Well, here's another nice commission you’ve gotten me into!

Soft Technology v Jones Lang Lasalle [2022] NZCA 353

The Court of Appeal recently considered section 126 of the Real Estate Agents Act 2008 (entitlement to commission) in a case where the real estate agent claimed commission from its client for introducing a tenant to a commercial lease.

Under section 126, a real estate agent is only entitled to commission where (a) work is performed under a written agency agreement signed by both the client and agent; and (b) a copy of the signed agency agreement has been given by the agent to the client within 48 hours of being signed by the client.

The High Court held that section 126 does not require the agency agreement to be signed by both parties before the agent begins the real estate work on which commission is payable.

The Court of Appeal considered the consumer protection focus of the statute, the legislative history (including the previous requirements, under section 62 of the Real Estate Agents Act 1976) and the other provisions relating to agency agreements.

Allowing the appeal, the Court of Appeal held that a signed agency agreement must be in place before undertaking the work for which commission is claimed.

Guidance from the Real Estate Agents Authority (which regulates real estate agents) says that, before an agent can receive a commission for real estate agency work, there must be a written agency agreement in place before the agent does any work. The agency agreement must be signed by or on behalf of the client and the agent, and the agent must give a copy of the agency agreement to the client within 48 hours of it being signed.

The guidance does not say the agency agreement must be provided to the client before commencing work. Perhaps surprisingly, the Court of Appeal also indicated that a copy of the signed agreement must be given to the client before the real estate work is undertaken:

“The use of the past tense [in section 126(1)(c)] requires the act of providing a copy of the completed agreement to have occurred before the essential activity addressed in the section, that is, the work to be performed” (paragraph 46).

In the alternative, if the agency agreement was not unenforceable, the Court of Appeal held that the agent was unable to recover commission relying on section 126(2). This provision enables the Court to order that commission is recoverable, despite a failure to give a copy of the agreement to the client within 48 hours, if the failure was “occasioned by inadvertence or other cause beyond the control of the agent”.

The signed agency agreement was never provided by the agent to the client, who only obtained a copy through discovery processes in the litigation. The Court of Appeal said that this reflected a “measure of negligence” by the agent that could not be excused as inadvertence.