PHOTO: LJ Hooker. FILE
In a recent case that highlights the complexities of real estate commissions, the Queensland District Court ruled on a heated dispute between a developer and a real estate agent regarding entitlement to commissions. The case, Podium Project Marketing Pty Ltd v B Global (Aust) Pty Ltd [2024] QDC 219, shines a spotlight on how agents can claim their commissions, even in multi-layered sales involving sub-agents.
Background: A $40K Commission at Stake
The property developer appointed a sales agent to sell 60 lots in a Queensland development under an open listing agreement. The agreement stated the agent would receive $40,000 per lot sold, split between when a sale became unconditional and upon settlement. However, things got complicated when the agent engaged sub-agents to locate buyers.
Despite knowing about and not objecting to the use of sub-agents, the developer later refused to pay commissions for certain sales, claiming the agent wasn’t the “effective cause of sale” and that sub-agents weren’t licensed real estate professionals.
The Legal Showdown: Key Questions
The court tackled several critical questions:
- What qualifies as the “effective cause of sale”?
- Did the developer authorize or acquiesce to the use of sub-agents?
- Was authorization contingent on the sub-agents being licensed?
- Did Queensland’s Property Occupations Act 2014 bar commission payments due to licensing issues?
Court’s Findings: Who Gets Paid?
- Effective Cause of Sale
The court clarified that an agent can still be considered an effective cause of sale, even if multiple parties contribute to the transaction. In this case, the agent’s coordination and marketing efforts created a causal link between the buyers and the developer, making it an effective cause. - Authorization of Sub-Agents
The court found that the developer had implicitly authorized the use of sub-agents, particularly since the developer was aware of their involvement and later formalized this in a contract. - Licensing Requirements
The court ruled that licensing issues with individual sub-agents did not invalidate the agent’s entitlement to commissions. The contracts between the agent and developer did not explicitly require sub-agents to hold licenses. - Commission Entitlement
The agent was entitled to retain its commissions. The developer’s counterclaim for previously paid commissions was dismissed, and the court ordered the developer to cover the agent’s legal costs and interest.
Key Takeaways for Real Estate Professionals
- Clarity in Contracts: Ensure agreements explicitly define terms like “effective cause of sale” and outline licensing requirements for all parties involved.
- Document Authorization: Developers should clearly document any expectations regarding sub-agents to avoid disputes.
- Understanding the Law: Agents should familiarize themselves with local property laws to protect their commission entitlements.
SOURCE: REIQ
