Sale fell through: is the agent's commission still owed in Queensland?

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Kooky

Builder of Shaka, the payment router that pays every agent their commission on closing date.

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A sold sticker goes up, a contract is signed, and a few weeks later the sale is over without a settlement. The buyer's loan was refused, or the building report was poor, or the buyer simply could not find the money on the day. The seller still owns the home. The agent has done months of work. Both of them then ask the same question from opposite sides of the desk: is commission owed on a sale that never completed?

Queensland law does not answer with a yes or a no. The Property Occupations Act 2014 leaves the timing of commission to the written appointment the seller signed, and then insists that the appointment say it clearly. So the answer sits in three places: the box ticked on the approved appointment form, the commission clause in the terms attached to it, and the precise way the contract of sale came to an end. This guide follows each kind of ending in turn, then looks at the deposit held in trust, the rule that a faulty appointment defeats any claim, and the way Queensland courts and the tribunal have decided real disputes.

The four events are those of the REIQ's standard commission clause as quoted in Queensland judgments; the notice period is in the Agents Financial Administration Act 2014; the ceiling is the one given by the REIQ in December 2024.

What the Act asks the appointment to say

A Queensland property agent cannot act for a seller without a written appointment. Section 102 of the Property Occupations Act 2014 says so, and for a home the appointment is made on the approved Form 6. How that form is filled in is the subject of another guide; one line of the Act matters here.

Section 104 lists what an appointment must state. Among those items, as the REIQ's published commentary on the form sets out, are the fees, charges and any commission payable for the service, and when they become payable. The Act does not fix that moment itself. It does not say that commission is due on settlement, and it does not say that commission is due on signing. It requires the two parties to decide and to write the decision down.

The two boxes on Form 6

The approved form has a commission part with a section headed for when commission is payable. In the version reproduced by the Supreme Court in Sunshine Group Australia Pty Ltd v Trappando Pty Ltd, decided in 2023, that section gave a choice between commission that depends on the contract settling and a box marked "Other", with space to write the alternative. In that case the "Other" box was ticked and the words added beside it pointed to item 5 of the terms attached to the form.

The form also carries a printed note addressed to the client. The court quoted it. It tells the seller that the commission is negotiable, asks them to be sure they understand when it is payable, and then says that if "Other" is chosen and the contract does not settle, "the agent may still seek commission".

Where the settlement option is the one chosen and nothing else is written in, the position is simple: the appointment makes commission depend on a settled contract, and a contract that ends early does not meet that condition. Where "Other" is chosen, everything depends on the wording it refers to. In practice that wording is very often the commission clause of the REIQ's terms of appointment, which many agencies attach to Form 6.

The form reproduced in that judgment was the edition signed in 2019. Approved forms are reissued from time to time, so the layout and numbering of the copy a seller signed should be read as it stands.

The four triggers in the usual terms

The REIQ's commission clause has been quoted word for word in several Queensland judgments, across more than a decade and across two generations of the form. Its structure has been stable. Commission is payable if a contract of sale is entered into with a buyer, during the term of the appointment or after it, where the agent was the effective cause of the sale within the term, and where one of four further events has occurred.

The first event is the ordinary one: the contract is completed. The second is that the seller defaults under the contract and it is terminated because of that default. The third is that the contract is not completed and the whole or part of the deposit paid is, in the clause's words, "liable to be forfeited". The fourth is that the contract is terminated by mutual agreement of the seller and the buyer. The REIQ, in an article on commission published in December 2024, listed the same four events for its residential sales terms.

Signing a contract is therefore never enough by itself under this wording: one of the four events must also be shown. The effective cause test is covered in a separate guide and is not repeated here. And since three of the four events describe a sale that did not settle, the clause plainly has failed sales in mind.

The table sets out how the common endings usually sit against the four events. It is a reading of the standard wording only. An appointment with different words gives different answers.

Cooling-off, finance, building and pest

Most residential contracts that fall over do so in the first weeks, under a right the contract or the Act gives the buyer. The buyer may withdraw during the statutory cooling-off period, or give notice that finance was not approved, or that the building and pest reports were not satisfactory. How each of those rights works is explained in this magazine's guides on cooling-off, the finance clause and the building and pest clause.

For commission, the common thread is that none of these endings is a completed sale, none is a default by the seller, and in the ordinary finance or inspection case the deposit goes back to the buyer in full, so no part of it is forfeited. If the buyer used the right properly, three of the four events are out of reach. That leaves the fourth, mutual agreement, and it is the one agents have tried.

