Is your Agency Agreement Dead or Alive
To those who use mass produced “brochure” type of Agency Agreements (AA), my advice is – bury them, preferably before they lead you into trouble.
I have preached for years that there is almost no justification for real estate agencies to use any mass produced forms of contract, other than industry standard REINZ/ADLS approved sale and purchase agreements.   In my opinion it is vital that we are able to quickly change our contractual forms to cater for changing circumstances, knowledge and experiences, our own and those of other people.
Prior to the introduction of the Real Estate Agents Act 2008 (REAA 2008), I was amazed at the number of Agency Agreements I saw while conducting Arbitrations, that had not been reviewed in very many years.    Three of the worst I encountered were those of two franchise groups and a marketing group which, despite looking impressive, were seriously legally flawed. Two of them made significant changes when I brought the flaws to their attention.
With the advent of the REAA 2008, that need for flexibility has become even more critical.   Determinations of the Complaints Assessment Committees and the Tribunal are essential reading for all Licensees and should form the basis for prompt reviews of established processes, procedures and documentation.
The recent Summit Real Estate decision is a classic in that the Company was relying on a Property Management Authority that put them in breach of the legislation, probably because the document pre-dated the REAA 2008 and had not been reviewed.
Then the recent article (The Hub, June/July) alerted us to the fact that any Licensee signing a vendor to a sole agency when there is an existing general agency in place, is almost certainly putting the vendor in the position of having signed conflicting contracts while both agencies are in place.    This is something that has been done for as many years as I can remember and we have always accepted that if we have the sole agency and the prior (general agency) company sells the property during the cancellation period, we would not claim the contractual entitlement to a commission.
Under the new regime of an Authority that is, quite correctly, all about consumer protection, this rather casual attitude of it being OK because we will not pursue our legal entitlement, is simply not good enough. In fact, we can just about guarantee that such a situation would be deemed “unsatisfactory conduct.”
That being said, what should we be doing about this particular issue?    Quite simply, we need to ensure that our sole Agency Agreements either do not commence until the existing agency appointments have ended, or preferably, acknowledge the status of the existing appointment and confirm in the Agency Agreement the circumstances under which no commission will be charged by the sole agent.   Because my clients use MSWord (or PDF) Agency Agreements, they were using updated versions within hours of this matter being brought to our attention.
Having adopted this policy of readiness to change more than twenty years ago, I have been amazed at how many changes I have made over the years, many almost insignificant, but others of great importance.
One simple example of an earlier change came about because of a dispute with a disgruntled vendor who decided that because their property did not sell, they would not pay the balance of the agreed marketing spend. During the dispute they demanded their large “For Sale” sign be returned to them as they had paid for it as part of the marketing. There was no option but to credit the amount of the sign which had long since been recycled. That very day we were able to change the Agency Agreement to stipulate that the sign charges were for the preparation, erection and removal of the sign and that it remained the property of the Company. No repeats of that problem.
So, having said that we should not use mass produced contracts, how should we communicate or distribute the (hopefully) ever changing documents to our front line people? Quite simply, larger organizations should ideally have all of their contract master copies on their intranet and each time a copy is required, a new one should be obtained from there.   The REINZ eforms system is a great example of eforms access that ensures that the users are always using the latest available version.
Smaller organizations who do not have this facility can post PDF or even MSWord versions of the document in file sharing systems such as Dropbox (, which is free to use.
PR presentations and brochures should be exactly that and Agency Agreements can be included in them, but not an unchangeable part of them. I seriously doubt that any agency will lose a listing because their Agency Agreement looks like a (nicely presented) contract.   There are other forms that should be reviewed and updated at every opportunity including property management documents such as Tenancy Agreements and Property Management Authorities.
In writing this article I have been mindful of the words of Donald M Nelson who said “Today changes must come fast. We must assume there is a better way to do almost everything.”
We have the tools to make instant changes; it is surely our responsibility to use them for the benefit of our clients, and ourselves.
Published August 2011, The Hub (Journal of the Real Estate Institute of NZ Inc)