Agency Agreement: When are you liable for an Agent’s Commission?

If you are selling your property and you’ve found your fit when it comes to the real estate agent, the next thing you should consider are the terms of the agency agreement. Here are some things to think about before you sign:

Agency Appointment

Often, agency agreements are framed as exclusive, meaning you are bound to engage the agent named in the agreement exclusively for a particular period. Exclusive agency agreements entitle the named agent to be paid their commission, even if the purchaser is introduced to the property by you or someone else.

Non-exclusive agency agreements allow you to appoint more than one agent at any one time and the agent who is the “effective cause of the sale” will be entitled to a commission.

Termination

Normally, agency agreements will provide for a set exclusive period, which will then continue as a non-exclusive agreement until the property is sold, or the agreement is terminated.

If the exclusive agency period exceeds 90 days, you can terminate the agreement by providing 30 days written notice to the agent at the end of the 90 days. If the agreement is terminated, the agent will have to stop marketing the property but can still successfully claim a commission if they caused the sale of the property.

Enforceability

The Property and Stock Agents Act 2002 provides that the requirements for an enforceable agency agreement must:

1. Be in writing;
2. Be signed by you and the agent;
3. Contain specific warnings and notices contained in the regulations; and
4. Be served by the agent on you within 48 hours after the agreement was signed.

If your agency agreement is missing one or some of the above requirements, you may still be liable to pay an agent’s commission upon the sale of your property if a court or tribunal finds:

1. the failure to comply with the regulations is a minor failure;
2. you haven’t suffered any loss; and
3. failure to make the order would be unjust.

If this article raises any questions in relation to your agency agreement and/or you require us to review and advise on the terms, please do not hesitate to contact our team.