Who can receive a commission as a real estate agent?

Cornerstone Group Ltd v OPM Financial Solutions Ltd (Court of Appeal, CA 11/05, 20 March 2006, Robertson, Randerson and Panckhurst JJ)

Can anyone who has helped you sell your property ask you to pay them a commission?

This concerned a number of issues arising from the development of a block of apartments at Orewa, north of Auckland, known as the “Nautilus”. The developer was Cornerstone Group Ltd. The only issue of concern here is whether OPM Financial Solutions Ltd (“OPM”) was entitled to recover commission for its part in selling the apartments. Cornerstone argued that OPM had been acting as an agent in breach of s 62(1) of the Real Estate Agents Act 1976, and was therefore not entitled to recover any commission or other reward. Under s 62(1), a person must have a license as a real estate agent before he or she could recover commission.

Section 3 of that Act defines “real estate agent” as “every person … who acts, or who holds himself or herself out to the public as ready to act, for reward as an agent in respect of the sale or other disposal of land…”

The Court had no difficulty concluding that the judge below was correct to find that s 62 was not complied with and recovery of the commissions was barred. Even the pleadings described OPM as appointed as agent to market the units. In agreeing to do so, OPM plainly came within the definition of “real estate agent” in s 3. It made no difference that the contract between Cornerstone and OPM provided a flat fee arrangement for the marketing of the unit, nor that OPM was not to handle any money.

The judgment points out that “there is a substantial argument for the proposition that our Real Estate Agents Act has firmly set its face against the recovery of commission or reward in the case of unlicensed persons carrying out the work of a real estate agent.”

Please note that the above information is intended to provide general information only. The contents contained in this article do not constitute legal advice and should not be relied on as such. For legal advice please contact our professional team at Forest Harrison.