The leading example is Limitless Property Qld Pty Ltd v Smith, a 2022 decision of the appeal tribunal of the Queensland Civil and Administrative Tribunal, summarised by the REIQ in March 2022. A buyer of a house in North Mackay obtained a building report that found leaks in the roof and a bathroom, with repairs put at $35,000. A special condition of the contract allowed termination only for a defect costing more than $5,000 to fix. The buyer terminated, the sellers took legal advice and did not contest it, and the deposit was returned.

The agency claimed its commission. It argued that the buyer's repair figures were estimates and not quotes, that the buyer had not acted reasonably, and that by not resisting, the sellers had in effect released the buyer, so that the contract ended by mutual agreement. The tribunal dismissed the claim in June 2020 and the appeal tribunal refused leave to appeal. According to the REIQ's summary, the appeal tribunal held that what mattered was the real cost of the repairs, that the contract did not require a quote, and that a seller who accepts a termination the buyer is entitled to make has not agreed mutually to end the contract. The idea that sellers owe their agent a duty to fight a termination was described as "not attractive".

Cooling-off is less tested. A buyer who withdraws in that period is exercising a statutory right, not making an agreement with the seller, and the deposit is refunded apart from a small termination penalty the Act allows the seller to keep. No Queensland decision found in the research for this guide rules on whether that retained penalty engages the forfeited-deposit event. It is a point that depends on the wording of the appointment and, if it matters, on legal advice.

When the buyer defaults and the deposit is forfeited

The position changes sharply once a contract is unconditional and the buyer fails to perform. If the buyer does not settle and the seller terminates, the standard contract lets the seller keep the deposit, a remedy covered in the guides on the deposit and on default. Under the usual commission clause, that same event, a deposit liable to be forfeited on a contract not completed, makes commission payable.

Sunshine Group Australia Pty Ltd v Trappando Pty Ltd shows the clause at work on a large scale. An agency sued a seller for commission of $1.65 million on a North Queensland rural property after a buyer who had offered $7.5 million breached the contract. The contract was terminated in June 2021 and the deposit was forfeited. The seller argued that a separate deed made commission payable only on settlement. The Supreme Court in 2023 found for the agency, and the Court of Appeal dismissed the seller's appeal later that year. The appointment had ticked "Other" and referred to the four-event clause, and the forfeited-deposit event applied.

The opposite result is just as instructive. In Hudson v Standfield, a 2013 District Court decision under the earlier Property Agents and Motor Dealers Act and its appointment form, the seller had amended the form so that commission was payable "Upon Settlement". The property was listed at $2.4 million and the buyer paid a $240,000 deposit, then could not settle. The seller terminated, kept the deposit and signed a contract with another buyer. The agent sued for $59,400 in commission and lost. The court was not satisfied that the first contract had ended by mutual agreement, and found the appointment had in any case not met the statutory requirements of the time. Same event, different wording, different outcome.

When the seller defaults

The second event is the one a seller controls. If the contract is unconditional and the seller refuses or fails to complete, the buyer may terminate, recover the deposit and claim damages, as the guide on default remedies explains. Under the usual clause the agent is then entitled to commission, even though no money from the sale has reached the seller and the deposit has gone back to the buyer.

A seller who has second thoughts after the contract is unconditional therefore faces two separate exposures: one to the buyer under the contract, and one to the agent under the appointment. The clause requires both a default by the seller and a termination by reason of, or following, that default. A seller who is merely late, and whose buyer chooses to extend time and settle, has completed the contract and owes commission on the ordinary footing.

When both sides agree to end it

The fourth event, termination by mutual agreement, catches the sale that seller and buyer decide together to abandon. A buyer's circumstances change and the seller lets them out, or a dispute is settled by a deed that releases both parties. The contract did not fail under its own terms; the two parties chose to end it.

Decided cases show that the line is drawn carefully. In Yong Internationals Pty Ltd v Gibbs, decided by the Court of Appeal in 2011, a $9 million contract for land at Redbank Plains ended in litigation between seller and buyer, which the two then settled by a deed of compromise. The agent claimed $226,139. The claim failed because the appointment form had not been completed as the Act then required, but one judge went on to consider the commission clause. He found, "not without hesitation", that a deed leading to the contract being abandoned amounted to a termination by mutual agreement. He also found the forfeited-deposit event was not made out: the sums the buyer had paid were instalments of price and payments for extensions of time, not deposit.

Against that stand Hudson and Limitless. In Hudson the seller terminated on their own for the buyer's breach, and the later contract with a new buyer was not evidence that the first had been ended by agreement. In Limitless, accepting a valid termination was not agreeing to one. Taken together, the decisions suggest that mutual agreement means what it says: a real agreement between seller and buyer to bring the contract to an end, usually recorded in a document, and not simply the absence of a fight.

Three of the four usual triggers describe a sale that never settled. The clause turns on why the contract ended, and the appointment's own words decide the rest.

