What is the quickest way to lose a commission? Act as an agent without being properly appointed
The Office of Fair Trading (OFT) has received reports of real estate agents acting as an agent for a commercial property transaction before being properly appointed by the client. Not only does this activity result in inequity in the commercial sector, but acting without a valid appointment is a breach of the Property Occupations Act 2014 (the Act).
In addition, under the Act, if the appointment form is not completed, the agent is not entitled to a commission.
While this fact is well known in the residential market, reports being received by the OFT indicate some agents operating in the commercial sector are not as familiar with this legislative requirement.
Confusion may have arisen as the Act does provide an exemption in some limited situations.
However, agents who want to make use of this exemption should bear in mind:
- It does not apply to residential property or rural land. An agent acting for a client in relation to residential property or rural land must be appointed on the approved form.
- The exemption is only available for property which has a total gross floor area of at least 10,000m2, or an estimated value of at least $10 million.
- Even if the agent and the client agree in good faith to apply the exemption, if the client can later show the exemption does not apply, the agent will not be entitled to any commission, fees or other reward.
As an agent, having a valid appointment in place is as much about complying with the law as it is about giving specificity to your relationship with your client.
The appointment form allows you to set out your commission, fees and any other expenses you may incur and on-charge to your client. In the simplest terms, it is your quote and contract all in one.
The appointment also offers a level of protection to help ensure you receive the commission you are entitled to. Provided you are properly appointed, if you are the effective cause of a sale or rental you are entitled to claim commission. Without a valid appointment, you could do all the leg-work to facilitate a transaction, only to have your vendor and a buyer or tenant complete the transaction privately and pay no commission.
The OFT takes compliance in the property industry, both residential and commercial sectors, very seriously. We plan to address concerns raised in the reports received by including an operation targeting the sale and rental of commercial property in our state-wide annual proactive compliance program.
While the OFT cannot provide legal advice about specific transactions, if you have any questions about appointments to act in a commercial property situation, you can email them to us at Brisbane.OFT@justice.qld.gov.au or contact us by phone on 13 QGOV (13 74 68).