Real Estate Agents - Failure to provide a copy of signed agency agreement can lead to loss of your commission!

A real estate agency purported to enter into an agency agreement with an owner of a commercial property. The client signed the agreement, but the agency did not sign the agreement until four months later. A signed copy of the agency agreement was never provided to the client.

During this time, the client entered into a short term lease with a film company who had a connection to the agency, and duly paid commission to the agency for this arrangement.

However, the client declined to pay commission for two subsequent leases, and advised the agency by letter that their agreement had expired with the completion of the first lease, and even if this was not the case, their letter should be taken as notice of its termination.

The agency sued the client for commissions in relation to the two leases.

By law, a real estate agent is only entitled to commission for work performed under a written agency agreement that has been signed by the client and agent, where a copy has been given by the agent to the client within 48 hours of the client signing it.

However, the Court has a limited power to order that commission is payable despite failure to provide the client with a copy of the agreement within 48 hours, if the failure to give a copy of the agreement within the required time was caused by inadvertence, or other cause beyond the agent’s control.

In this case, the Court held that the agency was not entitled to commission for the subsequent leases because of their clear failure to comply with the legal obligation to work under a signed agreement, and provide a copy of it to the client.

The purpose of these regulations is to protect consumers, because in a situation where terms are only being negotiated after part or all of the agent’s services have been performed, then there will most likely be an inequality of bargaining positions favouring the agent. This is because users of agents’ services are usually unfamiliar with market practices and are dependent on agents for advice.

The Court went on further to state that they would not make an order for commission due to inadvertence, because the agency had ample opportunity to provide the client with a signed copy of the agreement. The Court’s power to make an order for commission did not extend to situations where agents were just negligent. There had to be an unforeseen disruption caused by others. 

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Claire Tyler and Hanifa Kodirova