A few oversights during the transaction of a property can see a real estate agent lose their commission.
No doubt, putting in a great deal of effort in ensuring your seller finds a buyer at a great market price is the highlight of your role as a real estate agent. And after all your hard work you would expect that your well-earned commission is rightfully yours. However, sometimes sellers do challenge the rights of a real estate agent to their commission. If a seller challenges your rights to the commission on the sale of a property, they can do so on the basis of property law. There have been several cases of note which can help you to understand how courts decide whether a real estate agent has rights to commission.
The moral of the story is this – it is paramount you ensure all the relevant Forms, including Form 6 and Form 22a, are completed in accordance with requirements of the Property Occupations Act 2014 (Qld) in order to be able to show you are the ‘effective cause of sale’, to ensure your entitlement to commission.
How do you ‘obtain valid appointment’ as a real estate agent?
Pursuant to and in accordance with the terms of the Property occupations Form 6 – Appointment and reappointment of a property agent, resident letting agent or property auctioneer, a validly appointed real estate agent is entitled to receive commission from their client (the seller) upon completion of the contract of sale.
In the case where a dispute arises regarding the agent’s commission, for the agent to successfully recover their commission, the agent must be able to establish they are the effective cause of the sale.
Case 1: Agent should have allowed the Buyer to consider a higher price
In Outerbridge trading as Century 21 Plateau Lifestyle Real Estate v Hall [2019] NSWDC 724 it was disputed between the plaintiff (real estate agent) and defendant (Seller) whether the plaintiff constituted “the effective cause of the sale” within Clause 3.1 of the Agreement. The plaintiff argued the Buyer was “effectively introduced” to the defendants and the Property by the agent during the agency period under the Agreement. However, the defendants submitted that the effective cause of the sale was the effort of an agent from another agency who obtained a clarification of the defendants’ position and an increase in the purchase price.
In establishing who was the effective cause of sale, the court noted the sale could not have occurred until the Seller or another agent undertook tasks not otherwise available to the Buyer and not contemplated at the time of the introduction, the proper conclusion will ordinarily be that the introducing agent was not the effective cause of the sale.
In this case, although the plaintiff played a very significant causal role in relation to the Buyer purchasing the Property by introducing the Buyer to the property, providing substantial information to the in relation to the property, taking the Buyer to an inspection of the Property, the plaintiff did not bring about a state of affairs giving rise to the contractual right to the commission and it was held they were not the effective cause of the sale.
The court found it was the crucial intervention of another agent who provided the mutual clarification of the defendants’ position to the Buyer and vice versa and allowed the Buyer to consider and make a higher offer which took into account the defendants’ desired sale price.
Case 2: Agent loses commission after Form 22 not filled out properly
In Yong Internationals Pty Ltd V Gibbs & Ors [2011] QCA 161, an agents’ claim for commission in the amount of $226,139 was dismissed on the grounds the PAMD Form 22a Appointment of real estate agent was invalid as it had not been completed properly. It was held by the Queensland Court of Appeal, as the agent had failed to complete a section of the Form 22a there was insubstantial compliance with section 134(1) of the PAMD Act. Consequently, as the agent was never properly appointed, it was established they were not the effective cause of the sale and therefore had no entitlement to recover any commission.
Case 3: Agent loses commission because Form22 not effective
In Hudson v Stanfield [2013] QDC 289, the Court held Form 22a was ineffective as the agent failed to bring to the seller’s attention information in the Form 22a about the effect of an open listing, exclusive agency or sole agency, a mandatory requirement of sections 134A and 135 of the PAMD Act. Although in this case, the Court held the agent was not entitled to commission in the amount of $59,400 due to a buyer’s breach rather than mutual agreement resulting in the contract being terminated, as Form22a was found ineffective, the agent would not have been entitled to recover the commission in any event.
How to make sure you are entitled to commission
To conclude, it is paramount agents act within the law when selling a property and ensure relevant Forms, including Form 6 and Form 22a are completed in accordance with requirements of the Property Occupations Act 2014 (Qld) in order to obtain valid appointment and show they are the effective cause of the sale to guarantee their entitlement to commission.
How can Attwood Marshall Lawyers help?
To ensure a smooth transaction with your seller, it is paramount a professional firm handles your transaction. Attwood Marshall Lawyers are the leading conveyancing and property law firm on the Gold Coast and in Northern NSW, providing professional legal services and exceptional client service. Feel free to contact our office with any legal questions in regards property law and refer your clientele to our firm to ensure all the documents involved in a property transaction have been tended to in a professional manner.
