Agents - Protect Your Sales Commission!
In the recent Queensland case of Trappando Pty Ltd v Sunshine Group Australia Pty Ltd (2023) the Court of Appeal provided real estate agents with some valuable advice as to the importance of having an adequately prepared Form 6. In the case the client terminated the contract and forfeited the deposit and the agent sought to recover their commission.
The Form 6 contained some discrepancies. The court ultimately found in favour of the agent, but not without the agent paying significant legal costs, which could have been avoided. The case therefore shows the importance of preparing your Form 6 correctly.
In the case the court discussed some aspects that the agent should have considered when preparing the Form 6. Below we have summarised some of the key aspects and provided you with some recommendations to ensure that your Form 6 is prepared correctly.
The primary issue for consideration by the court was whether the agent was properly appointed as the client’s real estate agent.
Adequality Preparing Your Form 6
It is presumed that upon signing a document, the person who signs the document has read, approved, and accepted its contents. Section 109 of the Property Occupations Act 2014 QLD states that;
the appointment of a property agent must be ‘signed and dated’ by the client and by the property agent; and
a copy of the signed appointment must also be provided to the client.
These are simple yet crucial steps.
In appointing a sales agent, the items in s 104 -105 of the Property Occupations Ac 2014 must be clearly outlined.
“104 General content of appointment
1. An appointment of a property agent or resident letting agent must include the following in the approved form—
a) a prominent statement that the client should seek independent legal advice before signing the appointment;
b) a statement about whether it is a single appointment or a continuing appointment;
c) for each service, provision for the inclusion of a statement about the following—
i. the service to be performed by the property agent or resident letting agent;
ii. the fees, charges and any commission payable for the service;
iii. when the fees, charges and any commission for the service become payable;
iv. the expenses, including advertising and marketing expenses, the agent is authorised to incur in connection with the performance of each service or category of service;
v. the source and the estimated amount or value of any rebate, discount, commission or benefit that the agent may receive for any expenses that the agent may incur in connection with the performance of the service;
vi. any condition, limitation or restriction on the performance of the service.”
“105 Other requirements—commission
1. This section applies to an appointment of a property agent or resident letting agent for a service that is the sale or letting of property or the collecting of rents if commission is payable for the service and is expressed as a percentage of an estimated sale price or amount of rent to be paid or collected.
2. The appointment must state, in writing, that the commission for the service is worked out only on—
a) for the sale of property—the actual sale price; or
b) for the letting of property—the actual rental for the property; or
c) for the collecting of rents—the actual amount of rent collected.”
We note that this includes proper clarification of commission. Failure to comply with any of these requirements may result in your appointment as agent being ineffective.
If the Form 6 is being amended to include any special conditions or clauses we recommend that you obtain legal advice on these conditions, as certain phases or single words used incorrectly can be detrimental.
An inaccurately prepared Form 6 may result in a loss of sales commission, particularly in the event of early contract termination.
Two further issues were raised in Trappando v Sunshine Group being:
whether the agent was the effective cause of sale; and
whether the agent was the effective cause of sale within the term of the appointment (notable because the contract was terminated prior to settlement).
Whether The Agent Was The Effective Cause Of Sale
In Trappando v Sunshine Group the client argued that the agent was not the effective cause of the sale because the Sales Manager for the agency had been acting in their personal capacity at the relevant time.
It was found that the agent’s business was “essentially a husband-and-wife business”, and the use of language such as “I” in the agents’ emails and texts with the client, did not mean the agent was intending to act in their personal capacity. This was an argument made by the client to avoid commission.
It is important to ensure that you are using appropriate language when communicating with clients and when acting on behalf of the agency use language such as ‘we’ rather than ‘I’, notwithstanding any relationship you may have with the client.
Whether The Agent Was The Effective Cause Of Sale Within The Term Of The Appointment
The exclusive listing period had expired, and the client argued that there was no express agreement that the appointment would continue as an open listing and even if there was an express agreement there was no end date for the term. The court found that no end date was required for the open listing, therefore, the sale was found to be within the term of the appointment.
This case clarified that where there is an open listing there is no end date required and the term will continue until the client or agent provides written notice ending the appointment. However, care should be taken to explain to clients that once the listing reverts to an open listing they need to give notice to terminate the listing, if they wish to end the appointment.
Conclusion – Your Next Steps!
Trappando v Sunshine Group clarified that:
basic and minor oversights during the preparation of a Form 6 can have a detrimental impact on agent’s entitlement to commission;
it is important that as an agent you are acting in your professional capacity; and
an open listing does not require an end date.
In Trappando v Sunshine Group the agent was ‘lucky’ that the technical errors in the Form 6 appointment were considered minor by the court and were not taken to be detrimental to the agent’s entitlement to commission.
We are happy to assist you in reviewing your Form 6 precedents to ensure they comply with the Property Occupations Act 2014 QLD.
Further, we recommend you complete a Land Title Search ($34.10) and an ASIC search ($23.67) (if the landowner is a company) to ensure that you are correctly identifying the “client” in your appointment.
Read the full case here.
Read the full appeal case here.
Please contact our Property Law Team if you wish to discuss further.