As a real estate agent, ensuring you are validly appointed to act for a seller is vital in protecting your ability to recover commission and any other expenses incurred. Attwood Marshall Lawyers Property and Commercial Lawyer Aimee Turner explains why inconsistencies and omissions in a Form 6 could have dire consequences for real estate agents.
Introduction
Pursuant to Queensland’s Property Occupations Act 2014 (The Act), a property agent must not act as an agent for a client unless the agent is appointed in accordance with the Act. The Act outlines various requirements in constituting a valid appointment, and failure to do so could result in an agent losing their entitlement to commission.
A Property Occupations Form 6 (Form 6) is a legally binding contract between an agent and a client, which sets out the rights and obligations of both parties. A Form 6 must be completed correctly and be signed by both parties for the appointment to be valid.
Although the Form 6 is the legal ‘contract’ between an agent and a seller and is the basis for an agent’s appointment and entitlement to commission, it is amazing how often this important document is not properly completed or is left blank in critical places! This can potentially compromise your claim to commission and recovery of marketing costs.
Ensuring the Form 6 is completed correctly
Using the approved form
It is crucial that the latest version of the QLD Government Property Occupations Form 6 is used. While seemingly simple, unfortunately there have been real-world examples where agents have been denied their commission due to errors on the Form 6.
Verifying the legal owner
Prior to being appointed, it is recommended that an agent take steps to verify the legal owner of the subject property to ensure the person appointing the agent on the Form 6 is the registered owner of the property. In order to determine the registered owner of a property, a title search of the property should be conducted.
During the appointment, it is important that you only take instructions from the client noted on the Form 6 and ensure that person is permitted to make legal decisions about the property.
You should also be wary of any mental capacity issues of the seller. Sometimes an elderly owner can suffer from dementia or be affected by an injury or illness. You may need to deal with another family member who has an Enduring power of Attorney.
Completing the “type” and “term” of the appointment
Agents can be appointed to act on the basis of an open listing, sole agency or exclusive agency. The Form 6 must be clear in evidencing the type of listing the client has agreed to.
The term of the appointment should be specified in Part 4 of a Form 6. If an agent is appointed on a sole or exclusive agency basis, the maximum term for the appointment is 90 days (except in a commercial scale appointment).
Clarifying the commission
In accordance with section 104 of the Act, the commission payable to an agent must be stated on a Form 6. It is crucial that the amount payable is clear to avoid any uncertainty between an agent and client. Wording such as “to be negotiated” can create ambiguity as to under what circumstances negotiation takes place, and how much the commission could vary. In order to mitigate these circumstances, it is vital that the commission be stated as either an exact percentage or dollar amount.
Clarify when commission is payable
Section 104 of the Act also requires that the Form 6 include when the commission is payable. The commission may be payable upon settlement of the sales contract or in any other circumstance noted on the Form 6. An agent may be entitled to commission even if the contract fails due to the default of the seller or due to termination by mutual agreement. Accordingly, it is crucial that the Form 6 expressly states when the commission is payable to avoid any ambiguity in this regard. It is also important to ensure the client understands when the commission is payable.
Disclose any expenses
The Act also states that any expenses to be incurred as a part of the appointment are to be disclosed on the Form 6. Such expenses may include the following:
- Marketing fees
- Advertising fees; and
- Repairs or maintenance (if applicable).
Get it signed
As an agent, it is imperative that a validly executed Form 6 is obtained prior to providing agency services to a client. The appointment will not be valid or binding until a Form 6 is signed by all parties.
Additionally, you must ensure all required sections of the Form 6 are complete in accordance with the Act before you request your client’s signature.
The consequences of an incorrect Form 6
Minor errors on a Form 6 can result in major negative consequences to an agent. There have been various real-world scenarios where this has occurred.
In Sharp v Tapp [2018], QCAT dismissed an agent’s application to claim commission after finding the agent was not the ‘effective cause’ of the sale. In this case, the client had appointed the first agent on an exclusive basis for the sale of their property. The first agent introduced the client to a potential buyer, who entered a conditional contract and subsequently terminated it. The first agent’s appointment with the client terminated and the client appointed a second agent to act on an exclusive basis. The same buyer entered a contract to purchase the property via the second agent, which was successfully settled. Once settled, the first agent attempted to claim commission on the basis that they were the effective cause of the sale. QCAT held that an agent is required to do more than merely introduce a buyer and there was insufficient evidence to show that it was the first agent’s efforts that resulted in the sale.
In Millar v Cox [2016], QCAT found that an agent was not entitled to commission as a result of using an outdated Form 6. The agent provided her client with a Form 22a Appointment of Real Estate Agent, which was the previously approved form pursuant to the Property Agents and Motor Deals Act 2000. QCAT held that the agent should have provided her client with a Property Occupations Form 6 under the Property Occupations Act 2014. The agent’s failure to do this resulted in her being in breach of various sections of the Act, therefore she was not properly appointed by the client. As a result, the agent was not entitled to commission.
Listing Agreements in NSW
The situation in NSW is different but quite similar in the sense that your listing agreement should be properly completed and all steps are taken to ensure it is a binding legal document. We will feature the situation in NSW in our next Agents mail out.
Attwood Marshall Lawyers – How can we help?
Attwood Marshall Lawyers Property and Commercial team are well experienced in helping real estate agents across various matters, including those related to the completion of a Form 6.
Our lawyers can ensure agreements between buyers or sellers and their agents are binding and that any terms and conditions required are tailored to suit individual circumstances.
Attwood Marshall Lawyers are a leading conveyancing and property law firm, having supported buyers, sellers and real estate agents in their property endeavours for over 75 years. We service both Queensland and New South Wales districts. Please get in touch with our team if you have any legal questions concerning completing listing agreements and other documentation. Contact our Property and Commercial Department Manager Jessica Kimpton on 07 5506 8214 or email jkimpton@attwoodmarshall.com.au today.
When it comes to property disputes, we have a dedicated Commercial Litigation and Dispute Resolution team who are well-versed at handling matters of this nature. If you are involved in a property dispute, please contact our Commercial Litigation Department Manager, Amanda Heather, on direct line 07 5506 8245, email aheather@attwoodmarshall.com.au or free call 1800 621 071 to find out where you stand.
It is our intent to support you and parties to a property transaction so that the settlement process can be streamlined and there are no nasty surprises along the way.
Read more:
Beware of your conduct: Real Estate Agents must be careful that their behaviour does not breach the Australian Consumer Law
Real estate agents forced to pay costs for wrong ‘Buyer entity’
When Real Estate Agents fail to get their commission: real cases – Property & Commercial Law
