Real Estate Agents Commission
Augustin retained Ray White St Albans (Ray White) to sell her property at 382 Greens Road Keysborough by signing an exclusive sale authority. Ray White sold the property, but the sale fell through. The property was sold again but not by Ray White. Ray White claimed commission on both sales, amounting to $385,000, on the basis of the second sale occurring during the period of the exclusive sale authority.
Augustin successfully defended the claim in the County Court on the basis that Ray White had not strictly complied with sections 49A(1) and 50 of the Estate Agent Act 1980 (the Act). Section 49A mandates that before obtaining a vendor’s signature to an authority the agent must inform the vendor that the commission and outgoings are negotiable and the vendor must be provided with a rebate statement. A rebate statement discloses that the agent may be entitled to rebate and if there is such an entitlement the rebate must be passed on to the vendor. Ray White argued that a rebate statement was not required because in this particular instance the vendor was charged an all in commission fee and there was no separate payment for outgoings.
The County Court at first instance rejected Ray White’s argument and held that strict compliance is required irrespective of the outgoings being charged separately or not charged at all. Ray White appealed, and the Court of Appeal unanimously upheld the decision of the County Court.
The Court of Appeal held that strict compliance with section 49 is required and the Court of appeal so held on the basis that there is a strong and consistent theme of consumer protection which runs through the Act. Consequently strict compliance with the consumer provisions of the Act is mandatory. At paragraphs 37 and 38 the Court of Appeal gives examples of the provisions of the Act embodying the theme of consumer protection:
- … Part III of the Act provides for a system of licensing of the estate agents and prohibits a person from acting as an estate agent without a licence;
- Section 29B imposes duties on a licence estate agent who carries on an estate agency business, including the duty to take reasonable steps to ensure that employees of the business comply with the Act;
- Section 25 makes provision for inquiries into estate agents, including as to whether an estate agent is a fit and proper person to hold a licence…;
- Part VI provides for monitoring of estate agency businesses and their trust accounts;
- Other consumer provisions include:
- The regulation of advertising: section 42;
- An estate agent’s estimate of selling price: section 47A-47F;
- The making of false representations to prospective vendors: section 47B;
- The making of false representations to purchasers: section 47C;
- Advice to clients as to commission sharing arrangements: section 48;
- The treatment of rebates: section 48A-48E;
- The provision of information about commissions and rebates: section 49A.
Estate agents must strictly comply with their obligations under the Act, otherwise, and pursuant to section 50, they will not be entitled to sue for or recover or retain any commission. On the other hand, vendors should always have the authority checked by a solicitor before signing.
PS: The Victorian Parliament has amended the Estate Agent Act through the Justice Legislation Miscellaneous Amendment Act 2018 – Part 7 Division 1 Sections 52-53 – click here. Hence, the decision in Augustin may not be relied upon for the recovery of commissions for cases where the rebate statement was in a form approved by the Director of Consumer Affairs.