If you are selling a property, are you aware of your obligations to pay the Agent’s commission?

It is important to ensure that you have carefully read your agreement with your agent and determine under what circumstances the commission will be payable. Alternatively, our office can review this document for you.

Under s89 of the Property and Occupations Act 2014 (‘the act’), an agent may only be able to sue for, recover or keep a reward or expense for the performance of an activity, where they have performed the activity (e.g. Sale of the Property).

However, under s5.1 of the Essential Terms and Conditions of the Appointment of Real Estate Agent (‘terms and conditions’), if the agent is the effective cause of the sale, they may claim the commission payable on the following basis:

1. The Contract of Sale of the Property is completed; or
2. The Client defaults under the Contract of Sale and that Contract is terminated by reason of or following that default; or
3. The Contract of Sale is not completed and the whole or part of the deposit paid is liable to be forfeited; or
4. The Contract of Sale is terminated by the mutual agreement of the Client and the Buyer.

The terms and conditions indicate that even if the Contract is not completed to Settlement, the Agent can still seek full payment of their commission.

At Common Law, the Courts have held that an agent may be entitled to seek compensation if they are found to be the effective cause of the sale and the precedent case with respect to these matters is LJ Hooker Ltd v Adams Estates Pty Ltd (1977) 138 CLR 52 which establishes the “effective cause test”.

This case provides that an Agent may be entitled to receive a sales commission, “if an agent introduces a person who ultimately becomes the purchaser, the agent has been an effective cause of the sale and the intervention of the seller, or another person, is irrelevant. “

In Moneywood Pty Ltd v Salamon Nominees Pty Ltd [2001] HCA 2, an Agent had introduced a Purchaser to the Vendor and a Contract for the Sale of the Land was entered into. The agreement included terms making the Sale of the Land conditional upon Council approval.

Council failed to rezone the land and ultimately the Vendor rescind the Contract. Later, the same Purchaser and Vendor re-enter into a second contract this time seeking to exclude the Agent from the Contract, however still including as much of the benefits from the first contract into the second.

The agent sought to recover the commission payable based on the fact, he introduced the Purchaser to the Vendor. On this basis the agent was an effective cause of the sale.

In this case, the Court held “if the Purchaser who is introduced by the agent is ready, willing and able to complete the purchase and is ultimately purchases the property, then the agent has been an effective cause of the sale” and is entitled to commission and that the initial work done by the agent flowed through to the second contract and remained influential.

In West Property Solutions t/as Century 21 West Property Group v Lewis & Anor [2015] QCATA 66, it was held that by advertising, holding open homes and negotiating the terms of a contract, the agent had “introduced” the buyer to the Seller.

This case further provides that even if an agent’s exclusive period has expired, the agent will still be entitled commission in circumstance where they have been the effective cause of the sale.

Key Takeaway

Given the cases above and the stances provided by the Court’s and Tribunal’s it demonstrates that there is no certainty when determining when if commission is payable and is dependant largely on the performance of the agent at the time to determine whether they have been an effective cause of sale.

That is why it is imperative you understand the terms of your agreement with your agent before signing anything.

If you need assistance in this regard, please do not hesitate to call our office on 07 5444 4750 or email info@millersockhilllawyers.com.au