You have signed up a client to sell their property, your PAMDA Form 6 has been signed, you have your signs on the property and you “introduce a buyer” (you show them the property but nothing happens as a result of the inspection). You only have an open listing but some months later you find out that the buyers that you introduced have now entered into a Contract for the purchase of the property. You cannot obtain a copy of the Contract from anyone and you are unsure as to what has transpired between the buyer and the seller.
The seller will not return your calls and has told you that the buyers were introduced by someone else. You smell a rat but have no hard evidence to assist you in establishing that the buyer bought the property on the basis of your introduction (your calls to the buyer are not answered. Indeed, you receive a threatening letter from their solicitors warning you not to contact them any further).
UPDATED BLOG: For Real Estate Agents: Handy tips and real cases to safeguard your commission
You have probably all had a similar situation occur and some of you may even have issued letters of demand or even instituted legal proceedings to recover your commission. Unfortunately, despite the fact that you have been appointed as the seller’s agent and have done all the right things to ground your entitlement to commission, there are still ways for the sellers to wriggle out of paying you commission.
Are you the effective cause of the sale?
As you know, it is not sufficient that you are appointed as the vendor’s agent of the property sold (PAMDA Form 6). Furthermore, it is not sufficient that you have “introduced” the purchaser to the vendor which results in a subsequent contract. It is well settled that it must be established that the agent was “an effective cause of the sale“. The agent also bears the onus of proving that he/she was ‘the’, or, “an” effective cause of the transaction.
The agent must also show that “his/her efforts continued to influence the purchaser in its eventual decision to buy“. There is a most useful summary and discussion of the issues concerning an agent’s entitlement to commission in the case of Emmons Mt Gambia Pty Ltd v Specialist Solicitors Network Pty Ltd [2005] NSWCA 117. This was a decision of the Supreme Court of NSW (Court of Appeal) and is often cited in disputes over commission. Although this case involved a second agent becoming involved and concluding the sale, it is instructive in relation to the issues that must be proved to found a claim for commission.
A point often overlooked in these cases is that the agent bears the onus of proof in proving that he or she was the effective cause of sale. This means that the agent must come up with the evidence to establish their claim to commission. Quite often the agent’s case will depend upon the evidence provided by the purchaser. The purchaser must give evidence to the effect that it was the agent who firstly introduced them to the property and that it was through the agent’s ongoing efforts and influence that led them to entering into the Contract to purchase the property. In the real world, if a purchaser and vendor have got together in an attempt to defeat an agent’s claim for commission, it is most unlikely that a purchaser will volunteer this information on behalf of the agent. Many agents will have stories of vendors and purchasers colluding in order to defeat a claim for commission.
Whilst the court can draw inferences from certain facts, ultimately the agent must prove their case and have sufficient evidence to show that he or she was the effective cause of the sale.
Unfortunately, in the cases where the evidence that might be given by the purchaser is unknown or they are completely uncooperative, it is very difficult to provide any meaningful advice to an agent in relation to their prospects of success in recovering the commission through the courts. Sometimes in the absence of this information, your chances are no better than 50/50.
In other cases, it is simply unknown what has transpired between the parties which led to the sale occurring and if the parties are uncooperative, you must bring an expensive application to the court to obtain this information before you can even make a decision or get any meaningful advice as to whether you have a solid claim or not.
It is often thought that if a significant period of time elapses between when the agent made the introduction and the eventual sale or where there is a significant change in the purchase price that either or both of these matters will be sufficient to defeat any claim for commission. This is not the case. There are many ingredients that form claims for commission and you should ensure that you obtain proper legal advice in relation to these issues before abandoning any claim for commission.
You are welcome to contact our office with any enquiries concerning property and commercial advice. Please contact our Property and Commercial Department Managers, Jess Kimpton on direct line 07 5506 8402, email jkimpton@attwoodmarshall.com.au.
