The process required to list a property for sale in NSW is extensive, and a simple oversight can end up being extremely costly, warns Attwood Marshall Lawyers Property and Commercial Lawyer Mieke Elzer. Here, she looks at the requirements to appoint an agent and get a property listed.
Among the significant paper trail for getting a house on the market, and then selling it, is the agent’s listing agreement. This agreement is a legally binding contract that sets out the relationship between an agent and the Vendor of a property.
In New South Wales, an agent cannot market a property for sale, nor claim commission without a written agency agreement with the Vendor in place, and that agreement needs to be properly completed, dated and signed for it to be enforceable.
It’s important to understand the requirements involved, whether you’re a real estate agent who is well-informed about the relevant industry jargon, or a homeowner thinking about engaging an agent.
Failure to comply with the requirements outline in the Property Stock and Business Agents Act, and Regulations can result in the agent being unable to recover their commission fees and expenses. Further, breaches of the Act and/or regulations could result in the agent being subject to financial penalties.
What is required to construct a valid listing agreement?
A listing agreement must be in writing and needs to set out the agent’s fees, commissions, and expenses. It also needs to set out the circumstances under which the agent will be paid, such as when the property is sold.
Section 55 of the Property Stock and Business Agents Act sets out strict guidelines for what needs to be covered. In brief, the agreement must be in writing and signed by the licensee and the client, and a copy of the fully executed agreement needs to be served on the client within 48 hours of signing.
Section 55 of the Act stipulates that failure by the agent to serve a copy of the fully executed agency agreement on the Vendor within 48 hours of the agent signing it, disentitles the agent to a commission. However, Section 55A of the Act outlines circumstances where an agent can appeal to a court of tribunal for relief to the disentitlement. This includes where the failure to serve the signed agreement was due to circumstances beyond the agent’s controls, and the commission and expenses being claimed are fair and reasonable. Attwood Marshall Lawyers can provide independent advice to agents who find themselves in this situation.
Importantly, a property lawyer should always review an agent’s agreement before it is signed. They will look to make sure the agreement includes all the required elements in the Act and does not contain any hidden expenses or pitfalls for the Vendor.
Other things that a solicitor will check is whether the document includes a description of the property, listing price, duties of the broker and the Vendor, termination dates, how payments are to be made (e.g. whether the agent can deduct their commission from the buyer’s deposit money), and warnings where a commission may have to be paid to more than one agent.
Types of Agency Agreements in NSW
There are five different types of listing agreements in New South Wales. Each has its own pros and cons. Our property law solicitors at Attwood Marshall Lawyers are well versed on the nuances involved to help clients and agents figure out which type is the most suitable for them.
Exclusive Agency Agreements
An exclusive agency agreement gives one agent exclusive rights to sell a property. This type of agreement is commonly used for residential property.
Sole Agency Agreements
Similar to an exclusive agency agreement, rights are given to one agent to sell the property but if the owner finds a buyer themselves without introduction from the agent, then the agent receives no commission.
General Listing/Open Agency Agreement
This agreement allows the property to be listed with several agents, and commission is paid to the agent who first secures the sale.
This involves a network of agents working together to sell a home, covering both auction and private treaty. Commission goes to the agent who the Vendor initially signed up with.
Auction Agency Agreement
Effectively the same as an exclusive agency agreement, except that it involves a property being listed for auction.
There are serious consequences for agents who fill out an appointment form incorrectly, including the loss of commission.
Be wary of the following common mistakes:
- Inadequately stating when commission is payable
- Failing to tick what services an agent is appointed to perform
- Noting the incorrect commission amount
- Failing to establish the term of the appointment
- Incorrectly stating the entity or trading name of the agent including licensee name, ABN number, and licence number
- Misstating the property description
Ending an Agreement
The law allows for a cooling off period of one business day during which an agreement can be cancelled. This period allows time for the signatory to consider the terms they have agreed to – including the agent’s fees. The cooling off period ends at 5pm on the business day after the agreement is signed. Saturday is included as a business day in this instance. You can opt to waive your right to a cooling off period, provided the agent has given you the draft agreement and a fact sheet from NSW Fair Trading at least one business day before the agreement is signed.
A cooling off period allows time for the Vendor to obtain advice from their property lawyer on the terms of the agreement. Some agents may be willing to negotiate parts of the agreement if, after receiving advice, there are parts of the agreement that the Vendor is not happy with. A property lawyer can help the Vendor negotiate the terms and ensure that the timeframes are reasonable.
If an individual decides to end an agreement during the cooling off period, they need to give written notice to the agent that they wish to cancel (or ‘rescind’) the agreement. That notice needs to clearly state that the individual is rescinding the agreement and include their signature as well as the agent’s name as it appeared in the agency agreement. Where the agreement is rescinded during the cooling off period, the agent cannot charge the Vendor any fees or costs related to the agreement and any money that has already been paid to the agent must be refunded.
Ending an agreement outside the cooling off period gets a little stickier. A listing agreement usually has a fixed-term and cannot be ended until that date unless all parties agree. Other times, it is considered open ended but must state how the agreement can be ended.
A key thing for Vendors to understand is that if an agency agreement is not properly ended and a Vendor signs up with another agent, both agents may claim that a commission is owed to them when the property is sold. The Vendor must give written notice and adhere to the timeframes for notice stipulated in the agreement.
A key part of negotiations when forming the agency agreement is to decide how long the agreement will run for and what notice period the Vendor must give the agent to end the agreement. This involves setting realistic expectations around how long it will take for the agent to sell the property.
If an agent believes they should be entitled to fees or costs as a result of an agreement being terminated, or they believe they were the effective cause of sale but there is a dispute over who should receive commission, all parties should seek legal advice as soon as possible to find out where they stand.
QLD Listing Agreements
In Queensland, listing agreements are governed by Section 102 of the Property Occupations Act. Under the law, realtors must make sure they are duly appointed by the Vendor as the proper agent in writing by completing and signing what is known as a Form 6. You can read our blog about the importance of completing a Form 6 and the consequences of it being incorrect here.
Like our handling of listing agreements in New South Wales, we are often engaged by our clients to check the Form 6 before they finalise the appointment of an agent for the sale of their property.
While completing the form seems a relatively straightforward exercise, there have been cases where an improperly completed form have caused massive headaches for agents, including significant legal costs and forfeiture of commission.
Attwood Marshall Lawyers – supporting real estate agents and their clients
Attwood Marshall Lawyers Property and Commercial team have comprehensive experience in helping real estate agents and home buyers across various matters, including issues that arise from disputes about agency agreements.
Our lawyers can ensure that agreements between buyers, Vendors and their agents are binding, include all the required terms and conditions, and are tailored to suit individual circumstances.
We practise in both Queensland and New South Wales districts and can facilitate electronic settlements using PEXA. If you need advice, please contact our Property and Commercial Department Manager Jess Kimpton on 07 5506 8214 or email email@example.com today.
If you are involved in a dispute over a contract of sale or an issue related to your commission, we have a Commercial Litigation and Dispute Resolution team who are well versed in handling such matters. For advice, please don’t hesitate to contact our Commercial Litigation Department Manager, Amanda Heather, on direct line 07 5506 8245, email firstname.lastname@example.org or free call 1800 621 071.