Real Estate Regulators - No Fault With Real Estate Agent's Caveat Clause

OPINION
by Tim O'Dwyer M.A., LL.B
Solicitor
Consumer Advocate
watchdog@argonautlegal.com.au

Not only had the buyers purported to “charge” the property with the seller’s agent’s commission liability while consequently consenting to the agent’s lodgement of an instrument-stopping caveat over the title, but also the seller had “irrevocably” authorized and directed the buyers’ solicitor to pay this commission at settlement.

After reading Peter Mericka’s excellent blog post, Conveyancing Consumer alert- Beware of the Sneaky Stamp, I was reminded of a fairly recent, not quite as sensational but equally disturbing experience I had involving a real estate agent’s “caveat clause” here in Queensland.   But first I will try to explain simply what a caveat is and does.  Essentially a caveat is a powerful legal document which, once lodged with the Registrar of Titles in respect of a particular property, has the immediate effect of preventing the registration on the title to that property  any legal instrument (such as a transfer from seller to buyer).  A lodged caveat will continue by law to prevent the registration of instruments until it lapses or is cancelled, rejected, removed or withdrawn.  Hence a caveat lodged immediately before or shortly after the settlement date of a property sale will cause chaos for all parties to the contract - as well as to their solicitors and lenders as Peter Mericka has reported.

Back to my real estate agent’s “Caveat clause” story:  I was acting for a single lady selling a Gold Coast property.  Like most agent- trusting real estate consumers she had signed the sale contract (prepared by her First National agent) without first seeking any legal advice.  When the fully-signed contract landed on my desk, I was horrified to see in special condition 3.4 of the contract these words:

Upon signing this contract … both parties hereby charge the subject property and consent to the agent lodging a caveat over the property, pending receipt by the agent of payment of the commission owing.

This obnoxious “condition”, the likes of which I had never seen in a real estate contract in my 30-plus years of legal practice, was preceded by special condition 3.4 - a no less obnoxious but quite common agent-protective proviso:

If at settlement the Agent … does not, as the Deposit Holder, hold sufficient money to satisfy payment of the commission in full, the Seller irrevocably authorizes and directs the Seller’s Solicitor, the Buyer and the Buyer’s solicitor to pay the commission or the balance of it to the Agent at settlement out of the proceedings (sic) of the sale.

Just pause a minute, dear readers, to reflect on this bizarre and extraordinary agent-orchestrated scenario:  Not only had the buyers purported to “charge” the property with the seller’s agent’s commission liability while consequently consenting to the agent’s lodgement of an instrument-stopping caveat over the title, but also the seller had “irrevocably” authorized and directed the buyers’ solicitor to pay this commission at settlement. 

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