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As a real estate agent, you refer clients to different services and vice versa. Generally, you can earn real estate commissions or agent’s commissions through such a referral process. However, it is essential to note that the legality of earning or sharing commissions depends on the state in which you are based. This article provides an overview of whether you can share your commissions, including agent commissions, by considering the applicable laws in various states and the consequences of failing to comply with the applicable laws.
New South Wales (NSW)
A real estate agent cannot share fees or commissions with any unlicensed entity (with the exception of unlicensed employees). You must not enter an arrangement where you provide an unlicensed person with a:
- share of the commission;
- fee;
- gain; or
- reward;
for any transaction by or with them.
NSW Fair Trading also states clearly that it is against the law for a licensed agent selling a property to share a portion of the final sale commission with any unlicensed person. Given the broad drafting of the law in NSW, there is a high risk that any transaction where the commission is shared between a real estate agent with an unlicensed person will breach the law.
Victoria
It is possible to enter into commission arrangements subject to specific requirements.
As a real estate agent, you cannot obtain or seek to obtain any payment from a person unless:
- you hold a written agreement or appointment that the client signs;
- before obtaining your client’s signature, you informed them that they could negotiate the commission;
- the contract contains details of the commission and outgoings that have been agreed upon; and
- if you calculate the fee on a percentage basis, you have a statement of that fee as both a percentage and dollar amount.
If you are a real estate agent and wish to share commissions with a person who is not a licensed estate agent, you must prepare a statement which states:
- any commission you receive will be shared;
- the name of every person who is entitled to share the commission.
Queensland
It is possible to enter into commission arrangements subject to specific requirements.
In relation to a sale, you must disclose the relationship with a referral recommended to the client. This includes any benefit you receive or expect to receive from the referral. You must also not claim a commission that is calculated on an amount more than the actual sale price of the land or rent collected (if it is a rental arrangement).
South Australia
It is possible to enter into commission arrangements. However, it is essential to have a signed written agency agreement in order to do so.
In relation to both the sale or purchase of land or a business, you must disclose the type and amount of any benefit you receive from the referral you recommend to the client. This includes any benefit you expect to receive in connection with the sale or the purchase.
If the commission arrangement is in relation to the sale or purchase of residential land, you must pay any undisclosed benefit to the client.
Western Australia
You cannot receive commission fees unless you:
- are licensed;
- hold a current every three years certificate; and
- there is a valid appointment in place which is in writing and signed.
Notably, a code of conduct exists for real estate and business agents and sales representatives in WA. It requires you to disclose the following information in writing when making recommendations to your client:
- the commission you could receive; and
- the relationship between you and your referral.
Further, you cannot accept a commission if you make a recommendation for a settlement agent.
This factsheet provides an overview of a real estate agent’s professional obligations.
Key Takeaways
There are state-specific laws that apply to commission arrangements as a real estate agent. For example, in NSW, there is a high risk that such arrangements may be illegal. You must consider and check the applicable regulations before implementing any commission arrangement.
If you need advice on the commission arrangements you would like to offer or the drafting of commercial agreements, contact our experienced real estate lawyers, who can assist as part of our LegalVision membership. For a low monthly fee, you will have unlimited access to lawyers to answer your questions and draft and review your documents. Call us today on 1300 544 755 or visit our membership page.
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