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REIQ Journal : July 2008
36 LEGAL ISSUES Michael Gapes, Partner, Carter Newell Lawyers performance of an activity as a real estate agent” unless a valid Appointment, which complies with section 133, has been entered into. The onerous requirements of section 133, combined with the strict provisions of section 140, are frequently the source of commission disputes where an agent has committed what it may consider to be only minor breaches of the PAMD Act. For example, agents may find that they are unable to recover commission because the Appointment is an outdated version or because it does not comply with the time limitations for sole and exclusive agency appointments. It is strongly recommended that agents always obtain an executed Appointment before performing any services for a potential client... Jones argued that McKay’s entitlement to commission was largely based on activities undertaken in May 2004, prior to the execution of the Appointment. On that basis, she asserted that she was not obliged to pay McKay’s commission. Fortunately the Court of Appeal rejected this argument. In the leading judgment, Justice Muir accepted that McKay had performed the services of a real estate agent prior to the execution of the Appointment. This included his dealings with the buyer and negotiating the terms of the contract in late May 2004. The court also held that any costs that McKay had incurred during that period would not be recoverable by him, because the costs were incurred prior to the Appointment. However, most importantly, the court found that McKay’s claim for commission from the sale, totalling $76,120, arose out of Jones entering into a contract of sale, which occurred after the Appointment was executed. Conclusion This decision serves as a cautionary tale for agents. Although the finding was in favour of the agent in this instance, the Court observed that if an agent introduced buyers and sellers before obtaining an executed Appointment, the agent runs the risk of losing his or her commission if the seller elects not to formally appoint the agent at the last minute and, instead, chooses to finalise the contract documents with the buyer privately. Quite apart from whether an agent will be entitled to commission, a failure to comply with the section 133 appointment requirements is an offence under the PAMD Act. In this case, for instance, the Court noted that McKay had provided the services of an agent as defined by section 133 in May 2004 without first obtaining an executed Appointment, which could expose him to disciplinary action under the PAMD Act. It is strongly recommended that agents always obtain an executed Appointment before performing any services for a potential client to protect themselves in respect of both the recovery of their commission and against any potential disciplinary proceedings. REIQ Journal July 2008