One Sale - Two Commissions
OPINION
by Tim O'Dwyer M.A., LL.B
Solicitor
Consumer Advocate
watchdog@argonautlegal.com.au
Carly Gillard was staggered, after settling the sale of her Northern New South Wales property, to find herself facing commission claims from two real estate agencies. Her property had been listed with both agencies, but only one secured the sale. She soon filed a claim with the NSW Consumer, Trader and Tenancy Tribunal to determine whether she was liable for two commissions and, if only one, which agency she should pay.
On 15th March 2006 Carly listed with Swann Realty (“Swanns”) under an exclusive agency agreement until 30th April. While this agreement provided for non-exclusive selling rights from 1st May until the property sold or the agreement was terminated, it also explained how, if another agent sold her property, Carly might have to pay two commissions. On 1st May, after Swanns’ exclusive agency ended, Carly gave a non-exclusive listing to Dillon Realty (“Dillons”).
On 28th April, Graham and Tracey Chapman, who were in the market to buy, arranged with Swanns to inspect Carly’s property. But the appointment was cancelled. Another was made, and Chapmans inspected the property on 2nd May when they said they might make an offer. A couple of weeks afterwards Swanns showed them another property.
Chapmans also approached Dillons about properties for sale. Carly’s was among those shown to Chapmans. When Chapmans told Dillons they had already inspected it with Swanns, Dillons said this would be OK. On 16th May Dillons notified Carly that a sale had been negotiated with Chapmans, but failed to mention that Swanns had shown Chapmans the property first. Contracts were exchanged on 30th May. After settlement on 14th July, Dillons claimed their commission. On learning of the sale, Swanns also claimed commission from Carly.
Chapmans helpfully provided a statement to the Tribunal. This described how there was no “follow-up” from Swanns after the first inspection of the property. The main reason Chapmans bought through Dillons was that Dillons’ finance broker “bent over backwards” to get their loan approved.
At the hearing Carly made allegations against both agencies of pressure tactics, communication failures, breaches of the law and misleading/deceptive conduct. There was also “considerable angst” between the agencies with mutual allegations of dirty dealing. Disregarding all these allegations, the Tribunal proceeded to find that Dillons were entitled to commission because they had been the effective cause of the sale to Chapmans.
But did Carly have to pay a second commission to Swanns? Part of their listing agreement stated: “The agent shall be entitled to a fee at the agreed amount if at any time following the expiration of the exclusive agency period the principal enters into a contract for the sale of the property to a purchaser effectively introduced to the principal or the property during the exclusive agency period by the agent, by another agent or by the principal”.
Swanns claimed their agreed fee on the basis that Chapmans were effectively introduced to the property during the exclusive agency.
The critical issue was whether this alleged introduction happened before 1st May. Swanns argued that Chapmans were introduced to the property by seeing Swanns’ internet advertisement and/or by seeing their ‘ “For Sale” sign and/or by making their initial appointment to inspect.
Rejecting this multiple-choice argument, the Tribunal ruled that “introduced to the property” meant being taken there and shown outside and inside. Chapmans did not participate in any such introduction until 2nd May – after Swanns’ exclusive agency had expired. The Tribunal could not accept that a buyer might be introduced to a property just by looking at a picture on the internet or by seeing a sign. Otherwise, the Tribunal explained, anyone driving along and noticing a “For Sale” sign would be technically “introduced”. Swanns were not entitled to commission because Chapmans were not introduced to the property during their exclusive agency.
Carly was delighted with this decision, and relieved at not having to pay twice for a single sale. She had a lucky escape. If Chapmans’ first inspection had not been cancelled, Carly would have been legally liable for both commissions. The law on this issue is an ass and should be changed to this: one sale, one commission and no liability otherwise.
(Real names are not used in this true story which first ran in Australian Property Investor magazine)
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