When Does A Purchaser Pay The Agent’s Commission?
by Peter Mericka B.A., LL.B
Real Estate Lawyer
Qualified Practising Conveyancer Victoria
Director Lawyers Real Estate Pty Ltd
Purchasers don’t expect to have to pay an estate agent’s commission, but what if the contract is booby-trapped with a special condition that requires the purchaser to indemnify the vendor?
We were asked to advise on a contract prepared by Davis Lawyers of Melbourne, for a property being sold through Edward Letico Real Estate. It would appear that the vendor was concerned about the possible involvement of another estate agent, and feared having to pay two commissions. Here is the special condition that Davis Lawyers added to the contract:
“INDEMNITY RE ESTATE AGENT
The purchaser warrants that he has not been introduced to the vendor or to the property directly or indirectly by any Real Estate Agent other than the Agent herein described or other person who might be entitled to claim commission from the vendor in respect of this sale and the purchaser shall indemnify, and keep indemnified the vendor, at all times, notwithstanding settlement hereof from and against any claim or liability for commission or loss or damages resulting from a breach of this warranty.”
Our advice to the purchaser was that this special condition would have to be struck out in its entirety. Alternatively, the purchaser would have to remember exactly how he came to be aware that the property was for sale, and to be in a position to prove that this was how he was “introduced” to the property, because if he had read an advertisement, sign or Internet listing prepared by an estate agent other than the estate agent named in the contract, then he could end up paying many thousands of dollars in estate agent’s commission.
We have asked Davies Lawyers how they would advise a purchaser in such circumstances. We will post their response in due course.
2 Comments
Hi – I’m a potential purchaser facing this exact situation – I viewed a property with agent #1 – even made offers. The vendor then changed to another agent. How do I continue with agent #2 when the contract has the above clause?
Estate agents don’t want to scare vendors out of their industry, and so there is usually a clause in the REIV Exclusive Sale Authority (in Victoria) that states that the vendor will not have to pay a second commission if the property is sold through the 2nd estate agent to someone who became aware that it was on the market while the vendor was contractually bound to the 1st estate agent. However, this does not apply if the vendor sells other than through an estate agent who is a member of the REIV.
A purchaser is only in danger if a vendor (or more to the point, the vendor’s lawyer or conveyancer) sneaks a condition into the contract requiring the purchaser to pay up if the vendor is handed a demand for commission by the 1st estate agent.