Risk your commission, Risk your livelihood . . .
As a real estate agent, ensuring your appointment to act is valid and enforceable is vital to protect your ability to recover commission from your client. In Queensland, this appointment is legitimised by way of a complete Property Occupations Form 6 - Appointment and reappointment of a property agent, residential letting agent or property auctioneer.
What Is A Form 6 in Real Estate?
A Form 6 is essentially a contract between you and your client which sets out the rights and obligations of both parties, and must be completed correctly and signed by both parties to be valid and enforceable. As a real estate agent, you must be properly appointed by your client before providing any services, which must be done by completing this form.
Tips For Completing A Form 6 in Real Estate
Use the approved form
Whilst using the correct form may seem like an obvious step for most, you'd be surprised how many instances agents have been denied their commission for using either the wrong or outdated form (we touch more on this at the end of the article).
Remember, in order to receive your commission, you must be properly appointed by your client by completing the approved Form 6 and no other.
verify the legal owner
Take steps to verify the legal property owner (e.g. a title search of the property will reveal this) and ensure you are taking instructions from the registered owner of the property only.
complete the type and term of appointment
Agents may be appointed as an exclusive agency, sole agency or open listing. If you have been appointed on a sole or exclusive agency basis, the maximum term for the appointment is 90 days (except in a commercial sale appointment). Part 4, Section 2 of the Form 6 allows you to document the specific dates of your agreed upon appointment.
It's also important that you know whether your client has already appointed another agent to act as a real estate agent to perform the service - especially if you're acting under a non-exclusive appointment. This could become critical when determining whether you are the effective cause for the sale if another agent has previously acted for your client.
clarify the commission
Clarifying the commission with your client before the commencement of the contract is vital. Using phrases such as “to be negotiated” or anything similar can cause uncertainty between you and your client, and risks the validity of the appointment by leaving it open to interpretation.
clarify when commission is payable
Agents are required to specify when commission is payable. This generally refers to sales made by the agent, although it can refer to other circumstances included in an annexure (for example, the REIQ Essential Terms and Conditions), which is attached to the Form 6. Under the REIQ Essential Terms and Conditions, the seller agrees to pay the agent commission if a contract of sale is entered into with a buyer, where the agent is the effective cause of the sale.
disclose any expenses
You must set out in the Form 6 any expenses that will be incurred as part of your services to your client that you wish to recover from your client, including:
- Marketing fees;
- Advertising fees; and
- Repairs or maintenance.
get it signed
It is critical that you obtain a signed Form 6 before you commence providing any services to your client, as you will not be formally appointed until the Form 6 is signed by your client. To do so, you must complete all the required sections before requesting your client's signature.
If you follow these simple steps, you should find that the Form 6 process will go smoothly. However, we still recommend you speak to a lawyer to ensure that nothing has been overlooked or leaves room for misinterpretation - it could be the difference between 0 and tens of thousands of dollars, just as it was for some of the below.
When A Form 6 in Real Estate Goes Wrong
While seemingly simple, unfortunately Form 6 in real estate errors (whether they be minor or major), can have devastating consequences for unaware agents. Below are some real-world examples where Courts have denied an agent their commission due to poor record-keeping.
Agent must be the effective cause of sale - you must do more than simply 'introduce'
QCAT dismissed an agent’s claim in 2018 for its commission, finding the agent not to be the ‘effective cause’ of the sale.
- The client had appointed the first agent as sole and exclusive agent for the sale of the property.
- The first agent introduced a potential buyer for the property, and the client contracted to sell the property to the potential buyer, conditional on satisfactory finance approval and a building inspection.
- The buyer terminated the contract as the contract conditions were not satisfied.
- The agency agreement then expired, and the client appointed a second agent as sole and exclusive agent.
- The same buyer then entered an unconditional contract with the client negotiated by the second agent (who was aware of the previous contract that was terminated).
QCAT held that:
- An agent must do more than ‘merely introduce’ the buyer - they must show that they were the ‘effective cause’ for that sale;
- The second agent was the ‘effective cause’ of the sale by brokering an unconditional contract with the buyer; and
- The first agent was not entitled to any commission on the sale of the property to the buyer.
No entitlement to recover commission
cause: use of incorrect form
The Queensland Civil and Administrative Tribunal (QCAT) dismissed an agent’s claim for commission in 2016 because the agent used the outdated PAMDA Form 22a appointment of real estate agent (and should have used the POA Form 6).
QCAT held the failure by the agent to use the appropriate POA Form 6 required under the current legislation meant the agent was not formally appointed by the client was not entitled to claim any commission.
No entitlement to recover marketing charges
CAUSE: failure to properly complete form 6
The Queensland Court of Appeal dismissed an agent’s claim for commission in 2011 because of an incomplete prescribed form.
The Court held:
- The agent failed to complete sections of the form that provided how the service was to be performed, including stating its fees, charges and expenses such as advertising and marketing expenses that the agent is authorised to incur in connection with the performance of its services; and
- The agent had no entitlement to sue for or recover any commission or its expenses because it was not properly appointed.
How Can We Help?
Our Real Estate and Projects team is well experienced in helping real estate agents across a range of matters, including those related to Form 6.
We can assist you in completing your Form 6 so that it is binding with your clients, and prepare any specific conditions you require to tailor your appointments to suit your business.
If you require our assistance, please fill out the enquiry form below for an obligation-free appointment.
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