Couple who used buyer's agency Henderson Advocacy to purchase Adamstown home say they 'should have run a bloody mile' after finding gag clause in contract

The pair had used a buyer's agent about two decades before, having had such a positive experience then they had great expectations for Jack Henderson and his team.

But there were a few red flags, Mr Sheridan said.

"The relationship was quite fractured by the time we found this place, we were actually on the verge of cancelling the contract - if this property had fallen through we were going to cut them loose," he said.

The couple's eyebrows first raised when they were asked to sign a contract including a non-disparagement clause at the point of engagement.

The gag order essentially said they weren't to disparage the agent, discourage anyone else from engaging with them or make any statements that would bring them into disrepute or negatively affect their reputation.

When they refused to sign, Mr Sheridan said Henderson's "folded like Superman on washing day" and agreed to waive the clause.

"It struck me as bizarre that I'm entering into a contract like this with a buyer's agent and they felt so strongly that the relationship could sour that they'd need to put a non-disparagement clause in," he said.

"Honestly, I should have run a bloody mile."

The Newcastle Herald has previously reported that an Australian Competition and Consumer Commission (ACCC) spokeswoman said broad non-disparagement clauses that prevent or limit customers from making public comments about goods or services risk being considered unfair contract terms.

She said unfair contract terms cause imbalance in rights and obligations.

"Under the Australian Consumer Law, businesses cannot seek to rely on unfair contract terms in their standard form agreements," she said.

"Businesses should not take actions that would prevent consumers from seeing genuine, relevant and lawful reviews by their customers."

Late last year, the ACCC took action against Sydney building firm Fowler Homes for enforcing unfair non-disparagement clauses in contracts.

Fowler Homes agreed to quit using contracts which stopped clients from publishing negative reviews or feedback.

Since 2019, more than 430 clients signed contracts containing the non-disparagement clause, which covered any attempt to complain online or on a social media platform.

The contract stipulated that any customers wanting to speak out about Fowler must first get permission from the builder. The clause also required clients to indemnify Fowler Homes against any losses suffered from enforcing those terms.

The ACCC spokeswoman said if consumers believe that a real estate agent is seeking to impose or enforce an unfair contract term, they should raise the issue with the business.

If it is not resolved, they should contact NSW Fair Trading and report the matter to the ACCC.

Newcastle's Mr Sheridan said when he entered a depressed market with a budget of $1.2m in the height of COVID-19, there wasn't a lot of housing stock available.

Desperate to find their retirement home, the pair signed up with Henderson's - sold on the benefits of its 'Henderson Advantage software' and close relationships with Hunter real estate agents.

But, they didn't know just how close. Shocked to learn that the director of PRD Presence Mark Kentwell, the company representing the seller of the Adamstown home they bought through Henderson's in November 2021, was a co-founder of Henderson Advocacy.

Through a corporate vehicle, Mr Kentwell took a 50 per cent stake in the buyer's agency last year, which he says he has not profited from.

The two men have also jointly directed two other separate companies since April 2021: Henderson Metro Vic Pty Ltd and Henderson Metro Qld Pty Ltd.

Since late 2020, the men have both been directors and joint owners of Know Media, which makes social media videos and podcasts for the real estate industry.

Mr Sheridan says no relationship was ever disclosed to him.

"I was stunned. The whole point of engaging a buyer's agent is to have someone acting on my behalf to interact with the vendor's equivalent so that it's a level playing field - you've got people who know the market, know the game, interacting together...," he said.

"If I was going to court and I knew that the defence and prosecution attorneys were sleeping together I wouldn't be comfortable. I'm not going to get a fair hearing."

The couple paid a two per cent commission on the $1.35 million purchase price, earning Henderson's about $27,000.

It could be years before they know who came off second-best, Mr Sheridan said.

"They might have done us a good deal, and we may yet have gotten a $1.4 million property for $1.35m, so we might have actually won out of that, but we don't honestly know," he said.

A Herald investigation revealed last month that the state's property services watchdog is making "active inquiries" into PRD Presence Newcastle and director Mark Kentwell's links to Future Property Co, which trades as Henderson Advocacy.

It is understood NSW Fair Trading is looking at a number of property sales where PRD Presence represented the sellers and Henderson Advocacy represented the buyers.

