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Agent commissions and fees case studies 

Consumer and Commercial Division

The following case studies reflect decisions made by the former Consumer, Trader and Tenancy Tribunal, which became the Consumer and Commercial Division of NCAT from 1 January 2014.

These case studies should not be viewed as precedents.  They are provided as a general guide only and should not be treated as legal advice or relied upon as such.  All Tribunal matters are determined on the merits of the individual case and the supporting evidence.

Exclusive agency agreements 

Case study 1

Under the Property, Stock and Business Agents Act 2002 real estate agents may enter into an exclusive agency agreement which entitles them to a commission on the sale price.

On the death of a home owner, the executor of the estate became the registered proprietor for the purposes of the sale of the house.  The executor entered into an exclusive agency agreement with a local real estate agent for a four month period. However, neither party terminated the agreement at the end of the period and a continuing agreement ran from that time. 

One month later, the deceased’s daughter purchased the property directly from the executor. The agent then sought payment of his 2.2% sales commission as per the agency agreement. The executor objected to this and lodged an application with the Tribunal seeking an order that he did not have to pay the commission.

During the Tribunal hearing the executor argued that the agent was not entitled to a commission as they did not introduce the purchaser, claiming that the agent did not introduce the property to the purchaser, nor were they responsible in any way for the sale. The daughter also gave evidence stating that she approached the agent soon after her mother’s death only to enquire about a fair price for the premises, but did not make any offer nor approach the agent again. The executor also stated that all negotiations to purchase the property were between the executor and the daughter and did not involve the agent.

The agent contended that the daughter had made it clear throughout the agency period that she intended to purchase the property. The daughter had sought and been provided with advice on how to proceed, there were discussions with her over price and how she could bid at auction and whether she could use her share of the inheritance as a deposit. The agent further stated that the agency agreement was never terminated and they were never requested to cease marketing the property.

The Tribunal examined the terms of the exclusive agency agreement and noted the clause referring to the agent’s remuneration. The Tribunal then referred to Court of Appeal authority that for the agent to be entitled to a fee, a causal connection between the agent’s efforts and the completion of the transaction had to be established.

The Tribunal accepted the evidence of the daughter that any conversation with the agent was only made for the purpose of determining a fair price for the property. The Tribunal stated that those conversations did not amount to negotiations over price or an effective cause of sale.  Orders were made relieving the executor from paying the agent’s commission.

Case study 2

Under the Property, Stock and Business Agents Act 2002 a real estate agent may enter into an exclusive agency agreement which provides that the agent is entitled to a commission for the sale of a property where the agent is the effective cause of the sale.

A couple entered into an exclusive agency agreement with a real estate agent for the sale of their home. The agreement provided that ‘the agent shall also be entitled to a fee at the agreed amount if at any time following the exclusive agency period the principal enters into a contract for sale of the property to a purchaser effectively introduced to the principal of the property during the exclusive agency period by the agent, by any other agent or by the principal’.

At the end of the exclusivity period, the agreement was terminated. A couple of days later the agent wrote to the couple confirming the end of the agreement and removal of signage. The agent also provided a list of names of people they had shown the property to. Shortly afterwards, the couple sold the property to M. M’s name was on the list of names provided by the agent.

The agent sought payment of its commission on the basis that it had introduced M to the property. The couple, however, believed that they were the effective cause of the sale, not the agent, and lodged an application with the Tribunal under the Property, Stock and Business Agents Act 2002 arguing that they should not have to pay the commission.

At the hearing the evidence showed that M was known to the couple before they decided to sell their house. The agent marketed the property on the internet, in newspapers and magazines and displayed a signboard outside the property. The agent had shown M other properties in the area similar to the couple’s house. The agent suggested on three occasions that M inspect the couple’s house but M refused.

The Tribunal Member found that M knew the house was for sale and her actions in not inspecting the property during the course of the exclusive agency agreement were deliberate. The Tribunal found that the agent was the effective cause of the sale and was entitled to commission.

No agreement, no commission 

Under the Property, Stock and Business Agents Act 2002, a licensee is required to enter into a written agency agreement with their client for the services to be performed. If such an agreement is not made, then the licensee is not entitled to payment of any commission or expenses.

A husband and wife were divorced and, as part of the divorce settlement, it was agreed that the husband’s real estate business would sell a commercial property belonging to the wife. The business had managed the property on behalf of the wife for several years before the divorce and during that time had arranged for a commercial lease of the premises.

