Guidelines for Practitioners Completing PAMD Form 32A

Guidelines for Practitioners Completing PAMD Form 32a

The Purpose of the form 32a

Two fold purpose:

(a)establish to your Client as the Buyer your independence from the Seller (or anyone associated with the Seller in the transaction) (see section 365B) to enable you to provide genuine independent advice; and

(b)provided that you are independent of the Seller, you are then able to confirm, on behalf of the Buyer, ether a waiver (see section 369) or shortening (see s 370) of the cooling –off period.

Prerequisites

(a)You must be a solicitor currently admitted to an Australian Supreme Court or the High Court and hold a current practicing certificate (not limited to Queensland practitioners).

(b)To waive the cooling-off period, the Certificate must be given to the Seller or to the Seller’s agent prior to the Buyer being bound by the contract [see section 369(2)].

(c)To shorten the cooling-off period, the Certificate must be given to the Seller or the Seller’s agent prior to the end of the cooling-off period under PAMDA.

When should you give a form 32a to your client?

(a)Under s 365B of PAMDA you must give a form 32a to your client, if you are engaged to act for them as the buyer of residential property.

(b)To give a form 32a certificate you should meet with, or talk to, your client and explain the matters referred to at 4(d).

(c)A failure to give a form 32a, even if you are independent, will be unprofessional conduct. See Legal Services Commissioner v McClelland [2006] LPT 13.

When can you give a form 32a waiving or shortening the cooling-off period under PAMDA?

You can only give a form 32a waiving or shortening the cooling-off period if:

(a)you are independent of the seller, the seller’s agent, and anyone else involved in the sale, or promotion of the sale, or provision of a service in connection with the sale, of the property; and

(b)you have no business, family or other relationship with any of those persons; and

(c)you have not received, are not receiving, or will not expect to receive a benefit in connection with the sale, or for promoting the sale, or for providing a service in connection with the sale, of the property, other than professional costs and disbursements payable by the buyer;

(d)you have explained to the buyer—

(i)the effect of the relevant contract; and

(ii)the purpose and nature of the certificate; and

(iii)the legal effect of the buyer giving the certificate to the seller or the seller’s agent.

What you need to explain to your Client as the Buyer

Prior to giving the signed certificate you should explain the following to the Buyer:

(a) If you are not shortening or waiving the cooling-off period:

(i)Whether you are independent from the seller and your relationship, if any, with the Seller (see clause 6 below);

(ii)the purpose and nature of the Certificate;

(b)If you are shortening or waiving the cooling-off period you need to also explain in addition to (i) and (iv)):

(i) the effect of the Buyer not being able to exit from the contract in the case of a full waiver;

(ii)where there is a shortening, the continued liability of the Buyer to lose 0.25% of the purchase price if the contract is terminated during the shortened cooling off period;

(iii)the essential contract terms in full;

(iv)if the Buyer is purchasing the property for investment purposes, the desirability of having the Buyer advised by an independent financial or investment adviser.

Concept of independence

Section 365B of PAMDA requires you to declare three matters:

(a)Whether you are independent of the seller and the seller's agents and anyone else involved in the sale, or promotion of the sale or the provision of a service in connection with the sale of the property; and

(b)Whether you have a business, family or other relationship with any of those persons; and

(c)Whether you have received, will receive, or expect to receive a benefit in connection with the sale, or for promoting the sale, or for providing a service in connection with the sale, of the property, other than professional costs and disbursements payable by the buyer

Independence

It appears from the Form 32a that the question of whether you are independent of any of the persons involved in the sale is to be resolved by stating whether you are acting for any of the parties. However, “independent” is defined to mean ‘free from outside control or influence’ and therefore, whether you are independent of other parties to the transaction is a wider question than whether you are acting for one of the parties involved in the transaction.

The Form32a provides some examples of situations where the objectivity of a lawyer may be compromised rendering the lawyer unable to provide independent advice. Ultimately this will be a question for the judgment of the individual lawyer and where there is some doubt about whether a relationship should be disclosed a lawyer should err on the side of caution. This would be a prudent course considering that disclosure of such a relationship in the certificate will not prevent the lawyer acting for the buyer in the transaction.

Examples where you may notbe independent:

Business, Family or other relationship

You will not be independent of the seller, the seller’s agents and anyone else involved in the promotion and financing of the sale if:

(a)you are receiving a commission or payment from the seller after sale of the property;

(b)you are related to the seller or their agents or employees by birth or marriage;

(c)you have an on-going professional relationship with the seller or their agents or employees in relation to other transactions;

(d)you have an on-going professional relationship with or are related to the financier for the development;

(e)you have an on-going professional relationship with or are related to the marketing agent for the property

(f)you have an arrangement with the marketing agents to receive referrals, whether there is payment for the referral or not. However, unsolicited referrals from a real estate agent are unlikely to create a ‘business relationship’. Refer to CEO Dept Tourism, Fair Trading and Wine Industry Development v Dickie [2007] QCCTPAMD 042.

7.Effect of failure to properly disclose

No contractual sanctions are provided for failure to give a Form 32a or for a failure to include the required information in the certificate. However, a lawyer who

(a)represented that they were independent of the seller or were receiving no benefit in connection with the sale; or

(b)failed to deliver a certificate at all

would be liable both at common law to the buyer and could face professional misconduct proceedings. Refer to Legal Services Commissioner v McClelland [2006] LPT 13.

Safeguard/Warning

It is recommended that you:

(a)ensure that your Buyer fully comprehends the effect of the Certificate which you propose to give;

(b)confirm the effect of the Certificate in writing to the Buyer and give the Buyer a copy of the Certificate;

(c)maintain comprehensive diary notes;

(d)in the even of the Buyer having difficulty understanding the English language or comprehending the effect of the Certificate, take steps to safeguard your position by way of engaging an interpreter or someone who can explain the true effect of the Certificate.

Under no circumstances give a Certificate unless you are convinced that the Buyer fully comprehends the true nature and effect. Your professional indemnity insurance will not respond to claims arising from dishonest or fraudulent conduct. For example, if you are not independent or if you receive a benefit from the sale and fail to disclose these then indemnity for any subsequent claim may be declined by your insurer.

Conflict of Interest

A lawyer who discloses that he or she is not independent of the seller or that he or she is receiving a benefit is not prevented from acting for the buyer. A buyer who is fully apprised of the facts may still choose to engage the lawyer to act for them in the transaction. The only restriction on the lawyer will be in relation to waiving or shortening the cooling off period. Only an independent lawyer who is not receiving a benefit may sign s2 or 3 of the certificate for the purposes of waiving or shortening the cooling off.

If you have declared you are not independent of the seller, you should before acting ensure you have complied with the Legal Profession (Solicitors) Rule 2007, rule 8. You should also note the prohibitions on acting for a client where your own interests may be in conflict with the client’s interests (rule 9) and the disclosure obligations in relation to commissions or referral fees in rule 32.