FIRB breaches highlight advisers’ high standards
Assumptions regarding the roles of real estate agents and lawyers in the sale of residential property to foreign investors needs to be examined, Connect ASEAN principal, Paul Tynan, says.
With the Foreign Investment Review Board (FIRB) investigating the legality of more than 1500 property purchases by foreign buyers, and forcing the sale of 19 properties where breaches of regulations were found, Tynan said that overseas buyers needed to seek counsel from advisers.
"We are told that real estate agents are agents of the vendor and not purchasers," he said, "But the scale of the potential loss incurred by the foreign owners surely calls for a review of this assumption.
"In certain sections of the financial services sector financial advisers and brokers may be regarded as agents for both sides of the transaction, albeit at different times.
"Had this situation occurred within the advice sector of the financial services industry, advisers would have to defend their conduct or be banned; commissions, fees and charges reimbursed; the dealer groups they represented investigated by the Australian Securities and Investments Commission (ASIC) with potential restrictions and penalties applied to their Australian Financial Services Licenses; and if a major institution was also involved, they may be faced with enforceable undertakings or high level investigation."
While Tynan said having estate agents acting on behave of foreign investors was a logical first step in attempting to attribute liability, he noted that the role of lawyers involved in such transactions should also be reviewed, to protect overseas investors from significant losses.
"Completing any business transaction can be complicated at the best of times," he said.
"But when the transaction involves the cross-border sale and transfer of assets and money, it requires a much deeper and broader understanding of all the factors and potential pitfalls that are involved.
"In the end, the fees and charges of reputable and experienced adviser is a wise investment of time and money by all parties".
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