Written by Jodie Masson on August 8, 2016
Large property owners who manage, lease and sell their own assets are one of the biggest winners under an amendment to NSW’s Property, Stock and Business Agents Act.
The Property, Stock and Business Agents Amendment (Property Reports and Exemption) Regulation (NSW) 2016 came into effect on 15 August 2016. These new exemptions are likely to have both a positive and negative effect for both commercial real estate agents and substantial property owners.
In very broad summary (but the devil is in the detail! – see below), there is now a complete exemption from the requirements of the Property, Stock and Business Agents Act 2002 (NSW) (PSBA Act) for commercial agents either:
It’s important to be aware that the exemptions won’t apply to all commercial agency relationships.
The new exemptions are great news for large property owners who manage, lease and sell their own assets via a separate, but related, licensed entity (which usually charges a fee to the owner). It means that those internally controlled agency entities no longer have the administrative burden of maintaining a real estate agent’s licence (including paying fees, annual CPD, required signage etc), managing trust accounts and holding PI insurance. It’s easy to understand why certain large shopping centre owners have been pushing for this change for many years.
It’s also great news for large commercial real estate agencies who will no longer need to ensure that they strictly comply with NSW agency law, particularly in the area of having compliant agency agreements, for their large clients. The courts have been brutal with real estate agents who do not have strictly compliant agency agreements (ie signed at the right time, containing all of the prescribed terms in the right places, and signed and served properly). In a commercial property industry which is largely dependent on relationships, it makes sense to relax the strict requirements so that agents can collect the agreed commission without having to jump through hoops.
The changes also lead to a negative result for commercial real estate agents. If large property owners can now easily internally manage their property management, leasing, acquisitions and disposals, there is now less disincentive to outsource this previously troublesome role to an external licensed real estate agent.
Our understanding is that the legislation was passed with little opposition from the real estate industry. Most large real estate agencies couldn’t oppose the changes without offending their most important clients!
However, as in any industry, there’s always a place for absolute experts. Ultimately, it’s likely that large property owners will always want to deal with the experts employed by large commercial real estate agencies, even if it is now easier to choose to do some of the work themselves.
Devil in the detail
The exemptions only apply to “commercial property agency work” – that is selling, purchasing, exchanging, leasing, managing or otherwise dealing with property that isn’t “residential property” or “rural land”. Both “residential property” and “rural land” have particular meanings in the PSBA Act and it is possible that a property you thought was exempted as commercial may well be captured by the strict definitions.
The new exemption for internally managed commercial agents only applies if the agent entity is an “affiliate” of a principal/owner. This can be any agent entity that is controlled by an owner entity (ie if it has the power to make decisions about its financial and operating decisions). For entities which are body corporates, subsidiaries and parent companies are also affiliates. Affiliates can be, but aren’t limited to, companies, trusts (including trustees), partnerships and individuals. This means that most corporate groups will be captured by the definition, but it’s worth being aware that particular shareholding, unit ownership and external custodian/trustee relationships for some fund managers, trusts and investment schemes may not strictly comply.
The new exemption for substantial owners only applies to real estate agents acting on behalf of a principal/owner who owns property worth at least $40 million (at market value) or with an aggregate gross floor area of at least 20,000 square metres. The value and floor space amounts will include property that is co-owned an affiliate, presumably only to the extent of the ownership, but this is not clear. However, it is important to note that property that is wholly owned by an affiliate and not by the principal/owner itself, is not counted within this threshold.
NSW vs national position
The amendments bring NSW agency law closer to its Queensland counterpart, with 2 important differences:
It’s noteworthy that NSW originally followed the Queensland approach in an earlier version of the new regulation, but changed it to its current state after a period of public consultation.
None of the other states/territories in Australia currently offer complete exemptions from the relevant agency legislation for commercial agency work.
Sincere thanks to our wonderful clients and hard-working team for supporting our inclusion in the Legal 500 (Asia Pacific) Guide as a leading firm in Real Estate for 2023
The Legal 500 has been analysing law firm capabilities across the world for more than 3 decades in over 150 jurisdictions. Their research is based on: “feedback from 300,000 clients worldwide, submissions from law firms and interviews with leading private practice lawyers, and a team of researchers who have unrivalled experience in the legal market.” – https://www.legal500.com/about-us/
February 10, 2023
We are delighted that Massons has been selected as an “Excellence Awardee” in the category of “Boutique Firm of the Year” at the 2022 Australasian Law Awards.
Thank you to all of our wonderful clients who have supported our nomination in this category, and to our amazing lawyers and support staff for making this possible!
Wishing all the other Awardees the best of luck and looking forward to the Gala Dinner. A night out with our team is always cause for celebration – win, lose or draw!!
March 23, 2022
We are excited about our inclusion in Doyle’s Guide for 2022 for NSW in the following categories:
Massons – Leading Property & Real Estate Law Firms
Jodie Masson – Leading Property & Real Estate Lawyers and Leading Leasing Lawyers
Leisha de Aboitiz – Leading Property & Real Estate Lawyers and Leading Leasing Lawyers
Ben Malone – Property & Real Estate Law Rising Stars
Thank you to all of our peers and wonderful clients who have helped to achieve this recognition.
March 14, 2022
February 28, 2022
We are excited to announce the appointment of Alex Ho as a Senior Associate at Massons. Alex started with us as a paralegal and has achieved this milestone in record time due to his hard work, his ability to develop and sustain fantastic relationships with clients, his engagement in constantly seeking to improve himself and others in equal measure, and his absolutely infectious enthusiasm. We couldn’t be prouder! Congratulations Alex!
January 5, 2022
December 8, 2021