Pay agent commission on settlment only

Hi there,
I am planning to sell my investment property in Ipswich, QLD.
In Form 6, Appointment of property agent it is stated under clause 5 in the essential terms and conditions section that "The Client agrees to pay the Agent Commission as specified in PArt 7 of the Appointment of Property Agent if a Contract of Sale of the Property is entered into with the Buyer..."

Can I change this clause to upon settlement only to protect myself if the deal falls over e.g. the buyer can't settle? I don't want to pay commission if the sale doesn't go through but as I read it in the terms the agent can ask for commission once the "Contract of sale is complete" Complete means when the vendor signs the contract.

 

Sure can. contracts are negotiable.

 

Wouldn't "settlement" be interpreted as being the completion of the contract though ?

Being that the contract has all the terms and conditions within and the settlement date, so unless settlement occurs the contract isn't completed...

Probably easier to change the contract (to stipulate completion being settlement) than changing the agency agreement.

There has been cases where as part of the contract the deposit has been arranged to be released early, as the agent holds the deposit in trust their agreement usually say's that they take their fee from the deposit and forward you the balance, so it is possible that the contract may still fall over after the agency has been paid. Then you would be faced with pursuing the defaulting purchaser for costs

 

Get legal advice, but it doesnt read like completion means when the vendor signs the contract. If that were the case whats the point of 5.1.2, 5.1.3 and 5.1.4, which all talk about events after exchange of contract?

 

Question is why they wouldn’t write settlement instead of contract of sale? Must be a reason for this I think it’s written in the agents favour but I can’t find anywhere else any clause that states “Commission to provide paid only on settlement” not even a sample clause somewhere on the internet which is really odd.

 

The weird thing is that Contract of Sale is not even defined in the first part of this term. Wonder if I should just add it in there saying ‘Completion of Contract of sale” means “On settlement”?

 

Clearly the other parts require payment of agents commission if the buyer fails to settle and the seller gets the deposit, or both buyer and seller decide to terminate.

Doubt any agent would agree to comms payable only if settlement occurs.

 

This doesn't make sense. 2 separate contracts involved. One for property the other for the agency agreement

 

I haven’t sold too many properties but I would only sign a Form 6 if the REA gets their commission at settlement.

Take our latest sale. The key dates are:

1. Contract signed 28th October 2019.
2. Contact unconditional 16th October 2020
3. Settlement hasn’t occurred yet

Yep, you are reading right:

• 12 months between contract signing and going unconditional, in that time we had 8 contract extensions.
• 4 months so far between unconditional and settlement.

How much support/communication do you think we would have received from the REA over the last 16 months if they got their commission in October 2019?

Another consideration:- as a seller, I like to see the deposit paid equal to the REA’s commission. Once we bought a property and the seller decided to reduce commission payable on our settlement.

I felt bad because, as a buyer, I paid minimal deposit. I don’t know how the dispute ended but, if my deposit covered the full commission, the REA would have been in a far stronger negotiating position.

 

Ok, anyone able to change this clause in a way that payment of commission can only happen at settlement so I can insert that in the form before I sign?

The seller client agrees to pay the agent commission (as specified in Part 7 of the Form 6) if a contract of sale is entered into with a buyer, where the agent is the effective cause of the sale, provided that:
5.1 the contract of sale is completed; or
5.2 the seller client defaults under the contract of sale and by reason of that default the contract is terminated; or
5.3 the contract of sale is not completed and the whole or part of the deposit paid is liable to be forfeited; or
5.4 the contract of sale is terminated by mutual agreement of the seller client and the buyer.

Cheers

 

why aren't you asking your solicitor?

 

That’s what I am just doing now.

 

You have to get the agent to agree to it too

 

It would seem the agent would only be entitled to commission under scenarios described in clause s5.1,5.2,5.3,5.4. Clause 5.1 & 5.3 it would seem you would have the buyer's deposit to pay the agent. Clause 5.4 it would seem you voluntarily backed out of the deal hence the agent did work only for you to back out. Clause 5.2 is the only one I would worry about.

 

I have seen similar in contracts and on discussion with agent it makes sense. They said that while they "earn" their Comms at contract they may request it be paid from deposit on trust if consent is given - Often limited by vendors bank and solicitor. In many cases their fee is only paid at contract settlement or just prior. The contract is worded this way to make then entitled. How could they sue if settlement was not completed otherwise?

Speak to the agent about the timing of the fee being paid. I believe the issue is two matters - One is the agent being entitled to income and the second is when they expect the fee that is earned will be paid.

 

From the agents perpsective their job is to get an unconditional contract on the property. Hence they often request the deposit to be released asap and they expect to be paid from that deposit.

It's an argument that does sort of align with that of the vendor. Their job is to sell the property. An unconditional contract acheives that. Even if the sale doesn't proceed, the vendor has the expectation that they'll retain the deposit, so it's not unreasonable for the REA to have the expectation that they'll get paid for their work.