Commissions at risk after REIV estate agent commission form bungle

Commissions at risk after REIV estate agent commission form bungle
Commissions at risk after REIV estate agent commission form bungle

Lawyers acting for Victorian vendors have successfully argued in the County Court that an estate agent was not entitled to the commission payment because the Exclusive Sales Authority (ESA) form used "did not comply" with the Estate Agents Act.

In August 2017 the County Court of Victoria found that a Consumer Affairs approved rebate statement did not comply with the Act as it did not contain each and every word of the prescribed warning.  Last month, a year later, the Supreme Court of Victoria – Court of Appeal upheld the decision of the County Court of Victoria.

The case involved a Ray White St Albans agent who had unsuccessfully sued the vendors for a $385,000 commission payment following the $8.8 million sale in 2016 of a six-hectare industrial site at 382 Greens Road in Keysborough.

The ruling opens the possibility of claims by unhappy vendors against estate agents who used a non-compliant ESA form which were supplied by the Real Estate Institute of Victoria (REIV) where the commission has yet to be paid.

The industry body, which represents around 5000 estate agents in Victoria, sold the ESA forms as a legally binding vendor contract giving the agent the authority to sell a vendor's home and be paid commission and any other outgoings including marketing and advertising costs.

Two versions of the contract were available for agents to buy from the REIV. The longer version with the full wording of the rebate statement as stated in section 49A of the act, whereas the shorter version did not.

The REIV's ESA form included an altered statement on rebates that was approved by state's consumer watchdog, but it was different from the exact wording of the Estate Agents Act

The form, which was amended around six years ago, did not comply with section 49A of the Act.

The issue erupted last week on the Lexology website where lawyers at Logie-Smith Lanyon noted it was "now incumbent upon the Victorian Parliament to immediately provide a legislative solution to rectify an obvious administrative error in the Consumer Affairs forms."

They noted while a legislative solution had been mooted, it is yet to be put before the Victorian Parliament.

The REIV chief executive Gil King said in a statement provided to Fairfax Media that "upon being made aware of the issue late last year, the REIV took immediate steps to ensure all authorities were compliant."

"At this stage, the extent of the issue is not clear," Mr King noted. 

It has emerged there is one case where Amy Sheggerud-Woods, a partner at Marsh & Maher Lawyers, is acting for an estate agent in proceedings involving the agent's entitlement to commission.

"Not only will the Supreme Court decision have far-reaching consequences for real estate agents who have used the Exclusive Sales Authority forms, but also for vendors, for the REIV (which has supplied the forms to real estate agents), and perhaps for Consumer Affairs Victoria (which approved the short form rebate statement)," Ms Sheggerud-Woods wrote on LinkedIn last month.

In the Keysborough case Augustin Pty Ltd (the Respondent) owned the property at 382 Greens Road, Keysborough and in signing an exclusive sale authority, engaged Advisory Services Pty Ltd (trading as Ray White St Albans) (Applicant) for the sale of the property.

The Respondent sold the property however the purchaser defaulted under the contract.

The Respondent then engaged another agency to assist in selling the property once more, which the applicant claimed was during the period of the exclusive sale authority.

A dispute arose and the applicant sued the respondent for commission on both sales, totalling $385,000.

Lawyers ML& K Legal facebooked in early May that the judgement was "a must read for real estate agents!"

The Ray White estate agency was represented by R Hay QC briefed by Alderuccio Solicitors while the property owner engaged I W Upjohn briefed by Webb Korfiatis.

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