Attwood Marshall Lawyers Property and Commercial Lawyer Hannah Roach explains why inconsistencies and omissions in agreements between sellers and their real estate agents could have dire consequences.
Appointing a real estate agent is usually a crucial step in the property sale process. Unfortunately, too many people sign agency agreements or the like without seeking complete and proper legal advice. Whether you are selling your principal place of residence or perhaps, one of several investment properties, it is important to obtain appropriate legal advice from a professional specialising in this area of law. This can minimise the likelihood of disputes in the future, and potentially save you thousands of dollars.
In Queensland, a Property Occupations Form 6 (Form 6) is a legally binding contract for the sale, purchase, leasing and/or management of residential property between a real estate agent and their client. The Form 6 includes the rights and obligations of both parties under the Property Occupations Act 2014, (Qld) and is often accompanied by annexures that include further rights and obligations for both parties.
In New South Wales, section 55 of the Property Stock and Business Agents Act sets out strict guidelines for an agency agreement, including that it must be in writing, contain all the terms required by the Act and be served on the seller within 48 hours of the licensee signing. The agreement must also disclose all rebates, discounts and commissions that an agent may receive for any expenses a seller has to pay under a deal.
Once signed by the parties, either document forms a legal contract between the agent and a would-be seller. These documents form the basis for an agent’s appointment and perhaps most importantly, their entitlement to commission. Property lawyers know what to look for when reviewing these agreements, and a seller should not sign anything until the agreement is reviewed for any errors or red flags that could ultimately leave the seller paying more than anticipated.
The risks of signing a Form 6 without getting legal advice
Many assume that the biggest risk of an invalid or incorrectly completed agency agreement is that the real estate agent could lose their commission.
However, there can also be serious consequences for sellers, including costly legal disputes and in some cases, a court order to pay double commission.
One significant risk is that there may be an obligation to pay an agent a full commission, even when it may seem unreasonable.
For example, under the terms of the agreement, an agent may be entitled to a commission regardless of who sells the property. This means that if a seller appoints a new agent and the new agent successfully sells the property, the first agent may still be owed commission. The first agent would need to prove they were an “effective cause of the sale” and were validly appointed.
In this situation, where a seller may not have understood the terms of the agreement, they can face significant unexpected costs that can impact the proceeds of their final sale. In some circumstances, this could reduce what the seller can afford for their next property purchase.
Another crucial clause that can go unnoticed is what happens when a sale does not settle. In some agreements, the commission could still be payable even if the buyer were in default under the Contract, and the deposit was forfeited. This could leave the seller at a significant financial disadvantage.
How a property lawyer can help
Before finalising an agent’s appointment for the sale of a property, it’s important to engage an experienced property lawyer who can check over the document and ensure complete understanding of the rights and obligations involved.
Additionally, if the agreement is incorrectly drafted or incomplete, this can create uncertainty about key terms such as commission entitlements, appointment periods and marketing costs.
A property lawyer can identify red flags that may otherwise go unnoticed, such as:
- Incomplete or incorrect details about the property or its legal owner;
- Unclear or missing information about the type and term of the appointment (e.g. exclusive, open or sole agency);
- Ambiguous commission structures, including vague terms such as “to be negotiated,”;
- Hidden risks around when and how commission is payable (e.g. whether multiple agents could claim commission or under what circumstances the agent can deduct their commission from the buyer’s deposit if the Contract does not settle); and
Undisclosed expenses such as advertising fees, maintenance costs or additional marketing charges.
These forms may seem relatively straightforward however, minor errors can have major consequences. A property lawyer can review these documents and ensure the agreement:
- includes all elements required under the respective state’s legislation,
- and does not contain hidden expenses or pitfalls for the seller.
Attwood Marshall Lawyers – your local property law experts
The Attwood Marshall Lawyers Property and Commercial team is experienced in helping buyers, sellers and investors achieve their real estate goals. We intend to support you to ensure a property transaction, and the settlement process, proceed smoothly and on time, without any surprises.
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. We service both Queensland and New South Wales districts.
Please get in touch if you have any legal questions concerning completing listing agreements and other documentation. Contact our Property and Commercial Department Manager Taylah Lein on direct line 07 5506 8208, email tlein@attwoodmarshall.com.au or call our 24/7 phone line on 1800 621 071.
When it comes to property disputes, we have a dedicated Commercial Litigation and Dispute Resolution team who are well-versed in handling matters of this nature. If you are involved in a property dispute, please contact our Commercial Litigation Department Manager, Chloe Smith, on direct line 07 5506 8257 or email csmith@attwoodmarshall.com.au to find out where you stand.
Our offices are located at Coolangatta, Kingscliff, Robina Town Centre, Southport, Brisbane, Sydney, and Melbourne, so you can meet with one of our lawyers at a location near you. Our Robina Town Centre office is also open Thursday night until 9 pm and Saturday morning until 12 noon.
