Commission on a re-sale? Not so fast!

Case

Icon Property Pty Ltd and Anor v Wood [2008] VSCA 123 (26 June 2008)

The Issue

How can agents make sure they get commission on a re-sale if the first sale fell through?

What Happened?

In the Icon Property case, the Vendors signed a standard REIV Authority which granted Icon Property an "Exclusive Authority Period" of 90 days and a "Continuing Authority Period" of a further 60 days. The property was sold but that purchase fell through because the purchaser's deposit cheques were dishonoured. A second sale was then entered into, but no new Authority was signed. The agent then issued an account deducting commission from both sales. The Vendors disputed this and argued that the agent had not obtained a new Authority appointing it as agent for the second sale.

The Court found that Item 2 of the Authority effectively stated that the Continuing Authority Period only applies if the property is not sold during the Exclusive Authority Period. That wasn't the case here, because the property was sold during the Exclusive Authority Period (i.e. the first sale). As a result, the continuing authority of a further 60 days was not applicable. Also, because the property was sold during the Exclusive Authority Period, the Authority was no longer operational on the date of the second sale.

The Court also held that Section 49A requires an agent to "hold an unequivocal written engagement containing information making it clear the obligations which may follow from it, and signed by the Vendors, before the agent may seek payment in respect of work done". As this wasn't done for the second sale, the agent wasn't entitled to the second commission.

Practical Tip:

If your client's sale falls through, always make sure you enter into a new Sale Authority if the property is going back on the market!

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The information contained in this article is intended to be of a general nature only and should not be relied upon as legal advice. Any legal matters should be discussed specifically with one of our lawyers.

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