By Luke Voogt
About 140 real estate agents in Geelong could be at risk of losing commissions after a property dispute exposed a flaw in a commonly-used sales form.
The Court of Appeal last month ruled that Real Estate Institute of Victoria’s (REIV) exclusive sales authority contract form was non-compliant with legislation.
The decision could expose the REIV’s 5000 members, including about 140 in Geelong, to home-sellers suing for their commissions back.
SLF Lawyers has issued writs on behalf of a real estate franchise to REIV and Consumer Affairs Victoria (CAV), which approved the form.
“A lot of agents are going to lose their commissions,“ said firm partner John Gdanski.
Mr Gdanski declined to say which agent he was representing but confirmed his client was “substantial“ and sold properties in Geelong.
“(The decision) affects every agent in Victoria that has used that form,” he said.
The Melbourne law firm received a memorandum of advice that claimed both REIV and CAV had breached their legal obligations to agents and vendors, The Age reported on Wednesday.
“Onus of responsibility was on the authorities,” Mr Gdanski told the Indy yesterday.
“What we’re doing by taking an action against the authorities is a big-picture thing.”
In August 2017 an agent from Ray White St Albans sued over a client’s failure to pay a $385,000 commission on an $8.8 million sale of a Keysborough industrial site.
But the County Court ruled the shorter version of the contract which the agent used failed to comply with the Estate Agents Act.
The agent challenged the decision in the Court of Appeal, which again ruled in the client’s favour on 19 April.
The decision provided a legal basis for sellers to claw back commissions even when agents acted in good faith, property law expert Robert Hay told The Age this week.
“There could be lots of innocent agents, who could be dis-gorged of their commissions,” he said.
An industry source told the Indy that three sellers in Melbourne were attempting to get their commission back through the “technical breach“ but was not aware of similar incidences in Geelong.
But they warned sellers could sue local agents for “years of commissions” if the Victorian Government did not introduce retrospective legislation addressing the flaw.
When the Supreme Court confirmed the original ruling it found the short form of the contract failed to include a statement regarding rebates, as required by the act.
An REIV spokesperson warned agents to check all authority documents comply with the law “whatever the source.”
“The REIV is working with Consumer Affairs Victoria and the Victorian Government for a timely solution to this anomaly,” the spokesperson said.