When the commercial property was finally sold, the agency retained $3,000 plus GST for previously unpaid commission for leasing services. The ex-wife lodged an application to the Tribunal seeking a refund of the total of $3,300.

At the Tribunal hearing, the wife appeared via telephone from overseas. The respondent ex-husband appeared in person. The wife argued that her ex-husband’s business was not entitled to retain any commission from the sale of the property pursuant to the orders of the Family Court. She alleged that after their separation, her ex-husband had leased the commercial property against her wishes and that she did not receive any rent during that time from the tenant.

In cross-examination, the Tribunal found that the husband’s business had not entered into a written agency agreement as required by the Property, Stock and Business Agents Act 2002, and was therefore not entitled to any commission or expenses.

The Tribunal made orders that the sum of $3,300 was to be refunded to the applicant.

Sale of restaurant business 

Under section 36 of the Property, Stock and Business Agents Act 2002 the Tribunal may determine the reasonableness of, or entitlement to, a fee or commission or part thereof, charged by a person holding a licence under the Act.

The seller of a restaurant business lodged an application with the Tribunal seeking orders that she did not have to pay $29,500 commission to the business agent who handled the sale. The seller (the applicant) claimed that the agent was not entitled to any commission as the agent was not present for the necessary negotiations and therefore was not the effective cause of the sale of the business.

The dispute arose after the business purchaser had placed a written offer to buy the business under the restaurant’s door on 22 March. The next day, the seller took the offer to the business agent with a request to investigate the potential purchaser’s intentions, and if possible to enter into negotiations. An exclusive agency agreement was also signed providing that the agent’s commission would be 10% on the first $80,000 and 8% on the balance plus GST. The exclusive agency period was to commence on 23 March and terminate at midnight on 30 April.

The agent sent a ‘sales advice’ letter to the purchaser’s solicitor and entered into negotiations during March and April which had the effect of increasing the purchaser’s offer from $320,000 to $340,000. A deposit was paid to the agent, but it was at this stage that the seller claimed that the negotiations had stalled.

At the Tribunal hearing, the seller claimed that the agent travelled overseas shortly after the exclusive management agreement had terminated on 30 April. The seller stated that the purchaser had effectively withdrawn from the sale at that point and that all relevant negotiations which led to the final exchange of contracts on 10 August were undertaken not by the agent, but by the seller with the costly assistance of her solicitor.

The agent did not dispute that he was overseas between May and August. The documentary evidence tendered by the agent showed he did not maintain email contact during that time and that he did not communicate with the seller until 16 August after the sale had taken place. However, the agent claimed that it was his initial written contact with the purchaser that was the effective cause of the sale.

The agent argued that he did all necessary things to facilitate the exchange of contracts prior to his departure, and was therefore entitled to a full commission. The agent presented the Tribunal with a copy of a confidentiality agreement forwarded to the purchaser and a request for information that he answered on 1 April; a lease and floor plan that he forwarded on 3 April; evidence of a meeting with the purchaser on 5 April; the draft contract forwarded on 12 April; and the price of $340,000 fixed on 18 April. The agent contended that because there had been a “meeting of the minds” between the vendor and purchaser it was not relevant that he went overseas and was not present for the exchange of contracts.

The Tribunal Member stated to the parties that it was the agent who had to establish that there was a causal connection between the agent’s efforts and the completion of the transaction. The agent had to show that he was an effective cause of the sale.

The Tribunal Member found on the evidence that the agent had not introduced the purchaser; rather it was the case that the purchaser was a local who knew the restaurant and approached the seller directly. It was established that the agent entered into negotiations with the purchaser, facilitated an agreement on the price and held the deposit in his bank account at the request of both parties. However, exchanges of contracts for sale had not taken place, nor were negotiations anywhere near finalisation.

During the agent’s absence, the parties encountered significant difficulties in finalising the sale. While the agent’s absence did not cause the delay, it did nothing to assist the seller and her solicitor in bringing the contract to exchange. It was advice by the seller and her solicitor concerning the lease agreement and the financing of the business that was the effective cause of the sale.

The Tribunal Member made orders that commission was not owing to the agent, and that the agent was to return to the seller the $29,500 deposit amount that was being withheld as the commission.