COMMISSION SHARING AGREEMENTS BY ANY OTHER NAME

Commercial Directions

Introduction

Whether described as commission sharing, referral or consultancy agreement, real estate agents and other unlicensed persons in Victoria who wish to share commission in respect of the sale of a property must heed the strict notice requirements under the Estate Agents Act 1980 (Vic) (the Act).

Failure to comply with the Act will prevent the agent from paying to any other person any share of a commission that the agent has obtained in respect of any agency work. This will apply to both estate agents and innocent referrers, regardless of their commercial experience and despite the fact that the obligation to comply with the Act rests on the estate agent.

Notice requirements to vendor

Notice of commission sharing arrangement must be given to the vendor under
section 48 of the Act. This applies to estate agents who agree to share any commission for estate agency work whether with persons they employ, are in partnership with, or who are unlicensed. (‘Commission’ includes fees, charges, rewards or other remuneration whether monetary or otherwise.)

Regardless of how such a fee is described, commission sharing is prohibited unless notice in writing has been given to the vendor.

Compliant statement

Prior to obtaining a person’s signature for estate agency work, an agent must ensure that the person is given a statement that complies with section 48(3) of the Act.

A compliant statement must:

  1. state that any commission the agent is entitled to under the engagement will be shared with one or more other people;
  2. identify by name every person who is entitled to share the commission with the agent;
  3. contain any other details required by the regulations; and
  4. be in a form approved by the Director of Consumer Affairs Victoria.

An agent is prohibited from paying to another person any share of a commission that the agent has obtained for estate agency work if the agent has failed to provide a compliant statement.

Take out message

Estate agents and other unlicensed persons in Victoria intending to enter into any commission sharing arrangements (however described) must be wary of the strict laws aimed at protecting consumers.

Unlicensed persons who enter into such an agreement with an estate agent risk ending up with an unenforceable agreement and losing the share of commission bargained for.

Estate agents who fail to give notice of such an arrangement risk large fines and professional disciplinary proceedings.

Authored by Michael Markowitz, Partner, Jodie Potts, Partner, Melbourne.


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