Listing Authorities / Your Obligation to Pay Commission


It is important to read the terms of the listing authority so you know how long you are appointing an agent for, especially if it is a sole listing, and when the listing comes to an end.

It is also important to know when you have to pay the agent a commission.

A sole agency agreement usually requires the seller to pay a commission if the property sells during the term of the sole agency, even if the agent did not introduce the buyer to the property. It is therefore important to add an exclusion in the listing authority if you have already been in negotiations with a potential purchaser, so that if that person ends up buying the property you do not have to pay commission.

Under a general agency, you usually only have to pay the agent commission if that agent introduces the buyer.

It is more complicated when a seller lists the property with more than one agent, or if he or she terminates the listing with one agent and then re-lists the property with a different agent. It is quite possible that a seller may have to pay both agents commission if the buyer was initially introduced to the property by the first agent before the listing was terminated, but then buyer makes an offer to purchase through the second agent, or directly to the seller.

An agent is not entitled to any commission unless there is a signed listing agreement in place. That is why agents are reluctant to show potential buyers through a property before a listing agreement is signed.

As long as there is a written appointment, the courts have said that an agent is entitled to commission (provided the agent has been appointed in writing) if the agent introduces the purchaser to the property and it is an effective cause of sale – the agent does not have to be the effective cause of sale.


The Court said the question to be asked is;

was the action of the agent in introducing the purchaser and conducting the inconclusive negotiations the effective, but not the only or exclusive cause of the transaction that ultimately resulted?”

This can be summarised in a simple question – did the agent find the buyer? If the answer is yes, this means that the agent will likely be seen as an “effective cause” of the sale.

What do you have to tell the buyer?


The basic rule is caveat emptor - “let the buyer beware”. In other words, a seller is generally under no duty of to voluntarily tell a buyer about any defects in the property. The buyer must rely on his or her own inspection and judgement.

This is true even when the seller knows that there is a defect, but a seller can not deliberately conceal a defect e.g. by covering a hole in the floor with a rug, or plastering and painting over a hole in a wall.

However, if the seller or the seller’s agent gives information to the buyer voluntarily, or in response to a question from a buyer, and the information is false, it may be a misrepresentation, or come within the Fair Trading Act 1996.

Although there is no requirement to voluntarily tell a buyer about a defect, a seller must answer a buyer’s questions honestly, and the seller must not do or say anything which is misleading. The line between silence and misleading words or conduct can be very fine.

An incorrect statement is still a misrepresentation even though it is made in an honest (but incorrect) belief that it is correct.

A representation is a statement as to a matter of past or present fact. It can either be made verbally, in writing, or by conduct.

Normally, a statement can not be implied from silence, unless silence makes a half truth of an actual statement. A statement may also become a misrepresentation, even if it was true at the time that is was made, if later becomes incorrect during the course of negotiations because of a change of circumstances - the person who made the statement must tell the buyer of the change of circumstances. .

A seller will be liable for statements made by him or her personally, and also for those made by an agent within the scope of the agent’s authority.

The statement can be made directly to the buyer, or through an advertisement or brochure. The representation must have induced the buyer to enter into the contract. i.e. the buyer would not have entered into the contract if the representation had not been made.

If there is a contract which is conditional, a seller can also be liable for incorrect statements which induce a buyer to declare the contract unconditional.

A seller will not be liable if the buyer knew that the representation was not true.

The Contractual Remedies Act 1979 gives the right of cancellation in some circumstances for misrepresentations, or a right of damages.

The Fair Trading Act 1986 deals with misleading and deceptive conduct and false representations. It has been applied to the sale of land.

Section 9 says that “no person shall, in trade, engage in conduct that is misleading or deceptive or is likely to mislead or deceive”.

The sale of your personal residence would not normally be “in trade”. However, if the misrepresentation has been made by your real estate agent, the agent would have been acting in trade, and so may be liable. Also, if a seller is in the business of buying and selling properties, that could be in trade.

What is in the agreement?


If you are buying another property, make sure the date for completing the sale (the settlement date) is the same as the completion date in your purchase agreement

The seller of a property makes certain promises to the buyer (warranties) in the standard sale agreement. These are found in clause 6. These may need to be amended, depending on the circumstances

When do you have a binding agreement?


To be enforceable, an agreement for the sale of land must be recorded in writing. This can be by an exchange of correspondence or other writing, rather than a formal sale and purchase agreement. There are certain other requirements.

The terms must be certain.

Also, there must be an offer, and the offer must be accepted.

During negotiations, it is common for the details (such as the price) in the agreement to be changed several times. Each time a change is made, this constitutes a counter offer. If an offer or counter offer is rejected, that terminates the offer or counter offer. A party that rejects an offer or counter offer cannot later have a change of mind and try to accept.

An offer must be accepted within a reasonable time or it will lapse, but it is highly recommended that if a seller has made a counter offer to one person which has not been either accepted or rejected, and then wants to enter into another agreement with a different party, the first counter offer should be withdrawn to avoid the danger of two different agreements being entered into.

If an offer (or counter offer) is accepted, the contract will not be formed until the other party has been informed of the acceptance.



Make sure the deposit is enough to cover the agents commission (and GST), and if necessary, enough to cover any deposit you may have to pay if you are buying another property. It should also be large enough to hurt the purchaser if the purchaser for some reason wants to walk away form the deal, especially if it is an overseas buyer. A 10% deposit is normal.

The agent is required to hold the deposit in the agents trust account for 10 working days before it can be released, unless both sides authorise the agent to release the deposit earlier than that. If you need to get your hands on the deposit quicker than that, you may need to add a clause to the agreement requiring the buyer to agree to an early release.

Also, if a buyer objects to the title to the property because of something on the title (a requisition), and serves an appropriate notice on the agent, the agent must continue to hold the deposit until that issue is resolved. To avoid requistions, all the easements etc that are listed on the title should be added to the legal description of the property in the agreement, Alternatively, the right of requisition in the agreement can be crossed out before signing.

Conditional agreements


An agreement can be conditional on the buyer doing something by a certain date (e.g. getting a bank loan, getting a LIM, getting a property inspection, or selling their own property), or on the seller doing something (getting the Council to issue a code compliance certificate).

If there is a condition, the person who must do something under that condition cannot just sit back and do nothing – he or she must make reasonable efforts to satisfy the condition.

Getting ready for settlement


If you have rented out your property, you must terminate the tenancy before the sale is completed if the buyer wants vacant possession. Make sure the date for completion (settlement date) is at least 42 days after the date that the agreement is to become unconditional.

Residential property Buying residential property Selling residential property

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