Estate agents, is your commission safe?

Introduction

Attention all Estate Agents: don't put yourself in a position that may require the repayment of agent commission. In the recent decision of Advisory Services Pty Ltd (t/a Ray White St Albans) v Augustin & Anor [2018] VSCA 95, the Court found that an agent was not entitled to its commission, as its sale authority was not valid.

Situation

Ray White acted for the Vendor in a sale which fell through. The Vendor then engaged another agent who subsequently sold the property. Ray White sued for the commission of the sale that fell through and the sale that subsequently occurred, totalling $385,000. They argued that the property was sold within the exclusivity period.

The sale authority was held not to be valid or in the right format as it did not comply with section 49(A)(C) of the Estate Agents Act, which requires the document to state that 'an agent is not entitled to retain any rebate'. The wording of 'an agent will not retain any rebate', which was used, was held to be very different.

Even more frustratingly, the sale authority that was used was one that was recommended and approved by Consumer Affairs Victoria.

This decision effectively enables customers to reclaim commission paid in the last 6 years, for all the times the defective sale authority was used. Collectively, of all Estate Agents in Victoria, it is estimated this amount would be in the hundreds of millions of dollars.

The first of these many potential claims has already been raised, to be heard in the Supreme Court in July 2018, over an $82,000 commission from a Beaumaris home sale.

These proceedings may now open the floodgates to reclaiming the commission paid, and can only be rectified by new legislation in Parliament. We understand the Real Estate Institute of Victoria (REIV) is lobbying the State Government for retrospective changes. Further, as Consumer Affairs Victoria sold the defective sale authority, the Government itself may be liable if sued.

How Sharrock Pitman Legal can help

We urge you to use the updated authority and rebate statement, sold through the REIV, and complying with the Act. Contact us if you have any concerns.

Remember, at Sharrock Pitman Legal, we are on your side. Call us today on 1300 205 506 or complete the form below.

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.

Liability limited by a scheme approved under Professional Standards Legislation.