Property investment articles
A seller's nightmare - one sale, two commissions owing
Posted on Tuesday, March 03 2009 at 7:44 PM
One day was all that saved this seller from having to pay a double commission on the sale of her property.
by Tim O’Dwyer
Carly G.* was staggered to find herself facing commission claims from two real estate agencies after settling the sale of her northern New South Wales property.
Her property had been listed with both agencies but only one secured the sale. She soon filed a claim with the NSW Consumer, Trader and Tenancy Tribunal to determine whether she was liable for two commissions and, if only one, which agency she should pay.
On March 15, 2006 Carly listed with Agency 1 under an exclusive agency agreement until April 30. While this agreement provided for non-exclusive selling rights from May 1 until the property sold or the agreement was terminated, it also explained how, if another agent sold her property, Carly might have to pay two commissions. On May 1, after Agency 1's exclusive agency ended, Carly gave a non-exclusive listing to Agency 2.
On April 28, Graham and Tracey Smith*, who were in the market to buy, arranged with Agency 1 to inspect Carly’s property. But the appointment was cancelled. Another was made and the Smiths inspected the property on May 2, when they said they might make an offer. A couple of weeks afterwards Agency 1 showed them another property.
The Smiths also approached Agency 2 about properties for sale. Carly's was among those shown to the Smiths. When the Smiths told Agency 2 they'd already inspected it with Agency 1, Agency 2 said this would be okay. On May 16, Agency 2 notified Carly that a sale had been negotiated with the Smiths but failed to mention that Agency 1 had shown the Smiths the property first. Contracts were exchanged on May 30. After settlement on July 14, Agency 2 claimed their commission. On learning of the sale, Agency 1 also claimed commission from Carly.
The Smiths helpfully provided a statement to the tribunal. This described how there was no "follow-up" from Agency 1 after the first inspection of the property. The main reason the Smiths bought through Agency 2 was that Agency 2's finance broker "bent over backwards" to get their loan approved. At the hearing Carly made allegations against both agencies of pressure tactics, communication failures, breaches of the law and misleading/deceptive conduct. There was also "considerable angst" between the agencies with mutual allegations of dirty dealing. Disregarding all these allegations, the tribunal proceeded to find that Agency 2 were entitled to commission because they had been the effective cause of the sale to the Smiths.
But did Carly have to pay a second commission to Agency 1? Part of their listing agreement stated: "The agent shall be entitled to a fee at the agreed amount if at any time following the expiration of the exclusive agency period the principal enters into a contract for the sale of the property to a purchaser effectively introduced to the principal or the property during the exclusive agency period by the agent, by another agent or by the principal."
Agency 1 claimed their agreed fee on the basis that the Smiths were effectively introduced to the property during the exclusive agency.
The critical issue was whether this alleged introduction happened before May 1. Agency 1 argued that the Smiths were introduced to the property by seeing Agency 1's internet advertisement and/or by seeing their 'for sale' sign and/or by making their initial appointment to inspect.
Rejecting this multiple-choice argument, the tribunal ruled that "introduced to the property" meant being taken there and shown outside and inside. The Smiths did not participate in any such introduction until May 2 – after Agency 1's exclusive agency had expired.
The tribunal could not accept that a buyer might be introduced to a property just by looking at a picture on the internet or by seeing a sign. Otherwise, the tribunal explained, anyone driving along and noticing a 'for sale' sign would be technically "introduced." Agency 1 were not entitled to a commission because the Smiths were not introduced to the property during their exclusive agency.
Carly was delighted with this decision and relieved at not having to pay twice for a single sale. She had a very lucky escape. If the Smith's first inspection had not been cancelled, Carly would have been legally liable for both commissions.
* All names in this article are fictitious.
Tim O'Dwyer is a Queensland solicitor.
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