Liability Analysis of Liability of Real Estate Agents and Accounting Professionals in Business Ventures
Question
Task: What are the legal responsibilities and potential liabilities of Liability of Real Estate Agents and accountants in business ventures?
Answer
Case over View
Investment into new ventures always carries a high-risk rate making it important for an investor to perform in-depth analysis and locate adequate information about the venture before commitment. Failure to invest towards research is likely to lead to incurring huge losses which could have been otherwise avoided. Consulting a legal representative and expert in the field is also vital as they are legally bound to provide their client with transparent information and advice related to the proposed ventures. Frank and Belinda decide to start up a business from their savings and consult a Liability of Real Estate Agents and accounting firms to assist with locating and evaluating the proposed plan (Cardone, 2010). Frank and Belinda incur losses as a result of lack of transparency and proper advice. The report shall analyse each stake holder’s contribution using the PIRAC methods and determines their liability towards the loss and whether the losses can be recovered from any of the service providers or individuals.
PARTIES
Frank and Belinda – Investors/ buyer
Miss/ Mrs Marie – Liability of Real Estate Agents Agent
Douglas Pty Ltd – Liability of Real Estate Agents Company
Mr Black – Accountant
Brown and Co – Accounting Firm
ISSUE
Miss/ Mrs Marie
A Liability of Real Estate Agents agent is responsible for assisting investors to locate a property. They are responsible for identifying preferable properties, checking their properties background records and history and consulting and holding talks with the property owners (Trade, 2017). They also are responsible for locating interested buyers for the property after which they then assume the role of handling the sale and completing all the paperwork. A property agent is usually a Liability of Real Estate Agents’s company’s representative and is not directly implicated to the final dealings.
Douglas Pty Ltd.
Marie is a property agent hired by Douglas Pty Ltd. She is responsible to researching, locating and establishing contact with property owners after which potential buyers can be found. Once identified the agent is responsible for executing the deal on behalf of her employer (Trade, 2017). The employer I responsible for ensuring all agents is professionally trained and offer genuine information to seller and buyer and acts as a mediator between the buyer and seller.
Mr Black
Mr. Black is an accounting professional who has been approached by Frank and Belinda for advice related to the business. They have requested for the accounting professional to analysis the proposed projects and advise on the idea (ABS, 2009). It becomes the accountant’s moral responsibility to investigate all aspects related to the business and clarify all details with the client related to the business
Brown and Co.
Frank and Belinda hired Brown and Co for advisory services related to analysing the proposed business venture making it the organizations moral obligation and responsibility to offer accurate guidance related to the venture. This required to be done after analysing the businesses records, history and reviewing the market and environment factors which influence the decision (ABS, 2009). It was clear that the region was facing some difficulties related to the tourist attractions with the fall in the water levels at the great lakes, drought and a winter which was classified as a disaster winter sports business due to the low amount of snowfall.
RULE
Miss/ Mrs Marie
The Liability of Real Estate Agents agent is required to undertake all transaction related to the purchase, sale, and transfer of a property between two parties. The agent is also responsible for advising the buyer regarding the current properties value and future growth expectations. The Liability of Real Estate Agents agent is responsible for advising the investor or seller regarding the properties current value and future appreciation or depreciation (ACCC, 2017). They are liable by law to offer accurate advice to the consumer and seller regarding the property value, appreciation and must ensure the property has clear paperwork and free of disputes.
Douglas Pty Ltd
Liability of Real Estate Agents companies are responsible for locating suitable properties for sale and verifying their documentation before advertising and offering them for sale to potential clients. The Liability of Real Estate Agents company is legally obligated to ensuring a property is clean before presenting it for ale to any client. They are also responsible for ensuring all paperwork related the identified property is clear and no legal disputes are linked to the property (REIA, 2017). They also value the property asked on the local market and are liable to educate the consumer or buyer regarding the identified properties value and future appreciation or depreciation rate.
Mr Black
The Accounting professional has been consulted by Frank and Belinda with regard to seeking advice related towards making the investment. He has required to calcite the costs involved with establishing the business and also providing accurate estimates related to the proposed idea after analysing other business in the same industry, locality and environmental aspects which may be influencing the businesses performance. The accountant has not been limited to only reviewing the businesses books but also needs to perform one ground research so as to offer the most credible finding and advice to the couple. Having been paid by Frank and Belinda for the financial and advisory services it becomes his moral obligation to clearly outline every aspect linked to the benefits and risks associated with the business (AASB, 2017).
Brown and Co
The Brown and Co representative was obligated to investigate the current scenario and investigate the concern so as to deliver accurate information to the couple related to investing in the business. It was the accounting firm’s responsibility to ensure they highlighted the different factors which had been identified which could have influenced the businesses performance (IPA, 2017). In addition to investigating and researching regarding the proposed projects viability, it was also the accounting firm’s responsibility to assign different accountants on the same task which would have helped highlight certain points which may have been missed. By simply placing one individual responsible for analysing, reporting and advising the client directly the business had failed to advise the client regarding the current low occupancy rate and reasons which may have been influencing the low performance.
ANALYSIS
Miss/Mrs Marie
The main issue facing Frank and Belinda is their failure to secure adequate or projected sales from the proposed venture which does not fall under the property advisors role. The property advisor is only responsible for ensuring all paperwork related to a property is clean and acts as a mediator between buyer and seller ensuring each gets the best deal (MyPlan, 2017). They are paid a fixed commission from the deal which is usually a percentage of the final amount agreed.