Agents in NSW are not permitted to act for the buyer and seller of a property at the same time, or to profit from both sides of a sale.

Mr Kentwell has denied any wrongdoing, saying he does not work for Henderson Advocacy, has not profited from the half share of the business that is linked to him and PRD made "adequate disclosures" about the business relationship to clients.

Numerous PRD clients, whose homes were bought by people being represented by Henderson Advocacy, told the Herald they had no idea the two businesses were linked.

Henderson Advocacy clients who purchased PRD properties also told the Herald they had no idea the firms were linked.

Buyer's agents specialise in searching, assessing and negotiating the purchase of a property on behalf of a buyer and real estate agents act for the sellers.

Like real estate agents, some buyers agents charge a percentage fee based on the eventual sale price and others charge a fixed fee.

Veteran Newcastle buyer's agent Kylie Frearson firmly believes in being independent.

Owner of Property Solutions 101, Ms Frearson said she started her buyer's agency to "protect clients" in property transactions.

Ms Frearson said the only way to do that is to be completely independent, with no links to anyone else in the sales process, which also means not accepting referral fees.

Developers desperate to find buyers offer substantial commissions of as much as $40,000 per referral to buyer's agents who introduce clients to their properties for sale.

It is also common for buyer's agents and selling agents to exchange referral fees, typically about 20 per cent of the other side's commission for introductions that end in a sale.

Buyer's agents also refer to buyer's and sales agents in other areas, as do selling agents, and many exchange referral fees.

Several insiders told the Herald that some agents don't declare referral fees to clients, disguising the windfall as consultancy, marketing or coaching fees.

They said most sales agencies also have arrangements with and accept referral or introduction fees from mortgage brokers and financiers.

A Newcastle-based agent said it was all about getting another "kick, or lick, and getting more money", but pointed out the "business arrangements" do not directly cost clients more money.

Ms Frearson said she refers to buyer's and sales agents in other areas, but does not take commissions.

"We refer because we believe they are good at what they do...," she said.

"From the very beginning in business, we never wanted our clients to wonder who were we working for.

"We make it very clear to our client that we are 100% independent, and only work for them, no one else."

Ms Frearson said she would like to see referral fees outlawed.

"Taking referral fees is something that I have never believed in and there is no part of me that thinks it should be legal within our industry," she said.

"I believe that legislation is not protecting buyers, and this needs to change ... Not taking referral fees is a very contentious point and one that previous staff members have not always agreed with, and have left our business."

A NSW Fair Trading spokesman said there were laws in place to prevent conflicts of interest and referral fees must be disclosed to clients.

"When dealing with related parties in a transaction, the laws require agents to disclose to their clients the nature of those relationships and the amount of any benefits received for referring their clients to other service providers, including other agents who are not independent of the agent," he said.

"The laws also include prohibitions to prevent conflicts of interest arising. This includes a prohibition on buyer's agents demanding or accepting a fee or other valuable consideration for referring the person to a selling agent."

According to Mr Kentwell, PRD Presence does not charge referral fees when Henderson Advocacy clients purchase a PRD-listed property.

He said any referral fees paid by PRD Presence, also known as PRD Newcastle and Lake Macquarie, are "adequately disclosed when required".

"Referrals within all industries, not just real estate, are common and relevant industry professionals agree that referrals should not be discouraged provided adequate disclosures are made," he said.

"Disclosures are made when necessary, such as when the parties enter into an agreement for the provision of services following a referral."

Real Estate Buyers Agents Association of Australia (REBAA) NSW representative Michael Ossitt said any referral or introduction fee must be disclosed.

"With any kind of referral fees paid or received, there is a part of the real estate legislation that says that must be disclosed to a client, whether you're giving or receiving," he said.

"Any payment for referrals or introductions has to be disclosed to a client. And if that's not happening, that's obviously against the rules and against the legislation."

Mr Ossitt said there was "a bit of a gray area in terms of who can give who referral fees".

"There's a common understanding that it's acceptable between licensees, so one licensed real estate business can receive and give to another licensed business, but not necessarily to Joe Bloggs down the road for introducing his friend," he said.

"So it's not acceptable to offer a client payment for introducing their friends and family as a client even if that's disclosed."

Read Mark Kentwell's full statement here and a second statement here.

Mr Henderson declined to comment.