Is your real estate agent claiming commission illegally?

Real estate agents can only claim commission if the vendor has signed a sale authority which complies with the Estate Agents Act 1980 (‘the Act’). Recently, the Victorian Court of Appeal[1] decided that real estate agents could not rely on one of the standard form sale authorities provided by the Real Estate Institute of Victoria (REIV) to claim their commission as the standard form sale authority which was used did not comply with the Act.

In order for a real estate agent to retain, recover or sue for any commission, the Act requires that the sale authority includes, among other things, a ‘rebate statement’[2] which states that:

The agent is not entitled to retain any rebate and must not charge the client an amount for any expenses that is more than the cost of those expenses.[3]

The Court decided that irrespective of whether or not the estate agent will be or is likely to be entitled to any rebate, or to charge for expenses, the rebate statement must still be included.

Although it is not necessary that the authority contains those exact words, and it would be sufficient that similar words are used to convey the intended message, a statement that only states ‘No rebate will be received’ does not comply with the Act.

The effect of this decision has wide-ranging ramifications for agents and sellers who have entered into the standard form sales authority. A real estate agent who has used the authority is not permitted to claim commission from a seller. Sellers may also sue to recover any commission paid to an agent in the last six years if the standard form authority was used.

If you require any advice regarding the sale or purchase of property or any other property related matter, please do not hesitate to contact our Property team on (03) 9870 9870.

[1] Advisory Services Pty Ltd v Augustin [2018] VSCA 95.

[2] Estate Agents Act 1980 (Vic) ss 50(1)(b), 49A(1)(c)(iii).

[3] Ibid s 49A(4)(c).

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