Protecting Your Commission: Why a Proper Signature is Essential

O*NO! Imagine closing a major deal, doing all the hard work to market and sell a property, only to find yourself battling over $420,000 in unpaid commissions because the contract wasn’t properly signed. It’s every real estate agent’s nightmare—but for one agency, it was a harsh reality.

In the world of real estate, a clear, well-executed agreement is your best friend. A recent case in NSW (Christer Nominees Pty Ltd v Calabria Community Club Ltd [2024] NSWSC 1071) highlights the importance of getting it right and the consequences of not following proper procedure. Here’s what went down—and how you, as a real estate agent, can avoid the same headache.

Summary of the Case 

A real estate agency sued a property owner (a company) to recover unpaid commission fees for services related to marketing and selling units in a strata development. The agency sought over $420,000 in commission, plus interest—and they won. Here's why.

The agency based their claim on two exclusive agency agreements:

• Agreement A: Signed on 14 November 2015, retroactive to 1 July 2015, for a 12-month period.

• Agreement B: Executed on 1 August 2016, for 24 months.

The defendant company (run by a board of seven directors) denied ever entering into these agreements. They claimed that the agreements weren't binding because only one director signed them, instead of two as per the company’s constitution and an internal resolution passed before the first agreement.

Where the Defendants Went Wrong

Disregarding Their Own Constitution: The company argued that their constitution required two directors to sign the agreements. However, the court found that the director who signed had implied actual authority, based on internal communications and the urgent need to finalise the deal before the sales launch.

Partial Performance: The defendants had already paid part of the commission, further undermining their argument. This demonstrated that they had accepted the agreements, even if they weren’t executed precisely as required by their internal rules.

Failure to Address NSW Compliance: While the defendant raised concerns about the agency's address not being in NSW (required under the Property and Stock Agents Act 2002), the court held that this didn’t disqualify the agency from receiving commission. The agency’s licence reflected a Victorian address, which was acceptable under the law.

Non-Compliance Claims Rejected: The defendant also tried to argue that the agreements didn’t comply with sections 28, 36, 55, and 56 of the Property and Stock Agents Act 2002. But these claims didn’t hold water. Section 55(1)(a) states that for a commission to be payable, an agency agreement must be signed by both the licensee and the person from whom the commission is sought. Here, the court found that any potential non-compliance was overcome, as the agency had performed its duties and the intent to pay commissions was evident.

The Consequences: The court sided with the agency, ruling that the agreements were valid and enforceable. The real estate agency was awarded $419,137.08, plus interest.

How Could This Be Avoided

Ensure Authority: When entering into agreements, always confirm that the person signing on behalf of a company has the authority to do so. While "implied authority" saved the day here, you don’t want to leave it to chance. Get the proper signatures upfront, especially if the company’s constitution or policies require multiple signatories.

Get Your Agreements Right: Adherence to the requirements of your state/territory act is crucial. Make sure all necessary signatures are in place and that your agreements are airtight to avoid any claims of non-compliance. This includes clearly stating the address of the agency’s registered office and properly reviewing your commission structures in line with the Act.

Document Communication: This case shows the power of internal communications as evidence. The defendants' own emails, discussions with their solicitor, and urgency to finalise the agreements before a key sales launch played a big role in the court’s decision. Keep records of all interactions—it might save you one day.

Clear Contracts: Always ensure your contracts are clear, compliant with the law, and signed by the correct parties. A small procedural misstep can lead to a big dispute. Double-check the technical details, such as company constitutions, signatory requirements, and compliance with the relevant state legislation.

Be Proactive with Legal Guidance: Don’t wait until there’s a dispute to seek legal advice. A lawyer can help you ensure that all agreements are bulletproof from the start.

Key Takeaways

• Ensure that the right people, with proper authority, are signing your contracts to avoid disputes over validity.

• Remember to adhere to the requirements in your state/territory laws, especially regarding document inclusions, signatures and address details, to ensure your agreement is enforceable.

• Document all communications and partial payments—they can strengthen your case if a dispute arises.

YOUR NEXT STEPS

Don’t wait until you're caught in a costly commission dispute! Let’s ensure your contracts are airtight and compliant from the get-go – our team of real estate agency lawyers are here to help!

Boring legal stuff: This article is general information only and cannot be regarded as legal, financial or accounting advice as it does not take into account your personal circumstances. For tailored advice, please contact us. PS - congratulations if you have read this far, you must love legal disclaimers or are a sucker for punishment.