently across the states and territories, as already mentioned, so I can only speak for NSW but the PSBAA 2002 is very clear here if you read the legislation.
    The definition of a real estate agent:
    NSW legislation

    real estate agent means a person (whether or not the person carries on any other business) who, for reward (whether monetary or otherwise), carries on business as an auctioneer of land or as an agent:
    (a) for a real estate transaction, or
    (b) for inducing or attempting to induce or negotiating with a view to inducing any person to enter into, or to make or accept an offer to enter into, a real estate transaction or a contract for a real estate transaction, or
    (c) for the introduction, or arranging for the introduction, of a prospective purchaser, lessee or licensee of land to another licensed agent or to the owner, or the agent of the owner, of land, or
    (d) collecting rents payable in respect of any lease of land and otherwise providing property management services in respect of the leasing of any land, or
    (e) for any other activity in connection with land that is prescribed by the regulations for the purposes of this definition,
    but does not include a person who carries on business as an auctioneer or agent in respect of any parcel of rural land unless the regulations otherwise provide.
    Note.
    This definition is not limited to the selling of land and extends to an agent acting on behalf of the buyer of land (a buyer’s agent).


    And then there's Part 2 Div 1 Sec 8 that states what constitutes the activities of an agent:

    8 Agents required to be licensed
    (1) A natural person must not act as or carry on the business of (or advertise, notify or state that the person acts as or carries on the business of or is willing to act as or carry on the business of):
    (a) a real estate agent, unless the person is the holder of a real estate agent’s licence, or
    (b) a stock and station agent, unless the person is the holder of a stock and station agent’s licence, or
    (c) a business agent, unless the person is the holder of a business agent’s licence, or
    (d) a strata managing agent or community managing agent, unless the person is the holder of a strata managing agent’s licence, or
    (e) an on-site residential property manager, unless the person is the holder of an on-site residential property manager’s licence or a real estate agent’s licence.
    Maximum penalty: 100 penalty units.

    What you have described above ie: sourcing, assessing, negotiating and acquiring real estate on behalf of a third party for reward (whether or not that be a fee, commission, expenses etc) sounds very much like that of a real estate agent (acting for a buyer)

    You may want to seek legal advice here, also in regards to your liability position, as real estate agents (at least here in NSW) are also required to hold mandatory PI insurance. They are also required to have a valid and completed Agency Agreement when acting for a third party, in order to be entitled to a commission or expenses
    See Part 4 Div 1 Sec 55
    NSW legislation

    Our BA Chapter, at REINSW, have worked for many years, lobbying Fair Trading NSW, to more clearly define our role under both legislation and codes of practice. One of the factsheets we were successful in getting onto the FT website is for consumers when using a BA to buy. You might find it useful
    Using an agent to buy property

    I hope the above helps and I agree that it would be useful to seek legal advice in your position. Best wishes.
     
  6. datageek

    datageek Well-Known Member

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    Thanks so much for all the feedback.

    I did a JV with my friend back in 2009 in NSW. I picked out a property which he bought. We then renovated at my expense. Post-reno we got it revalued and split the net increase. He still owns it. It's up about 125%.

    I can't remember the conversation we had at the time of choosing the property. I wonder if the courts would rule that I "induced" him to buy, and on what basis.

    Yeah, legal advice definitely required. Thanks all.
     
  7. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker in Sydney Business Member

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    Did you consider the tax aspects?
     

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