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Is rental bidding legal?

7 March 2017

The legislation does not prohibit rental bidding in New South Wales, or the Australian Capital Territory, Tasmania, Western Australia, Northern Territory and South Australia.

Although rental bidding is not specifically outlawed in most Australian States, it may come under the auspices of section 18 of the Australian Consumer Law.

Section 18 says that a person must not, in trade or commerce, engage in conduct that is misleading or deceptive or is likely to mislead or deceive.

Therefore although rental bidding is not illegal in NSW, it may be seen as unethical and its opponents might argue that it contravenes the prescribed rules of conduct for real estate agents as set out in Schedule 1 to the Property, Stock and Business Agents Regulation 2014 and, in particular, Rule 3 which provides as follows: 

  1. An agent must act honestly, fairly and professionally with all parties in a transaction.
  2. An agent must not mislead or deceive any parties in negotiations or a transaction.

However, the rules of conduct do not apply to landlords so this argument would only be relevant if agents engaged in the practice of rental bidding.

In summary, rental bidding is not illegal in NSW but may be seen as unethical and, therefore, may come under attack under the auspices of the prescribed rules of conduct or even federal law’s misleading and deceptive conduct.

REINSW’s view on rental bidding 

REINSW believes it is best to apply both the common sense rule and helicopter view in determining if such practices in your business are worth pursuing.

Does it make sense, is it necessary and how would the consumer view it from an ethical perspective?

REINSW President John Cunningham said: “It is always up for interpretation particularly when Australian Consumer Law is concerned. 

“Interestingly most rental bidding is instigated by tenants desperate to secure a home to live in so agents need to know how to deal with this situation with care.

“Ensure that you record every communication and confirm everything in writing along with a total level of transparency in all you do.

“You need to look at your internal procedures and policies to see if this methodology fits and whether you are willing to take the legal risks especially if you are proactively instigating the process. 

“Do you have the necessary pre-frames in place so that there is no confusion in the execution of this practice from a consumer perspective?

“The last consideration is whether it is worth the grief it may create. Auction sales are clear cut and covered by state legislation so there is very little confusion for consumers, so be wary of activities that require a legal interpretation that is not specific.”