An agent must prepare a written agency agreement for any services that an agent agrees to provide for a client.
It is important to ensure the agreement is prepared, signed and served in accordance with the law.
An agent is not entitled to any commission or expenses for services performed for a client unless:
- a written agency agreement has been entered into for the services
- the agreement was signed by the licence holder and the client
- the agreement contains applicable terms required by the regulations, and
- a copy of the agreement signed by the licensee is served on the client within 48 hours after the client signs the agreement.
An agent is still entitled to receive commission and recoup expenses without a written agency agreement for services relating to livestock.
These requirements are in the Property and Stock Agents Act 2002 (the Act) and the Property and Stock Agents Regulation 2014(the Regulation).
If the agency agreement relates to residential property or rural land, it must contain a statement identifying the source and estimated amount of all rebates, discounts and commissions that the licensee will, or may receive in respect of the expenses payable by the client under the agreement (see section 57 of the Act).
An agent is not entitled to any expenses from the client if these disclosures are not made.
If the agreement is for the sale of residential property, the client must be given a copy of the approved guide for agency agreements.
The agency agreement approved guide can be given to the client up to one month before the agreement is signed by the client (see section 56 of the Act).
If the agreement is for the sale of residential property or rural land, the client has a cooling-off period of one day that is either a business day or Saturday, after signing of the agreement (see section 59 of the Act). The client can cancel the agreement by giving an agent written notice during the cooling-off period (see section 60 of the Act).
Important – assistant agents cannot enter into an agency agreement
Certificate of registration holders cannot enter into an agency agreement – in order to be legally binding, the agreement must be signed by a Class 1 or 2 licence holder.
This does not prevent certificate of registration holders from prospecting for clients for the agency and contributing to the preparation of the agency agreement.
For example, assistant agents will continue to be able to carry out property inspections and prepare an inspection report, whether that be for sales or property management.
However, the licence holder entering into the agency agreement will need to ensure that the inspection is carried out properly and be satisfied that the contents of the inspection report are true and accurate.
A certificate of registration holder as an assistant stock and station agent may enter into an agency agreement that relates only to the sale or purchase of livestock.
Serving a copy of the agreement
Without limiting the means by which a copy of the agency agreement can be served on a person, it may be served:
- electronically, or
- by other means allowed by the regulations.
Currently, the Regulation does not prescribe any other means. In most instances, agents would deliver a copy of the agreement personally to the client, electronically or by post to the client’s postal address.
An agency agreement must:
- contain terms prescribed by the regulations
- be signed by a Class 1 or 2 licence holder and the client
- be a fully signed copy and served on the client within 48 hours of the client having signed it
- disclose all rebates, discounts and commissions which will or may be received by the agent in relation to expenses payable by the client under the agreement (relating to residential property or rural land)
- ensure that a copy of the approved guide for agency agreements is given to the client (if the agreement is for sale of residential property or rural land)
Terms prescribed by the regulations
The Regulation prescribes certain terms which must be included in different kinds of agency agreements. You can look at Schedules 7 to 14 of the Regulation to see the terms required to be included in each type of agreement. Agency agreements can also contain additional terms, so long as they do not conflict with the Act, Regulation or with the prescribed terms.
Agreements for the sale of residential property or rural land
There are several measures to help homeowners understand their rights and obligations relating to agency agreements. Under the law:
- certain terms, warnings and disclosures must be included in agency agreements
- the agent must give a copy of the approved guide ‘Agency agreements for the sale of residential property’ to sellers of residential property before they sign the agency agreement, and
- the seller has a cooling-off period of one business day (which includes a Saturday) in which they can cancel (rescind) the agency agreement after having signed it.
How the cooling-off period works
The cooling-off period begins when the agreement has been signed by or for each of the client/s and ends at 5 pm on the next day that is a business day or Saturday. Public holidays, bank holidays and Sundays are not included in the cooling-off period.
The length of the cooling-off period can be extended if the agent and client both agree. This can be done in two ways:
- a term can be included in the agency agreement stating the agreed longer cooling-off period, or
- before the usual cooling-off period ends, the agent can sign a written statement extending the cooling-off period.
How does the client rescind the agency agreement?
If the client decides not to proceed with the agreement, they need to give the agent a written ‘notice of rescission’ within the cooling-off period. The notice of rescission is simply a letter addressed to the agent stating that the client rescinds or cancels the agreement.
The notice must be signed by the client or their solicitor. If there is more than one client, the notice must be signed by each client or their respective solicitors.
The notice can be:
- given to the agent personally
- delivered to or left it at the agent's place of business or at any other address specified in the agency agreement as a place where a notice of rescission may be given, or
- faxed to the agent.
What is the effect of rescission?
When a notice of rescission is served during the cooling-off period, it is taken to be rescinded from the day the client signed the notice. Neither the agent or the client is liable to pay any commission, damages, costs or expenses in connection with the agency agreement or its rescission. If the client has already paid any money to the agent, it must be refunded in full.
How does the client waive the cooling-off period?
The client can choose to give up, or ‘waive’ their right to a cooling-off period.
The cooling-off period can only be waived under the following conditions:
- if the agent provides the client a copy of the unsigned agreement at least one business day before the agency agreement is signed by the client, and
- if the agreement is for the sale of residential property, the agent must give the client a copy of the approved guide ‘Agency agreements for the sale of residential property’ at least one business day before the agency agreement is signed, and
- if the client signs the NSW Fair Trading approved waiver form before signing the agency agreement.
In relation to giving the client a copy of the unsigned agreement and approved guide, a Saturday is not recognised as a business day.
Is the agent still required to serve the client with a copy of the fully signed agreement within 48 hours?
Yes. Section 55 of the Act requires that a copy of the agency agreement signed by the licensee must be given to the client within 48 hours of signing it. Otherwise, the agent is not entitled to receive payment for commission and expenses under the agency agreement.
An agent who has failed to serve a copy of the agency agreement to their client within 48 hours may appeal to a court or tribunal to recover all, or part of the commission or expenses incurred. There are limited circumstances under which an agent can appeal, described in section 55A of the Act.