The commission payable to a real estate agent on the sale of a property is a significant expense for any seller. If you are considering engaging an agent to sell a property, you should review the terms of the agent’s appointment carefully to understand the circumstances in which the agent may claim commission. You should also consider the consequences of changing agents.
Some sellers unwittingly expose themselves to multiple claims for commission by not taking into account that an agent may still be entitled to commission for a sale that takes place after expiry of the agent’s appointment if the agent was the effective cause of the sale. West Property Solutions t/as Century 21 West Property Group v Lewis & Anor [2015] QCATA 42 and 66 is a case in point.
In brief, the relevant facts were as follows:
- In October 2013, the vendors appointed West Property Solutions t/as Century 21 West Property Group (West) as agents to sell their property.
- On 1 February 2014, Mr and Mrs Bartlett inspected the property with an agent from West.
- On 12 February 2014, West presented the vendors with a contract from Mr and Ms Bartlett.
- On 13 February 2014, the vendors requested a variation to one of the special conditions proposed.
- On 14 February 2014, West prepared the new special conditions and sent them to the vendors and Mr and Mrs Bartlett. Later that day, after further dealings, West sent an email to the vendors advising that Mr and Mrs Bartlett were happy with the revised special conditions.
- On 15 February 2014, West’s appointment as agent expired.
- On 24 February 2014, through a different agent, the vendors signed a contract with Mr and Mrs Bartlett on the same terms as West presented on 12 February 2014.
- On 26 March 2014, the sale settled and West claimed commission on the sale.
At first instance, the Queensland Civil and Administrative Tribunal dismissed the claim on the basis that there was not a sufficient nexus between West and the eventual sale of the property.
On appeal, the Appeal Tribunal referred to the High Court’s decision in LJ Hooker Ltd v WJ Adams Estates Pty Ltd (1977) 138 CLR 52, which determined that if an agent introduces a person who ultimately becomes the purchaser, the agent was the effective cause of the sale and the intervention of the seller, or another person, is irrelevant. The Appeal Tribunal noted that the Tribunal at first instance had focussed on whether the nexus between West and the eventual sale had been broken, rather than examining whether West was the effective cause of the introduction of Mr and Mrs Bartlett that resulted in the sale.
The Appeal Tribunal also considered the Supreme Court of Queensland’s decision in Rankine & Ors v Rankine & Ors [1996] QSC 281, in which Justice Ambrose held that the real estate agent introduced the purchaser by the calling of public tenders and the conducting of negotiations which led to the sale. The Appeal Tribunal found that, in the same way, West had introduced Mr and Mrs Bartlett to the property by advertising, holding open homes and negotiating the terms of a contract. The fact that the vendors paid for the advertising and went to the expense and trouble of engaging another agent were not relevant considerations.
The Appeal Tribunal therefore found that West introduced Mr and Mrs Bartlett and was entitled to the commission.
This case is a basic reminder for agents and vendors alike that the agent who was the “effective cause of the sale” will generally be the agent that introduced the person who ultimately becomes the purchaser, which will give rise to an entitlement to commission.
For more information or discussion, please contact HopgoodGanim Lawyers' Litigation & Dispute Resolution or Commercial Property teams.