Part 2 - An examination of the PO Form 6 Appointment for sales agents

Further to last month's article regarding Property Occupations ('PO') Form 6 Appointments for Property Managers (found here), in the following article we will examine the requirements for a valid PO Form 6 Appointment, specifically relating to sales agents and some common mistakes that are made by agents.

Requirements for a valid PO Form 6 Appointment

A real estate agent must not perform an activity for the client (defined as a service) unless they have been validly appointed to do so.^[1]

The PO Form 6 Appointment must be completed in accordance with the requirements of the legislation and must be signed by the client before an agent can lawfully provide any services to the client.

The general requirements, which must be satisfied in order for the PO Form 6 Appointment to be valid, are listed in section 104 of the Property Occupations Act 2014 (Qld) ('PO Act'). It is important that agents are aware that section 112(4) of the PO Act mandates that any appointment is ineffective from the time it is made if the appointment does not comply with section 104 of the PO Act. Accordingly, much care and consideration needs to be taken to ensure that all relevant information is included in the PO Form 6 Appointment.

Sales agents must be appointed using the approved form and the PO Form 6 Appointment must contain, inter alia:

• A prominent statement that the client should seek independent legal advice before signing the appointment;^[2]

• A statement outlining:

  1. whether the appointment is a single appointment or a continuing appointment;^[3]

  2. the type of service to be performed by the agent;^[4]

  3. the fees, charges and any commission payable for the service;^[5] if the commission payable for the service is expressed as a percentage of a sale price, the appointment must state that the commission for the service is calculated and payable only by reference to the actual sale price; ^[6]

  4. when the fees, charges and any commission for the service become payable;^[7]

• any expenses, including advertising and marketing expenses, the agent is authorised to incur in connection with the performance of each service or category of service;^[8]

• the source and the estimated amount or value of any rebate, discount, commission or benefit that the agent may receive for any expenses that the agent may incur in connection with the performance of the service;^[9]

• any condition, limitation or restriction on the performance of the service;^[10]

• if the property is to be sold by auction, the day set for the auction.^[11]

The PO Form 6 Appointment must be signed and dated by the client and the agent before any services are provided (including advertising the property or showing the property to prospective buyers).^[12] Furthermore, an agent must provide the client with a signed copy of the PO Form 6 Appointment or potentially face a penalty of up to $28,750 (200 penalty points).

Sole or Exclusive Agency

When being appointed for a sole or exclusive agency, agents must also take particular steps pursuant to section 103 of the PO Act, including:

• Giving the client notice, in the approved form, that provides information about sole and exclusive agency appointments; and

• Discussing with the client:

  1. whether the appointment is to be a sole or exclusive agency;

  2. the proposed term of the appointment; and

  3. the consequences for the client if the property is sold by someone other than the agent during the term of the appointment.

Failing to comply with section 103 of the PO Act may result in fines of up to $28,750 (200 penalty units).

In addition to the statements set out above, an appointment for a sole or exclusive agency must also include:

• a statement in writing whether the appointment is for a sole or exclusive agency, and the day the appointment ends;^[1]

• the term of the appointment, not being more than 90 days.^[2]

The appointment may provide that at the end of the term of the sole or exclusive agency, it continues under the terms of an open listing that may be ended at any time by the client or agent. Alternatively, at the end of a sole or exclusive agency for the sale of a residential property an agent may be reappointed for a sole or exclusive agency for 1 or more terms of not more than 90 days.^[3]

However, agents must not be reappointed under a sole or exclusive agency earlier than 14 days before the term of the sole or exclusive agency ends. The reappointment of an agent within that timeframe amounts to an offence under the PO Act and renders the reappointment ineffective.^[4]

Open Listing

Where the appointment is not a sole or exclusive agency, that is, an open listing, a statement must be included in that the appointment may be revoked by either party giving the other party at least 30 days written notice of the revocation, unless the parties agree, in writing, to an earlier day for the appointment to end.^[1]

Common Mistakes

As solicitors for the REIQ Professional Indemnity Scheme, we often see many claims arise due to incorrectly completed PO Form 6 Appointments. Some common mistakes, include:

• Listing the commission payable to the agent on the PO Form 6 Appointment as an amount which excludes GST, such as "3% of total sale price + GST". The commission payable must be inclusive of GST. The commission can be expressed in a number of ways, which may include a percentage or a flat fee (or a combination of both), however, it is imperative that agents clearly express the commission payable and that the client fully understands the likely amount;

• Commencing services outlined on a PO Form 6 Appointment without the PO Form 6 Appointment being signed and dated by both the client and agent;

• Failing to provide the client with a copy of the PO Form 6 Appointment;

• Failing to record minor amendments on the PO Form 6 Appointment and failing to ensure all parties note their agreement by writing their initials and the date next to the amendment;

• Omitting or incorrectly calculating the term of a sole or exclusive agency;

• Failing to properly communicate with clients regarding the circumstances and consequences of a sole or exclusive agency;

• Failing to properly describe the property the subject of the appointment, or the legal owner;

• Failing to properly describe and/or account for all marketing expenses and when they will be payable;

• Selecting more than one type of agreement, that is, sole, exclusive and/or open where it is not clear when the type of agreement commences;

• Incorrectly describing the entity and/or trading name of the agent including licensee name, ABN and licence number.

Conclusion

Without a valid appointment in place, an agent is not entitled to claim its commission for services they purport to provide and face penalties of up to $28,750 (200 penalty units).

It is therefore critical that sales agents ensure that the PO Form 6 Appointment has been correctly completed and complies with all legislative requirements. Further, agents should be sure that their clients understand the difference between a sole, exclusive or open agency prior to entering into the appointment.

By ensuring that all legislative requirements are complied with, agents will minimise the risk of disputes regarding commission, and will reduce the risk of claims regarding invalid appointments.

References

[1] Property Occupations Act 2014 (Qld) ss 102(1)-(2) (PO Act).

[2] Ibid s 104(1)(a).

[3] Ibid s 104(1)(b).

[4] Ibid s 104(1)(c)(i).

[5] Ibid s 104(1)(c)(ii).

[6] Ibid s 105(2)(a).

[7] Ibid s 104(1)(c)(iii).

[8] Ibid s 104(1)(c)(iv).

[9] Ibid s 104(1)(c)(v).

[10] Ibid s 104(1)(c)(vi).

[11] Ibid s 107.

[12] Ibid s 109(1).

[13] Ibid s 108(2).

[14] An appointment for the sale of residential property will be rendered ineffective from the time it is made if the term of the appointment is more than 90 days pursuant to the PO Act s 112(1).

[15] PO Act (n 1) s 110(1).

[16] Ibid ss 110(3), 112(4).

[17] Ibid s 106(2).