Real Estate Agents Entitlement To Commissions

Frequently, disputes arise as to whether an agent was the effective cause of sale and therefore entitled to commission on sale of a property .

In Outerbridge trading as Century 21 Plateau Lifestyle Real Estate v Hall [2020] NSWCA a real estate agent agreement appointed the agent on a non-exclusive basis. The agreement conferred a right to be paid commission where the agents were “the effective cause of the sale” and if a purchaser “has been effectively introduced” by them.

Following a sale of the property, by another agent, a dispute arose as to whether the first appointed agent was the effective causer of sale and entitled to payment of commission.

The buyer in this instance was introduced by first agent . An offer was made and rejected by the sellers. A further offer was made, and accepted “in principle” initially but then the acceptance was withdrawn. Further attempts to negotiate were unsuccessful as the agent went overseas on holidays.

The buyer then contacted second agent to look for other properties ,but then went back to look at the subject property, and revived negotiations ,increasing their offer by some $400,000 which was accepted and a contract was signed and a sale then completed . The second agent however-had gone into liquidation and

The issue for the appeal court was whether the first agent was the, or an, effective cause of the sale of the property.

The Court found against the first agent holding that the mere introduction of the buyer to the property is insufficient to amount to an effective cause of sale. The first agent appealed.

The issues on appeal were:

(i)  Whether the primary judge wrongly considered that the appellants’ contention that they were an effective cause of the sale was necessarily inconsistent with the second agent being an effective cause of the sale.

(ii)  Whether the primary judge erred in supposedly equating the importance of procuring finance with the task of providing the clarification on price desired by the purchaser.

(iii)  Whether the primary judge erred in failing to give consideration to whether the task of negotiating a sale could have been undertaken by the first agent.

(iv)  Whether the primary judge’s finding that the appellants were not the effective cause of the sale of the property was contrary to the weight of the evidence.

The Court held, dismissing the appeal:

As to issue (i): While the actions of more than one agent can answer the description of an “effective cause” of the sale of a property, a consideration of whether the first agent’s conduct was the effective cause of the sale nevertheless required a consideration of factors external to him that brought about the sale, including the conduct of the second agent.

As to issue (ii) : The primary judge did not treat the conduct of the second agent in securing the sale of the property as akin to the task of arranging finance. The task of providing clarification to the purchaser was referred to as part of the explanation of how a transaction that was effectively over after the first agent departed on holiday was later revived.

As to issue (iii) : The primary judge did not fail to give consideration to whether the task of negotiating the sale could have been undertaken by the first agent in circumstances where he was not capable of providing the purchaser with any clarification of the respondents’ price expectations because he was overseas and effectively uncontactable.

As to issue (iv) : A determination of effective cause requires a consideration and evaluation of all the circumstances surrounding a sale. The mere introduction of a purchaser that creates their interest in a property is usually, or at least sometimes, insufficient to be an effective cause. In this case the potential for a sale was effectively extinguished when the first agent departed overseas and became uncontactable. It was the second agent who revived and completed the sale.

Each case turns on its own facts, and determination of whether an agent is an effective cause of sale will invariably involve evidence of the terms of the agency agreements and the actual events of introduction, negotiations and offers and acceptance.

If you have a commission dispute as an agent or seller, please don’t hesitate to contact us for advice.

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