In this Alert, Partner Anthony Pitt and Special Counsel Hayley Harvey examine a recent case where the agent’s right to commission was disputed, as well as a decision where a home buyer sought to overturn the Commissioner of State Revenue’s decision for them to repay the First Home Owner Grant.
Dispute as to agent’s commission – Was the agent the effective cause of the sale?
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.
Application to overturn the Commissioner of State Revenue’s decision to order repayment of the First Home Owner Grant
The opportunity to claim a grant to assist with the purchase of a property will often be an important consideration for a buyer. Some property developers use the availability of the First Home Owner’s Grant when marketing properties to prospective buyers.
In Gonzalez & Anor v Commissioner of State Revenue [2015] QCAT 65, the Queensland Civil and Administrative Tribunal considered the circumstances in which a person is entitled to the First Home Owner’s Grant, and the possibility for it to be required to be repaid if it is later found that the relevant eligibility criteria were not established.
The original developer of a unit went into receivership, and the unit was sold to a subsequent developer, who then sold the unit to Mr and Mrs Gonzalez. Mr and Mrs Gonzalez purchased the unit using funds which included the First Home Owner Grant granted by the Commissioner of State Revenue pursuant to the First Home Owner Grant Act 2000 (FHOGA). However, following their purchase of the unit, the Commissioner required Mr and Mrs Gonzalez to repay the grant on the basis that the unit was not a “new home”, and Mr and Mrs Gonzalez applied to the Queensland Civil and Administrative Tribunal to review the Commissioner’s decision.
Pursuant to Section 10(1)(b) of the FHOGA, a grant is payable for an ‘eligible transaction’, which Section 5(1)(a) defines as a contract made for the purchase of a “new home”.
Mr and Mrs Gonzalez submitted that because the seller did not occupy the unit and did not intend to occupy the unit and no other person had occupied the unit, the property was a new home.
However, the Tribunal found that the legislation requires that a “new home” is something that has not been previously occupied or sold as a place of residence, and that if either of those things are established then the property will not be a “new home”. The Tribunal noted:
“The test of ‘sold as a place of residence’ is objective and does not depend on the acts or intentions of the parties, but the predominant character of the property. It is not physically moving in or the parties’ intent that characterises the property, but the purpose for which it is built.”
The Tribunal noted the purpose for which the unit was built from the Transfer document of the previous sale, which noted the “current land use” as “multi-unit” and not commercial. The Tribunal therefore found that the property was “previously ‘sold’ as ‘a place of residence’ – a place to live in or reside”.
The consequence of this finding was that Mr and Mrs Gonzalez did not enter into an “eligible transaction” and were therefore not eligible for the First Home Owner Grant for a “new home”.
Mr and Mrs Gonzalez contended that this outcome was anomalous with the intention of the FHOGA, which was to encourage first home owners. However, the Tribunal noted that in 2012 Parliament shifted its policy intent away from helping first home buyers as a whole by amending the definition of “eligible transaction” so as to restrict eligibility for the grant only to first home buyers who build or buy a “new home”.
Mr and Mrs Gonzalez claimed that they would not have purchased the property if the Commissioner had not approved the grant and that the Commissioner had ample opportunity to reject the grant prior to the contract becoming unconditional. However, the Tribunal held that this does not mean that the Commissioner is prevented or stopped from reassessing eligibility when the initial assessment is based on incorrect information. The Tribunal stated that it was incumbent upon Mr and Mrs Gonzalez, as applicants for the grant, to have provided correct information to the Commissioner and conducted proper checks on the property that they were purchasing.
The Tribunal therefore confirmed the Commissioner’s decision to disallow an objection to the decision to repay the grant.
First home buyers, real estate agents, property developers and advisors alike should all be aware of this decision which interprets the parameters of what amounts to an “eligible transaction” for the purposes of the FHOGA, as an incorrect application for a grant could result in a home buyer being required to repay the grant.
For more information or discussion, please contact HopgoodGanim Lawyers' Litigation & Dispute Resolution or Commercial Property teams.