Eliminating double commission liability for home sellers

Real estate industry takes initiative to eliminate potential double commission liability for home sellers

The Real Estate Institute of New Zealand (REINZ) and the industry regulator, the Real Estate Agents Authority (the REAA) are jointly recommending that real estate agencies New Zealand wide use a set of new clauses in residential real estate agency agreements, which minimise the possibility of vendors being liable for double commissions as well as reducing the potential for disputes between agents. Practices to manage these issues have been in place informally in a number of regions over many years, but not nationwide.

The double commission situation can arise when a vendor changes agent after signing an agency agreement with another, as the vendor can potentially still be liable for a commission if the ultimate buyer had originally been introduced by the first agent. REINZ has been concerned for some time about the potential for disputes between agents as to which agency is entitled to the commission and for the jeopardy arising for vendors if agents cannot resolve the situation amongst themselves.

To address this issue the REAA and REINZ have agreed on new clauses to replace the current ‘introduction clauses’ in Residential Agency Agreements. These clauses have been made available to REINZ members since July and have also been incorporated into a new agreement published by REINZ called “REINZ Agency Agreement First Edition 2014”. REINZ is providing the clauses and the agreement to its members which they may choose to adopt on a voluntary basis.

REINZ Chief Executive Officer Helen O’Sullivan says the new clauses are designed to introduce certainty for residential property sellers and the industry which works on a ‘no sell, no fee’ basis.

“This is an issue of common interest for home owners and the real estate industry which we as a responsible member organisation have set out to resolve with the support of the REAA. We believe the wide adoption of these new clauses will be beneficial for vendors and the real estate industry by increasing confidence and understanding between the parties.”

If vendors use more than one agency in selling their property, the new clauses will entitle the agent to claim commission only if the sale agreement has been signed during the agency period. The agent’s entitlement to commission will continue for 6 months after the end of the agency period only in the event of a private sale.

“We encourage all REINZ members selling residential property to use an agreement which incorporates the recommended clauses. We also encourage people selling their property to carefully check the terms of a listing agreement and remember that they can and should seek legal advice before signing”, Helen O’Sullivan says.

The initiative will also standardise the notice period required to terminate a non-exclusive listing agreement with an agent.

“We are pleased that the industry has recognised the possibility for problems and has taken a leading role, working with the industry regulator, to find a solution.” Helen O’Sullivan says.

There is no statutory regulation governing how real estate agency agreements should be drafted.

The Real Estate Institute of New Zealand is a voluntary industry membership organisation with over 13,000 members,representing the majority of the real estate industry in New Zealand.

The Real Estate Agents Authority is the independent government agency that regulates the New Zealand real estate industry.

ENDS

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