Beneficial Interest

 

Last month we discussed one of the types of disclosures a selling agent may have to make in the course of a sale, that is, when they may have an agent’s interest in the property they are marketing. In this edition of the College Chronicle, we are going to explore what happens when the selling agent may have a beneficial interest in a property they are selling.

49 Restrictions on licensee obtaining beneficial interest in property

(1) A real estate agent who is retained by a person (“the client”) as an agent for the sale of property must not obtain or be in any way concerned in obtaining a beneficial interest in the property.
Maximum penalty: 200 penalty units or imprisonment for 2 years, or both.

(2) A real estate salesperson employed by the real estate agent must not obtain or be in any way concerned in obtaining a beneficial interest in the property.
Maximum penalty: 200 penalty units or imprisonment for 2 years, or both.

So what is a beneficial interest? Section 49 of the Act states:

(5) Without limiting this section, each of the following is considered to constitute the obtaining of a beneficial
interest in property:

(a) purchasing property,

(b) obtaining an option to purchase property,

(c) being granted a general power of appointment in respect of property.

However it is not just the agent themselves that is considered in this section of the legislation. It is considered that the agent obtains a beneficial interest if any of the following connected to the licensee purchase the property, obtain an option to purchase or are granted a general power of appointment in respect of the property:

(4) Without limiting this section, a person is considered to obtain a beneficial interest in property if:

(a) the person or a close relative of the person obtains a beneficial interest in the property, or

(b) a corporation having not less than 100 members and of which the person or a close relative of the person is a member, or a subsidiary of such a corporation, obtains a beneficial interest in the property, or

(c) a corporation of which the person or a close relative of the person is an executive officer obtains a beneficial interest in the property, or

(d) the trustee of a discretionary trust of which the person or a close relative of the person is a beneficiary obtains a beneficial interest in the property, or

(e) a member of a firm or partnership of which the person or a close relative of the person is also a member obtains a beneficial interest in the property, or

(f) the person or a close relative of the person has, directly or indirectly, a right to participate in the income or profits of a business carried on for profit or gain and another person carrying
on that business obtains a beneficial interest in the property.

So how do we use the connections and networks we have grown if we are possibly going to be considered obtaining a beneficial interest? The agent must act honesty and transparently and apply the rules set out further in section 49

(3) A person does not contravene this section by obtaining a beneficial interest in property if:

(a) before the person obtains the interest, the client consents in writing in a form approved by the Secretary to the person obtaining the interest, and

(b) the person acts fairly and reasonably in relation to the obtaining of the interest, and

(c) no commission or other reward is payable to the person in relation to the transaction by which the interest is obtained, unless the client consents in writing in a form approved by the Secretary to the commission or other reward being paid.