PUBLICATIONS

Rebate statements: Agent’s commission at risk!

18TH OF OCTOBER 2019

In an important update for estate agents, on 19 April 2018, in Advisory Services Pty Ltd (t/a Ray White St Albans) v Augustin & Anor [2018] VSCA 95, the Supreme Court of Victoria (Court of Appeal) found that an estate agent was not entitled to claim commission on the basis that the agent’s authority did not follow the wording pursuant to the Estate Agents Act 1980 (Vic) (“Act”).

Background

Augustin was the owner of the property situated at 382 Greens Road, Keysborough (“Property”), who had an exclusive sale authority signed on her behalf to engage Advisory Services Pty Ltd (trading as Ray White St Albans) (“Advisory”) for the sale of the Property.

The Property sold, but the purchaser defaulted under the contract of sale. Subsequently, a new estate agent was engaged and, when the Property was sold once more, Advisory asserted that it was during the period of its exclusive sale authority. Accordingly, it sued for commission arising from both sales in the sum of $385,000.00.

The trial judge found that the authority was unenforceable. It followed that Advisory was not entitled to the commission.

On appeal, the decision was upheld. The Court of Appeal decided that a statement that an agent will not retain any rebate was different to a statement that an agent is not entitled to retain any rebate. 

What does this mean for estate agents and commission? Pursuant to section 49A of the Act, an estate agent’s engagement or appointment (usually referred to as an authority) must contain a “rebate statement”, which is:

·        in a form approved by the Director of Consumer Affairs (“Director”); and
·        states that an agent is not entitled to retain any rebate and must not charge the client an amount of for any expenses more than the cost of those expenses.

If estate agents have been using an REIV authority, or an authority containing a rebate statement in the form provided by the Director, then those authorities do not comply with the Act.

The consequences are severe because, if the authority does not contain a rebate statement that complies with the Act, the client is not liable to pay the commission, fees, or outgoings to the agent, and any commissions, fees, or outgoings paid to the agent over the last six years (when a defective rebate statement was included in the authority) may be recoverable by the agent’s client(s).

Other impacts?

Agents may be entitled to indemnification from REIV and/or the Director if their authorities contain defective statements. If so, liability could be extremely costly. Ultimately, it is up to the Victorian Parliament to provide a legislative change to fix this problem. It will be particularly interesting to see what happens in the coming months.

What should agents do?

Estate agents must review their engagements and authorities and to ensure that they comply with the Act. In other words, estate agents should remove any rebate statement provided by the REIV or the Director. If they are not sure, they should seek legal advice urgently.

Madison Branson Lawyers can assist.

Obviously, agents should think twice before taking legal action to recover commission, fees or outgoings pursuant to an authority that contains a defective statement, so long as the issue has not been corrected by legislation.

An agent who wishes to enforce a claim for commission, fees or outgoings when he has an authority with a defective rebate statement may be best served by deferring the action in respect of its claim to a later date.

However, if an agent receives a claim from a client in relation to a refund of commission, as a consequence of a non-compliant rebate statement, the agent should contact their insurer immediately, and otherwise oppose the claim and seek legal advice.

What should landowners do?

If you are a landowner and you have signed an agent’s authority, you should check to see whether the rebate statement complies with the Act. If the authority contains a defective rebate statement, the agent may not be entitled to payment, or you may be entitled to a repayment by the agent.

If you are not sure, seek legal advice. Madison Branson Lawyers can assist you.

For more information, or if you would like us to review an agent’s authority, please contact:
Simon Tsapepas (Director) T: 1300 653 189, E: [email protected], W: madisonbranson.com