Douglas Pty Ltd
Douglas Pty Ltd is a Liability of Real Estate Agents agency which is responsible for researching and locating suitable properties for sale in the market. They then publish these properties on their website or connect the property owners with a potential buyer. They are responsible for ensuring the properties paperwork is clear and will be the response for completing all paperwork and transfers related to the property (MyPlan, 2017). The Liability of Real Estate Agents agent will change a communication from both the buyer and the seller and will usually pay their agents a fixed salary plus incentives for sales made by the agent each month.
Mr Black
Black is also responsible for clearly stating the facts related to the analysis and finding due to him having being consulted especially by the couple regarding this information before any agreement was made. The couple even gives Mr. Black some additional days to review the paperwork and highlight some important points which may require closer considerations (ABS, 2009). The problem is he only states the levels the business would require achieving so as to register success and does not report on the previous and market realities.
Brown and Co
Brown and Co is responsible for offering accurate information’s and advises to its clients with regard to project investment viability. The company had placed one of its representatives responsible for analysing and reporting the Frank and Belinda investment requirement which resulted in inaccurate advice. It was the organization's responsibility to ensure the project had been reviewed and counter-checked by multiple professionals which would have helped identify additional concerns which may have required to be highlighted. Being a review and advisory service the business has failed to offer accurate information to its client by simply highlighting proposed levels of occupancy required to secure a profit (ABS, 2009). Instead, the business should have also highlighted the current low rate of occupancy and highlighted reasons which may have influenced the low businesses performance.
CONCLUSION
Mrs/ Miss Marie
The concern facing Frank and Belinda’s losses was not related to the property value but related to the income being generated from the business which does not implicate the property agent. In this situation, the property agent cannot be held responsible for the loss as his responsibility was to locate a suitable property for the investor who would then need to perform their own analysis to determine if the business was viable or not. The property agent did her part by locating a suitable property free from disputes and as per the required specification which was her role which was achieved.
Douglas Pty Ltd
Douglas Pty Ltd cannot be held responsible for the losses incurred by Frank and Belinda due to the Liability of Real Estate Agents agent only advising regarding the property’s value and future appreciation rate. Aspects linked to how the couple intended to utilize the property and generate income cannot be associated with the Liability of Real Estate Agents agent as this is not related to a property value or appreciation and depreciation rate. Frank and Belinda cannot hold Douglas Pty Ltd liable for any losses incurred not claim any loses from the Liability of Real Estate Agents agent as the losses are related to a business venture opened on the property but not directly related to the property’s value.
Mr Black
This leads the client to invest in the proposed business venture expecting to achieve a 40-50% occupancy rate which is well below the actual occupancy rate which I only 12.26% at the end of one year in operation. The failure to project or highlight a low current occupancy rate results in the couple incurring major losses as a direct result of lack of accurate advice from Mr. Black, Mr. Black cannot be held responsible for the losses directly by Frank and Belinda as he is an employee Brown and Co employee. In this situation, Frank and Belinda would need to hold the organization responsible which will then be responsible for taking disciplinary action of its affected employee internally
Brown and Co.
Brown and Co were responsible for offering accurate information related to the business and it was the companies responsibility to have the proposed plan reviewed by multiple analysts and accountants which would have helped highlight any areas which may have been missed. The Company did not analyse the proposed business accurately and failed to highlight the concern which misled the client to invest in the business leading the loss.
Having failed to highlight these current business performances and influencing factors and only focusing and emphasizing on the projected profit rate the Brown and Co can be held liable for the losses incurred and compensation claims launched under the false advice and information act. This I due to the accounting firm being responsible for projecting a profitable occupancy rate but failing to highlight the current low occupancy and all factors which are influencing the low occupancy.
References
AASB, 2017. Accounting standards. [Online] Available at: http://www.aasb.gov.au/Pronouncements/Current-standards.aspx [Accessed 20 September 2017].
ABS, 2009. 1220.0 - ANZSCO - Australian and New Zealand Standard Classification of Occupations, First Edition, Revision 1. [Online] Available at: http://www.abs.gov.au/ausstats/abs@.nsf/Product+Lookup/1220.0~First+Edition,+Revision+1~Chapter~UNIT+GROUP+2211+Accountants [Accessed 20 September 2017].
ACCC, 2017. Liability of Real Estate Agents. [Online] Available at: https://www.accc.gov.au/consumers/health-home-car/real-estate [Accessed 20 September 2017].
Cardone, G., 2010. If You're Not First, You're Last: Sales Strategies to Dominate Your Market and Beat Your Competition. New Jersey: John Wiley and Sons.
IPA, 2017. IPA Rules And Standards. [Online] Available at: https://www.publicaccountants.org.au/about-us/ipa-rules-and-standards [Accessed 20 September 2017].
MyPlan, 2017. Liability of Real Estate Agents Sales Agents. [Online] Available at: http://www.myplan.com/careers/real-estate-sales-agents/description-41-9022.00.html [Accessed 20 September 2017].
REIA, 2017. Legislation. [Online] Available at: https://reia.asn.au/agents/legislation/ [Accessed 20 September 2017].
Trade, F., 2017. Agency responsibilities; Fair Trade. [Online] Available at: http://www.fairtrading.nsw.gov.au/ftw/Property_agents_and_managers/Agency_responsibilities/Pre_purchase_property_inspection_reports.page? [Accessed 20 Sept 2017].
