Overview
Understanding an Agent’s Role in Earning Commission
In Queensland real estate, determining whether an agent is entitled to commission for a sale often revolves around the concept of effective cause. Numerous court decisions have helped clarify what constitutes an effective cause, especially when multiple agents are involved in the sale of a property. Agents and sellers alike must be aware of these legal principles to avoid disputes over commission payments.
What is Effective Cause?
In Queensland, simply introducing a buyer to a property is not enough to automatically entitle an agent to commission. The concept of effective cause requires that the agent’s actions must have directly contributed to the sale. This means the agent must play a significant role in facilitating the sale, rather than just showing the property or introducing a potential buyer.
Key elements to determine effective cause include:
- Efforts that significantly contributed to the buyer's decision to purchase
- Ongoing involvement in the negotiation or sale process
- The role played in closing the sale
Court Decisions on Competing Commission Claims
Many disputes arise when more than one agent claims to be the effective cause of a sale. In Queensland, case law offers guidance on how courts determine which agent is entitled to commission.
Introduction is Not Enough
While introducing a buyer is part of an agent’s duties, it alone may not be sufficient to claim commission. For example, if the agent introduces a buyer but the sale occurs later under different terms, that agent may not be entitled to commission.Post-Exclusive Agency Period Sales
A common situation occurs when a property is sold to a buyer after the expiration of an exclusive agency period. If the terms and price are the same, the original agent who introduced the buyer may still have a valid claim for commission, even if another agent completes the sale.
Read more about this example here.
Can Two Agencies Claim Commission for the Same Sale?
In some instances, courts have ruled that two different agents may be considered effective causes of a sale—one for introducing the buyer and the other for negotiating or closing the sale. This occurs when:
- The first agent's introduction is integral to the buyer’s decision to purchase
- The second agent’s skills in finalizing the transaction are equally important
This scenario can create disputes, as both agencies may claim commission. The courts will carefully evaluate the timeline of events and the roles each agent played to determine if both were essential to the sale.
Read an example of this situation here.
Key Factors in Determining Effective Cause
When courts examine commission disputes, several factors are considered to determine whether an agent is the effective cause of a sale:
- Timing of the introduction: Did the agent introduce the buyer during their exclusive agency period or afterward?
- Buyer engagement: How much influence did the agent have over the buyer’s decision-making process?
- Ongoing involvement: Was the agent actively involved in negotiations, or did another agent take over to close the deal?
- Price and terms: If the sale occurs at the same price and terms after an agent's introduction, it strengthens the agent’s commission claim.
See an example here.
Frequently Asked Questions (FAQ)
1. Is introducing a buyer enough to earn commission?
No, introducing a buyer is not enough to establish effective cause. The agent must be significantly involved in bringing the sale to fruition, either through negotiations or other efforts that directly contribute to the sale.
2. Can two agents both claim commission for the same sale?
Yes, in some cases, two agents may be considered effective causes. One may introduce the buyer while another closes the deal, and both may be entitled to commission, depending on their roles.
3. What happens if the sale occurs after the agency agreement expires?
If the agent introduced the buyer during the exclusive agency period and the sale happens shortly afterward on the same terms, the agent may still be entitled to commission, even if another agent completes the sale.
4. What should agents and sellers consider when drafting agency agreements?
Clear terms should be included in the agreement regarding the agent’s responsibilities, commission entitlements, and post-agency obligations. This can help avoid disputes if the sale occurs after the agreement has ended.
Determining commission entitlement can be complex, particularly when multiple agents are involved. Queensland law focuses on whether the agent was the effective cause of the sale, requiring more than just an introduction to claim commission. By understanding the factors that contribute to effective cause, agents can better protect their interests, and sellers can avoid disputes over commission payments.
Disclaimer: This information is intended for general guidance regarding Queensland Property Law. It does not constitute legal advice. We strongly recommend seeking legal advice tailored to your specific situation. For expert assistance, call 1300 590 613 or use our live chat to arrange an initial consultation.
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