Early Release (Or Stealing?) Of Commission
 OPINION
by Tim O'Dwyer M.A., LL.B
Queensland Solicitor & Consumer Advocate
watchdog@argonautlegal.com.au
A solicitor mate of mine, Chris Bridge, recently had two celebrations: thirty years of legal practice and his first (possible) win with Queensland’s Office of Fair Trading.
Queensland has no statutory equivalent to Section 27 of Victoria’s Sale of Land Act (for early deposit releases) as mentioned in Peter Mericka’s article "Early Release of Deposit". Here it is quite uncommon for the parties to a contract to agree to an early deposit release, but it is not illegal.
There is no Queensland law permitting agents to take sales commissions from deposits held in their trust accounts before settlement even if both parties authorise it.
Honest agents wait till their sales are settled. The occasional dishonest agent will steal money from the trust account, but that is another story.
Alarm bells rang when Chris Bridge noticed the following special condition in a contract which arrived all signed sealed and delivered on his suburban legal office desk:
“The client agrees that as and from the date upon which the contract of sale becomes unconditional, the agent shall immediately be entitled to payment of commission…and such commission shall be paid from the deposit monies AND FURTHER the client directs the stakeholder to release the commission to the Agent immediately the Contract of Sale becomes unconditional.”
Chris promptly fired this bullet off to the Office of Fair Trading fingering a local real estate office of a major national franchise group:
“We act for a vendor in connection with a transaction where our client’s property was sold by the above agency.
Enclosed is a copy of the Special Condition inserted in that Contract.
Our client did not have us view the Contract before executing it however we are instructed that our client queried the agent on the inclusion of such a clause. We are instructed that our client was assured that this clause was inserted in all Harcourts’ real estate contracts.
We have warned the agent not to act in accordance with the clause and have also advised the agent that the seller and the buyer have mutually varied the Contract to exclude the Special Condition.
We have brought this matter to your attention because of the representation to our client that the agency includes this clause in all of its contracts.
We have in fact seen the same clause in contracts where the agency was involved on 2 other occasions. On those occasions, we were not directly involved in the transactions.
We consider that if acted upon, the agent is in fact stealing the buyer’s money and is in breach of the Property Agents and Motor Dealers Act.
We are of the view that should the agent act on this clause (which is in fact unenforceable due to the agent not being a party to the Contract and the clause itself being uncertain), it could place the seller at real risk.
The scenario we envisage is that the agent takes the view that because the Contract is no longer subject to finance or building and pest inspections and the cooling off period has expired, it is “unconditional” and then removes the commission. Due to undisclosed easements or other defects in title or otherwise, the buyer then properly terminates the Contract and requests a refund of the deposit. The agent has in those circumstances already taken the commission out of the deposit and the buyer would then be seeking to recover the deposit from the seller.
In the circumstances, we are of the view that the agent should be warned against including such provisions in contracts in future.
It is our experience that the previous occasions when we have seen contracts with the same clause, they originated from the Alderley office.”
This is the essence of the welcome reply which came from the Konsumer Kops:
“Reference is made to the matter of your complaint against the above agency’s clause authorising the agents to draw commission for the sale of the property concerned immediately upon the contract becoming unconditional.
It is considered that agents who act on such clauses contained within their appointment form, the contract of sale itself or any other documentation, are in breach of the requirements of the Property Agents and Motor Dealers Act 2000, (the Act).
Section 385 of the Act states that a licensee is only authorised “to draw the licensee’s transaction fee” (commission) “when the transaction is finalised”.
That section of the Act also provides an example of when a “transaction is finalised”: as being at the time of “the settlement of a contract for the sale of property or the termination of the contract”.
Hence, it is considered that a transaction is not ‘finalised’ at the time of contract of sale becomes unconditional, but when settlement of the contract occurs.
The actions of the agency mentioned in your complaint have been investigated and as a result it is intended that a brief of evidence will be referred to the Commercial and Consumer Tribunal for consideration of disciplinary action against the agent.
I thank you for your interest in this matter.”
It would seem that this greedy grub of an agent was putting this obnoxious clause not only in sales contracts but also in the agency’s appointment agreements. Watch this space.
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