In Queensland, real estate agents are appointed by the seller signing a Form 6 Appointment or Reappointment of a Property Agent.
Under a Form 6, there are three types of appointment:
- Open Listing;
- Sole Agency; and
- Exclusive Agency.
Under an Open Listing, the agent is only entitled to commission if the agent is the effective cause of the sale.
Under a Sole Agency, you must pay the agent if the property sells, other than if you sell the property privately. If another agent sells the property, you must pay both agents the commission they are entitled to under their Form 6.
Under an Exclusive Agency, the agent is entitled to be paid commission if the property sells, regardless of the cause of the sale. Most exclusive appointments revert to open listings at the expiry of the term.
It is important to note that even if the term of the exclusive appointment has expired, but the agent introduced a buyer to the property who purchases the property after the expiry of the term, the agent is still entitled to its commission.
Many sellers choose an exclusive appointment as it provides the agent with the motivation to invest time and resources into marketing the property.
The downfall is where an agent is appointed on an exclusive basis but the seller is not satisfied with the agent’s efforts and wishes to appoint an alternative agent. In these situations, it is essential that the seller first obtains a release from the initial Form 6, to avoid the risk of being required to pay double commission as set out above. Even if a release is obtained, risks remain as a result of the first agent’s efforts in showing the property to potential buyers.
For example, a property is listed with Tom. During this time, a couple comes to an open home and likes the property. Unfortunately, Tom was unable to sell the property during the exclusive period in the Form 6 and the seller decides to list the property with another agent, Natalie. Natalie holds another open home and the same couple put in an offer on the property. The offer is accepted, the contract is signed and it proceeds to settlement.
As Tom introduced the couple to the property, there is an argument that Tom is entitled to commission. There is a further argument that Natalie was the effective cause of the sale and that Natalie is also entitled to commission.
If there is a need to involve a second agent or sell the property privately, the seller should seek legal advice and, if necessary, negotiate a release or termination of the exclusive agreement with the original agent.
The Small Business Lawyer is experienced in property transactions and can review any Form 6. Please contact us if you require assistance.