Agency Agreements

Brian Cannan: Today, I have Greg Jemmeson with me from Jemmeson Fisher Solicitors and Accountants. And we're going to be talking about agency agreements. Greg, what's the importance of agency agreements?

Greg Jemmeson: Thanks Brian, really the most important thing about an agency agreement is a real estate agent is not entitled to be paid any commission unless they have a valid agency agreement in place. Now, essentially, the Property Stock and Business Agency Act sets out requirements, saying that unless there is an agreement in writing, critically, it must be signed by both the licensee and the principal, it must comply with all of the regulations. And if the agent, then signs the agency agreement it must be served on the principal within 48 hours.

Brian: Principal being the owner?

Greg: Being the vendor. Yes. And the other requirement is if the agent doesn't have an agency agreement and proceeds to sell a person's house, they can be prosecuted by the Office of Fair Trading. Now, all of the regulations set out all of the prescribed terms. Now normally, an agent would use a commercially prepared agency agreement, which would have all those terms set out, but the agent then needs to fill out the agreement. And this is where the mistakes start to occur.

Brian: So this would be the do's and don'ts of filling out agency agreement?

Greg: Yes, yes. Now, there are a lot of things that go into an agency agreement, and probably one of the easiest tips is don't leave anything blank. Now the common mistakes that we see are that the all of the principles names are not correctly entered into. So you don't put initials, you must put the parties full names.

Brian: Including their middle name?

Greg: Including their middle name.

Brian: So their legal name?

Greg: Yes, the other thing about that, too, is, of course, we know that with an agency agreement, there's a cooling off period. And the cooling off period does not finish until all of the parties have signed. So if you have three principles, and only two sign, if a third one signs two weeks later, they can then exercise the cooling off period. So obviously, this is something we want to avoid.

Brian: So the cooling off period starts after the last person signs. Technically, yes. And that goes to next day. 5pm?

Greg: That's right.

Brian: Not including a Sunday?

Greg: That's right. Yeah. Other common mistakes we see is that the licensee is not properly described so the licensee is normally the company, which the agent works for, not the actual licensee in charge. So it should be something proprietary limited, quite often will see the wrong license number inserted, being the individual's license number and not the company's license number. Other mistakes we commonly see is that the agent hasn't put in details of who the solicitor might be acting on behalf of the vendor, what the recommended form of sale may be, quite often the inspection report is not signed and dated. There may be the agent hasn't completed what the opinion is as to the market opinion of the sale price. I've even seen agency agreements that have left the commission section blank. So obviously that's going to be a pro bono sale.

Brian: In other words, not receiving any commission.

Greg: That's correct. Other common mistakes, I've seen agents not charging marketing fees. So they put a line through the marketing area. That's a prescribed term. So by putting a striking through the marketing can render the agency agreement void. Now in the past, the courts have taken a strict interpretation of agency agreements, and simply by forgetting to put in the details of the vendor's solicitor renders the agency agreement void. Now there has been some relief, brought in by Fair Trading by some amendments to the legislation known as section 55a. And what happens here is a court or tribunal now has the power to overlook a minor mistake in an agency agreement. If by paying the commission it would be still fair and reasonable and not unjust.

Brian: Has there been any cases around minor mistakes as yet?

Greg: Not as yet, there is nothing through the courts, which is set a precedent. My legal view and better opinion would be a minor mistake would be, for example, the agent not putting what their recommended form of sale is, maybe the license number being incorrect. Maybe! Another one, I think that wouldn't affect the agency agreement is if they forget to put in the solicitor's details, or they're unaware of the solicitor at the time of entering into the agreement. But until such time as we have to go to court and fight on one of these, the better view is always fill out the agency agreement. Don't leave any blanks, make sure you fill it in correctly.

Brian: Well, Greg, thank you very much for that today. That's very interesting. I'm sure we can learn a lot from what you've just said to us all.

Greg: My pleasure. Thanks Brian.