[Author – Tim ODwyer]
It is always fascinating, if not also disturbing, to see the self-serving clauses added by agents when the law allows them to prepare real estate contracts without the inconvenient involvement of solicitors.
What follows is one agent’s annexure to a contract which recently landed on my desk. The vendors and purchasers had already signed – obviously without understanding what the agent had cunningly slipped into their agreement.
There is nothing here that needed to be included in a written contract for the sale and purchase of real estate. Nothing anyway relevant to the property being sold or in any way pertinent to the usual rights and duties of the parties.
Needless to say, this is simply an exercise in protecting the agent’s commission. How offensive is it to incorporate in a contract between vendor and purchaser, what is primarily an agreement between vendor and agent on the rate of sales commission – and when and how the commission will be payable?
Note that the agent expects his pound of flesh not only on completion of the contract, but also if the deposit “or some part thereof” is forfeited.
It is fair enough for the vendor to have some liablity to the agent if the vendor defaults, or releases the purchaser from the contract. But why provide for that in a contract between vendor and purchaser? Note too that the agent still wants to be protected if the purchaser pays less deposit than the amount of commission. In this case the agent outrageously purports to include an irrevocable authority and direction to either the purchaser or the purchaser’s solicitors to pay the commission when the contract settles.
Sadly, in my experience, too many solicitors when acting for purchasers in such situations (with or without clauses like these) are quite happy to act also as unpaid debt collectors for vendors’ agents.
Finally, and for good measure, the agent purports to cover the situation where the deposit is not held in its trust account. How offensive again to include in a contract between vendor and purchaser a clause whereby the vendor authorises and directs whoever holds the deposit to pay the commission “promptly upon completion?”
Clearly this annexure is no one-off item, but is rather a standard document inserted by the agent in every sales contract. Variations of this outrageous exercise are, of course, not uncommon in jurisdictions where agents are legally licensed to prepare contracts. What hope?
All I know is, that if any solicitor added costs-protecting conditions like these to contracts prepared between clients and other parties, the whole nation would soon see the sordid details on some television current affairs program. And yours truly would probably make one of my regular TV appearances condemning such despicable and unprofessional conduct.
ANNEXURE A FOR CONTRACTS OF SALE
Special Conditions annexed hereto and forming part of the Contract of Sale.
1. (a) The Vendor agrees to pay the commission to the Agent at the rate agreed upon between the Vendor and Agent. In the absence of any agreement commission shall be payable at the maximum rate permissible by law.
(b) Commission shall be payable by the Vendor:
(i) On completion of this contract; or
(ii) If the Agent has introduced the Purchaser who entered into this enforceable Contract of Sale and who completes this Contract; or who does not complete this Contract in circumstances where the deposit or some part thereof is forfeited; or who does not complete this Contract pursuant to any default, act or omission by the Vendor or if the Vendor does not complete this Contract; or if the Vendor subsequently agrees to release the Purchaser from further obligation under this Contract.
The vendor authorises and directs the stakeholder or other person (including the Vendor’s solicitor) to whom the deposit is paid under this contract to pay the agent’s commission out of the deposit promptly upon completion of this Contract and upon production of this document. The Vendor declares that receipts for such payment will be sufficient discharge to the stakeholder or other person from any obligation to account to the Vendor for the amount so paid.
(c) If at the completion of this Contract, the Agent is not the stakeholder or does not, as stakeholder, hold sufficient money to satisfy the commission, the Vendor irrevocably authorises and directs the Purchaser or the Purchaser’s Solicitors, to pay the commission or the balance of the commission to the Agent on completion. The Vendor agrees that any sum due by the Purchaser to the Agent by way of commission or balance of commission shall be deducted by the purchaser from the balance of moneys payable to the Vendor.
(d) The Vendor authorises and directs the stakeholder or other person (including the Vendor’s solicitor) to whom the deposit is paid under this Contract to pay the Agent’s commission out of the deposit promptly upon completion of this contract if the agent’s commission has not been paid pursuant to sub-clause (c) and upon production of this document pursuant to sub-clause (c). The Vendor declares that receipt of such payment will be sufficient discharge to the stakeholder or other person from any obligation to account to the Vendor for the amount so paid.