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Proposed legislation changes to protect real estate agents - collecting sales commission

Lachlan discusses a recent legislative bill aimed at protecting real estate agent commission in the wake of Advisory Services Pty Ltd (t/as Ray White St Albans) v Augustin & Anor [2018] VSCA 95 in which it was found that real estate agents were not entitled to collect commission on the sale of a property because they had not met their disclosure requirements under the Estate Agents Act 1980 (Act).   

Relief appears to be on the horizon for real estate agents as the Victorian government has acted swiftly in introducing a bill to parliament to protect real estate agents following the controversial Court of Appeal decision of Advisory Services Pty Ltd (t/as Ray White St Albans) v Augustin & Anor [2018] VSCA 95 in which it was found that real estate agents were not entitled to collect commission on the sale of a property because they had not met their disclosure requirements under the Estate Agents Act 1980 (Act).

Background

The vendor signed an exclusive sale authority with Advisory as the real estate agents for the sale of a property in Keysborough. Advisory sold the property but the purchaser defaulted under the contract. The property was sold again, but not by Advisory, who asserted that the sale was during the exclusive authority period and they were entitled to be paid commission on the sale.

Advisory bought proceedings in the County Court of Victoria where the trial judge found that Advisory’s authority from the vendor did not contain the precise wording as required under Act. Specifically, the trial judge found the authority did not contain a complete ‘rebate statement’ stating that the agent was not entitled to retain any rebate and must not charge the client for any expenses that were more than their cost.

The language used in the authority was based on one of two forms approved by Consumer Affairs Victoria and was readily available for download by real estate agents.

The authority was found to be unenforceable and Advisory was therefore unable to recover its commission.

The Court of Appeal upheld the trial judge’s decision finding against Advisory. In its decision the Court of Appeal said that the authority simply did not say that the agent was not entitled to retain any rebate. There was no statement at all in respect of the agent’s obligations with respect to expenses.

Recent developments

The bill provides for amendments to the Act which will protect agents who have used a rebate statement which does not contain the specific statement referred to in the Act but has been approved by Consumer Affairs. The protection will only apply where the rebate statement is contained in an authority entered before the date the bill is passed as legislation.

Consumer Affairs has rectified the incorrect form on its website although there are still a large number of real estate agents which have relied upon the defective form.

Unfortunately the proposed amendment to legislation will not assist Advisory.

An agent whose authority contains a defective rebate statement may be able to bring an action against the REIV or Consumer Affairs.

What should agents do?

  • Review the forms of the authorities they use and if they have any concerns, seek legal advice.
  • Exercise caution and seek advice when deciding whether to issue proceedings against a client for commission, fees or outgoings when the authority contains a defective rebate statement.

To discuss the issue of entitlement to commission on agent's authorities further, or a possible claim, contact Lachlan Cloak on 03 8673 5522.

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About the author

Lachlan Cloak
Associate Principal

Valued by his clients for his innovative ideas, relaxed demeanour and commercial approach to resolving disputes, Lachlan is regarded by clients and other team members as the go-to person for advice in resolving matters with rare or unique facts and issues.

Lachlan has had significant success resolving protracted disputes, particularly in the property, leasing (both commercial and retail...

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