Warning issued as legal disputes over commission rise
According to a lawyer, current market conditions could lead to increased litigation over sellers who refuse to pay commission to agents claiming to be the actual cause of the sale.
Twomey Dispute Lawyers director Ben Twomey said these types of commission disputes usually arise between a salesperson and an agent when there’s an open listing and a long process – and it’s an issue that “seems to be ask quite often”.
While an agent will argue that they were the actual cause of the sale, the solicitor conceded that “being the actual cause of the sale is not as simple as the agent presenting the property to the buyer”.
Instead, “the agent must show that he was instrumental in getting the deal done.”
Illustrating his point, Mr Twomey cited a case his firm had conducted for Gold Coast commercial agent Joseph Codianni, of Real Commercial Qld, last year.
The case was brought against property salesman Preetpal “Mick” Singh in Southport Magistrates’ Court in 2019.
Mr Singh had refused to pay Mr Codianni $100,000 in commission for his involvement in the sale of Mr Singh’s commercial property at 35 Dominions Rd, Ashmore, to director of Imagine Education, Bill Adler, for 3, $2 million in September 2018.
Prior to the sale – and when Mr. Codianni was the exclusive selling agent – two contracts to purchase the property for $3.2 million were signed between Mr. Adler’s company, Stonehaven, and Mr. Singh.
However, both of these contracts were terminated due to the fact that Mr. Adler’s company, Stonehaven, was unable to obtain financing.
Mr Codianni claimed it was his idea to set up a deal for Imagine Education and Stonehaven to lease the property for five years, with Stonehaven having an option until May 31, 2019 to buy the property on the same terms as the one of the previous contracts. .
In September 2018, Stonehaven exercised the option and purchased the Ashmore property for $3.2 million.
But, Mr Singh refused to pay a commission to Mr Codianni, instead claiming that the agent was not the actual cause of the sale because the transaction resulted from a drafted call option deed by his lawyers and Stonehaven. He also alleged that it was a CBRE senior manager who introduced him to Mr. Adler when Mr. Alder was looking to rent the property in question.
Despite Mr Singh’s claims to the alternative, Magistrate Grace Kahlert ruled in favor of Mr Codianni, saying the call option deed drafted by lawyers for the defendant and Mr Adler did not deny Mr. Codianni’s role as the effective cause of sale.
In her judgment, which was delivered in July 2021, Magistrate Kahlert said, “Mr. Codianni’s efforts to induce Mr. Adler … to offer to purchase the property from the defendant for $3,200,000 came to fruition in such a way so that it was in a real sense an important and substantial cause of the final sale in September 2018.”
Mr. Codianni received $100,000 plus interest (a total of $113,821) as a result of the judgment, but the commercial agent said it was not about the money.
After fighting the case over a four-year period, the sales agent said he pursued it “purely on principal” – especially since the case ended up costing him $135,000 – more of the $100,000 commission owed to him.
“I wanted to send a message to the minority of wealthy sellers who do not pay agents for a job well done, knowing that most agents or agencies are reluctant to enter a long and costly legal battle,” he said. share.
“I was able to present to the court a significant amount of documented evidence that clearly showed that I was entitled to the commission I was seeking.”
He acknowledged that “Realtors run the only businesses that operate effectively for free until a property sells and settles”.
“After putting in tremendous effort, expertise and time, I was not ready to leave,” he explained, noting that he had secured a price for Mr Singh’s property of 500 $000 above appraisal, plus about $400,000 more in rental. income until settlement is reached.
Mr Codianni said the deal was a ‘gamble’ as he was not sure Mr Singh had the assets to pay him initially.
“He bet I would give up and leave, but he was wrong,” Mr Codianni said.
According to Mr Twomey, cases such as Mr Codianni’s will become more common in today’s market – which he attributed to properties taking longer to sell.
His advice to agents? Document the sales process as much as possible.
“When you claim you were the actual cause of the sale, you must give a timeline of everything you did that contributed to making the sale,” he said.
“You have to keep a timeline of everything that happened. Take detailed notes and document them as much as possible. »
He added that “generally the law recognizes that our memories are not perfect and if you have a highly contested case you want to have as much in writing as possible.”
In Mr. Codianni’s case, there was plenty of documentation to support his position that he owed commission: ‘What the court ruled was that without Joseph, there was no deal’ , did he declare.
“Joseph did a very good job. When contracts fell through in the first few months, he put other options on the table, such as lease and option deed, which led to the sale.
Calling it “a resounding victory,” the attorney concluded that the judgment reflected that documentation process.
Grace is a reporter for real estate and investment brands Momentum. Grace joined Momentum Media in 2018, bringing with her a Bachelor of Laws and a Bachelor of Communications (Journalism) from Newcastle University. She is passionate about providing easy-to-digest, relevant information and content for her key audiences and stakeholders.