SALES AGENCY AGREEMENTS
NEW STATUTORY WARNING FROM 1 MARCH 2015
The Property Stock and Business Agents Regulation 2014 recently amended the existing Regulations so that from 1 March 2015 onwards all agency agreements for the sale of residential and rural land (and also sale of business) containing clauses which set out that commission is payable by the vendor even if the sale of the property is not completed must contain the following statutory warning:
WARNING: The term immediately above provides that a commission is payable under this agreement even if the sale of the property is not completed.
The Regulations stipulate that the above warning statement must be included in the agreement immediately following the relevant clause and must be no less prominent than that clause.
Types of clauses to which the warning applies
A typical agency agreement may have a clause or several clauses similar to the following:
Remuneration/commission is due and payable by the Principal to the Agent:
- immediately upon completion of the sale of the Property; or
- upon the Principal and the Purchaser entering into a mutual agreement (whether written or verbal) to terminate or rescind the contract or otherwise not proceed with the sale; or
- if the sale is not completed owing to the default of the Principal after the parties have entered into a binding contract; or
- upon the termination of the contract by the Principal as a result of the default of the Purchaser and the commission is the same or less than the amount of the deposit which is forfeited to the Principal.
As the last three points require commission to be paid even though the sale did not proceed to settlement, the new warning would then be inserted immediately after this clause (being no less prominent that the clause):
WARNING: The term immediately above provides that a commission is payable under this agreement even if the sale of the property is not completed.
In light of the changes, our view is that a claim for commission by an agent where the sale has not been completed would likely fail if the relevant agency agreement did not contain the new statutory warning.
Recommendations
Agents should review their agency agreements in order to determine whether they require the warning to be inserted, as some agreements may not set out that a commission is payable even if the sale does not proceed to completion. In that event, the warning would not be required.
Agents may also wish to review their existing remuneration clauses and consider whether they want to require payment of commissions even if a contract for sale is rescinded or terminated.
We also recommend that if you are using offline or paper forms, these should be reviewed and updated on a regular basis to ensure that changes brought in by new legislation from time to time are incorporated into the forms when required. Using services which provide online forms (rather than relying on paper copies) can help with this issue.
For further information, please contact:
Catherine Vincent Senior Associate Phone: (02) 9267 6263 Email: Catherine@jemfish.com.au
Greg Jemmeson Partner Phone: (02) 9267 6263 Email: Greg@jemfish.com.au
Disclaimer: The information in this article is correct as at 27 March 2015. This information is not to be taken as legal advice and at all times we recommend you seek independent legal advice regarding your own individual circumstances from your legal representative.