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Legislative Assembly for the ACT: 2003 Week 7 Hansard (26 June) . . Page.. 2530..


MR STANHOPE

(continuing):

As well, the bill contains a number of features which are unique to the ACT and which will provide buyers and sellers with significantly improved levels of consumer protection in their property transactions.

The bill also addresses another major consumer protection issue in the sale of residential property that has crept into the ACT real estate market. I refer to the unethical practice of dummy bidding at public auctions. This practice involves the person, whether the seller, agent, auctioneer or another person, making a false bid at auction in order to increase the sale price of the property. The person has no interest in purchasing the property and is merely seeking to inflate the final sale price at the fall of the hammer.

As with the gazumping proposal, there's no intention to interfere with the seller realising the best price for their property. The aim of these provisions is to prevent an unfair and deceitful practice that distorts the market and artificially drives up property prices.

I'll now direct members' attention to major aspects of the bill.

Sellers of residential property will now be required to have a draft contract of sale prepared prior to listing the property on the market. Attached to this contract will be a number of due diligence documents and reports that will provide the buyer with all the information necessary to determine whether this is the property they wish to purchase.

Under the current process of the sale of residential property, the buyer conducts all the necessary inquiries concerning the property and also commissions certain inspection reports. The majority of these due diligence inquiries are conducted after an oral agreement to purchase the property has been concluded.

The time that it takes to conduct these searches and have a contract drafted opens a wide window of opportunity for gazumping to occur. Requiring the seller to have these documents available for a buyer to inspect from the time the property is first advertised for sale closes the window of opportunity.

The new process that the bill proposes bears some resemblance to the New South Wales system but differs in a very significant way. The New South Wales anti-gazumping legislation does not require inspection reports to be attached to the contract, as was noted by my colleague Mr Hargreaves in this Assembly some time ago. The New South Wales system has not been successful in reducing gazumping in that jurisdiction, and my government doesn't intend to make the same mistakes. The New South Wales system does not work because it fails to address the window of opportunity for gazumping to occur.

Buyers in New South Wales still have to undertake substantial due diligence inquiries before they can move to exchange, leaving the window open. Because this bill requires the seller to attach all the documents necessary to conduct an adequate level of due diligence on a property up front, the window of opportunity closes. Buyers and sellers will now be free to enter into binding written contracts as soon as an offer is accepted.

The bill will, for the first time, open up the market and allow real estate agents as well as solicitors to organise and conduct the exchange of contracts between a buyer and a seller.


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