Principals Be Aware Protect Your Commission

16 Jan, 2012

As we are all aware, for a real estate agent to perform a service for a client, the client must first appoint the real estate agent in writing (Section 133(1) Property Agents and Motor Dealers Act 2000).

A recent Queensland Court of Appeal decision highlighted the need to be vigilant when preparing and completing an Appointment to Act.

An agent is prohibited from suing for or recovering a reward or expense for the performance of an activity as a real estate agent unless the agent has been properly appointed (Section 140 Property Agents and Motor Dealers Act 2000). This includes commissions, advertising and other outlays.

A recent Queensland Court of Appeal decision highlighted the need to be vigilant when preparing and completing an Appointment to Act.

In Yong Internationals Pty Ltd v Gibbs & Ors [2011] QCA 161 (15 July 2011), the Queensland Court of Appeal was asked to consider an appeal from the District Court of Queensland in which the judge determined that the PAMD Form 22a was invalid and therefore disentitled the real estate agent from recovery of commission.

The facts were that a PAMD Form 22a was completed appointing the agent to act in relation to the sale of property at Redbank Plains.

Clause 4.1 of the Appointment require the agent to set how the agent intends to perform the services and to state any conditions, limitations or restrictions on the performance of the services.

In this case Clause 4.1 was left blank.

The Court of Appeal considered the legislation and section 133(3)(a) of the Property Agents and Motor Dealers Act 2000 which provides:

‘The appointment must for each service:

  1. state the service to be performed by the real estate agent and how it is to be performed’.

The operative word in the legislation is ‘MUST’. In other words, it is a mandatory requirement to provide this information, not discretionary.

The real estate agent argued that as the balance of the PAMD Form 22a had been completed – i.e. as to commissions payable etc., that there had been substantial compliance with the legislative requirements as to the completion of the Appointment.

Make sure that your PAMDs are completed in full and be specific as to the services you are going to provide.

The Court of Appeal rejected this argument.

Justice Muir stated:

“…the manifest purpose of the Act was to require specific disclosure of information in a particular form for the protection of the clients and for the avoidance of disputes”.

As a consequence, the Appointment was ruled to be invalid and accordingly the real estate agent was not entitled to recover commission.

The commission payable on sale – $229,000.00. Ouch!!!

Obviously while the above scenario dealt specifically with a PAMD Form 22a, the same considerations would apply to a PAMD Form 20a.

While we are on the topic of the completion of the PAMDs, attention should also be drawn to Clause 4.2 of the Form.

This requires a specific inclusion in the Form if a continuing appointment is selected. The Form must specify when the continuing appointment is to end.

Again, this is a mandatory requirement.

Section 133(4) of the Property Agents and Motor Dealers Act 2000 states:

“A continuing appointment must state:

  1. the date the appointment ends; …”

Again, the operative word in this part of the legislation is ‘MUST’.

The moral of this decision – make sure that your PAMDs are completed in full and be specific as to the services you are going to provide, the commission you will be charging, the extent of the continuing appointment and specify the charges for advertising and other outlays.

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