Real estate commission disputes can cause significant delays in property transactions and strain relationships between agents, buyers, and sellers.
Most Real estate commission disputes are contested and disputed on 2 issues:
- Whether the agent was the effective cause of sale and
- Whether the appointment is effective
Frequently a third party enters into an agreement to buy a property and the owner disputes the agent was the effective cause of sale.
In the recent decision of Sunshine Group Australia Pty Ltd v Trappando Pty Ltd  QCA 214, these issues arose and the agent was successful.
The Seller listed the property for sale with the Agent.
The Form 6 appointment, dated 15 January 2018, provided that it was a “continuing appointment” commencing on that date for an “open listing”. The list price was $12,000,000.
The commission was payable as follows:
- 4% of the sale price if the agent introduces the buyer to the property.
- 2% of the sale price if the seller introduces the buyer to the property.
In 2019, Anderson was approached by a Victor Soh who said he had “international buyers” interested in the property. Soh, who was not a real estate agent, wished to be rewarded for any introduction of the buyer to the property.
On 13 May 2019, Soh, Anderson, and the director of the seller, entered into a Deed of Agreement whereby Soh was rewarded on a sale.
Subsequently, a different Form 6 was signed as an exclusive agency.
On or about 17 August 2019, the agent introduced the property to a purchaser who, on or about 21 August 2019, made an offer to purchase for $7,500,000.
Subsequently, at the request of that buyer, a new buyer was substituted. The new buyer did not settle and the deposit of $750,000 was forfeited.
The agent claimed recovery of $1,650,000 from the seller on account of commission, payable under the agreement recorded in Form 6 dated 25 May 2019 (“the 2019 appointment”) on the sale of 500 acres listed at $12,000,000.
Alternatively, it claimed $330,000 as commission, if calculated under Form 6 executed in 2018 (in the event the 2019 appointment was ineffective) (“the 2018 appointment”).
The agent contended that it was the effective cause of the sale of the property, pursuant to both the first and the second contracts; and that it was entitled to recover the commission, as calculated under the 2019 appointment, despite the termination of the second contract, having regard to part 7 of the appointment and clause 5.1.3 of item 5 of the essential terms and conditions.
The seller defended the agent’s claim on a number of bases.
Relevantly, for present purposes, the seller contended that:
- The agent was not entitled to recover any commission, because it was not properly appointed under s 89 of the Act, as the 2019 appointment did not state in writing that the commission was to be worked out only on the actual sale price, as required by s 105(2)(a) of that Act;
- Anderson, in his personal capacity, not the respondent company, was the effective cause of sale;
- In any event, the agent was not the effective cause of sale within the term of the appointment, pursuant to the 2019 appointment, as the term ended on 30 July 2019; and
- The 2019 appointment had to be read and construed in conjunction with the Deed of Agreement, pursuant to which no commission was payable unless the contract actually proceeded to settlement.
The appellant also counterclaimed for recovery of the balance of the deposit.
The agent succeeded in recovery at the first instance finding that:
- Although s 105(2)(a) of the Act required that the appointment “state, in writing, that the commission for the service is worked out only on … the actual sale price” and part 7 of the signed Form 6 referred to the “sale price”, the omission of the word “actual” did not matter as the plain meaning of the words in part 7 was that the commission for the service was worked out on the price for which the property was agreed to be sold, not, for example, an advertised or listed price. Accordingly, the Form 6 appointment in May 2019 was valid and effective. and the seller appealed.
- The agent was the effective cause of sale, not Anderson in his personal capacity. The email correspondence in relation to the sale of property was all signed off by Anderson, in his capacity as sales manager for the agent’s real estate business and it was the agent who was the appointed real estate agent for the sale of the property, by the relevant Form 6. The agent was also nominated as the seller’s agent in both contracts of sale and the property was marketed by the agent; it was the means by which the buyer found the property.
- The commission was payable in accordance with the terms of the 2019 appointment. Its terms were not to be read down and construed conjointly with the Deed of Agreement. The agent was not a party to the Deed of Agreement which, insofar as it purported to record an appointment of Anderson personally with Soh as agents for the sale of the property, would be unenforceable for non-compliance with the Act in multiple respects.
- The Form 6 appointment was an agreement between the agent as real estate agent and the appellant as the seller. Clause 15.1 of its essential terms and conditions specifically provided that it constituted the entire agreement of the parties with respect to the subject matter and superseded all prior negotiations or expressions of intent or understandings.
The appeal court dismissed the appeal finding no error on the part of the trial judge:
- The Form 6 appointment appointed the agent as real estate agent for the sale of the property. It expressly provided for the payment of commission in the factual circumstances that prevailed in respect of the contract.
- There was no error in a conclusion that, in those circumstances, the agent had established an entitlement to the claimed commission on the basis that a contract of sale of the property, with a buyer, had been entered into during the term of the open listing, with the agent being the effective cause of the sale within that term.
Substitution of a buyer can easily lead to a dispute over whether the agent was the effective cause of sale and care should be taken to carefully record and document the process.
Real estate commission disputes can be complex and costly.
Please contact Michael Sing for advice and representation on any real estate commission disputes. You can contact him through our website, by email at [email protected], or by phone at (07) 3009 8444.