A second buyer after the first contract fails

A home whose first contract fails usually goes back on the market, often with the same agency, and a second buyer signs. Sellers reasonably ask whether one sale can produce two commissions.

Under the usual clause each contract is tested separately. If the second contract settles, commission is payable on it in the ordinary way, provided the agent was the effective cause within the term of an appointment that is still valid. The first contract is then looked at by itself. If it ended under a finance or inspection condition, no event was triggered and nothing is owed on it. If it ended with a forfeited deposit, a default by the seller or a mutual agreement, the wording allows a claim on it as well, and nothing in the standard clause says that a later sale cancels the earlier entitlement.

Whether an agency in fact claims twice is a commercial matter between agency and client, and any variation the two agree at this point belongs in writing. In Hudson, where a second contract was signed once the first had been terminated, the dispute before the court concerned only the first, and the claim on it failed. The length of the appointment also matters when a home returns to the market: the limits on sole and exclusive terms and on reappointment are set out in the guide on what happens when a home does not sell.

Commission and the deposit in trust

In most Queensland sales the deposit sits in the agency's trust account, and the usual terms of appointment include an authority from the seller for the deposit holder to pay the commission from it once the entitlement arises. The REIQ described that authority in its December 2024 article.

That authority works inside the limits of the Agents Financial Administration Act 2014. Section 22 of that Act lets an agent draw a transaction fee, which it defines to include commission, from the money held for a transaction only when the Act authorises it. The authority to draw the fee arises after the transaction is finalised, and after any balance has been paid to the person entitled to it. The Act gives two examples of a transaction being finalised: the settlement of a contract for the sale of property, or the termination of the contract. Drawing money outside those rules carries a maximum penalty of 200 penalty units or two years' imprisonment.

So a terminated contract does finalise the transaction for trust purposes, and where commission is payable under the appointment the agent may take it from a forfeited deposit and pay the balance to the seller. The balance must be paid within 14 days of a written request, or within 42 days of the transaction being finalised if no request is made.

The picture is different as soon as there is an argument. Under section 22, if a dispute about the money arises, the transaction is not treated as finalised until the Act's dispute provisions allow the money to be paid out.

In Holgar v Chief Executive, Department of Justice and Attorney-General, a 2021 appeal tribunal decision about an $80,000 deposit, the tribunal treated the first of those steps as a question about what the agent actually knew or considered at the time, and held that an agent who had written authority from both parties was entitled to act on it.

Commission released before settlement is a separate risk. Sometimes part of the commission is paid to the agent before settlement day. If the sale then fails in a way that triggers no event, the money has been paid for an entitlement that never arose. In Hudson, $6,600 had been paid to the agent early, on written terms that it could be returned if the contract did not settle for reasons other than the seller's default. The court ordered it repaid, with $3,465 in interest.

No valid appointment, no claim

Every argument above assumes a valid appointment. Section 89 of the Property Occupations Act 2014 provides that a person is not entitled to "sue for, recover or keep" a reward or expense for acting as a property agent unless they held the right licence, were authorised under it and were properly appointed under the Act. The word keep matters: the rule reaches commission already received, not only commission still being claimed.

The Act also says which defects are fatal. The REIQ's commentary on Form 6, updated in May 2024, records that an appointment which does not meet the content requirements of section 104 is ineffective from the time it is made, and that a sole or exclusive appointment for a residential sale running longer than 90 days is likewise ineffective. In Yong, a single blank item on the earlier form was enough to defeat a six-figure claim, and in Hudson the appointment failed the requirements of the earlier Act.

Courts have not treated every slip as fatal. In the Sunshine Group appeal, the seller pointed out that the form left out the word "actual" from the statement, required by section 105, that a percentage commission is worked out on the actual sale price. The Court of Appeal held that the form, read as a whole, said the same thing and that substantial compliance was enough.

Where a dispute is heard

A claim for unpaid commission is a claim for a debt under a contract, and it goes to the body whose money limit fits the amount. The REIQ's December 2024 article gives the ladder agents are told to expect: a minor debt claim in the Queensland Civil and Administrative Tribunal for up to $25,000, and the Magistrates Court for amounts from $25,000 to $150,000. Larger claims go to the District Court or the Supreme Court, which is where Hudson and Sunshine Group were heard. How the tribunal works, its fees and its limits are covered in this magazine's guide to the tribunal and property disputes.

A seller who disputes a commission taken or claimed from a deposit can raise it with the agent in writing before the money is drawn, which engages the trust account rules described above. The answer for a particular sale depends on its own paperwork and, where the sums are large, on legal advice.

Kooky, from Shaka

Kooky edits Queensland Estate and builds Shaka, the payment router he made for Queensland property professionals. One payment comes in, and every agent, agency and party in the deal receives their signed share on closing date.

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