OPINION
by Peter Mericka B.A., LL.B
Real Estate Lawyer
Qualified Practising Conveyancer Victoria
Director Lawyers Real Estate Pty Ltd

When Slater & Gordon lawyer Pieter Kruger publicly declared that he had engaged in conduct recently found by the Supreme Court of Victoria to be illegal, and challenged me to report him to Consumer Affairs Victoria, it was not simply a matter of one lawyer debating another. Rather, Mr. Kruger's taunt was a challenge to Consumer Affairs Victoria and the Supreme Court of Victoria in the wake of a declaration by the Supreme Court that negotiating the sale of real estate on behalf of a client is not an ordinary function of an Australian Legal Practitioner. But is Slater & Gordon too big to challenge?

If it looks like a duck and quacks like a duck...

On 27 March, 2012 the matter of Dr Claire Noone, Director of Consumer Affairs Victoria v Mericka & Ors (The MERICKA Case) was decided in favour of Consumer Affairs Victoria (CAV). A few days later, in a discussion I posted on the LinkedIn page of the Law Institute of Victoria Group about the court's finding. I noted that the court had decided that, because my firm had promoted itself as being entitled to negotiate the sale of real estate on behalf of clients, it had held itself out to the public as being willing to engage in the "business" of real estate. This attracted a comment from lawyer Pieter Kruger.

Mr. Kruger's comment was short and to the point, "If it looks like a duck and quacks like a duck...".

Stung by the insensitivity and narrow-mindedness of a fellow legal practitioner, I checked Mr. Kruger's LinkedIn profile, and discovered that he is a lawyer with the mega-firm Slater & Gordon, whose tag line is "No challenge too great".

When I made the observation that he is a Slater & Gordon employee, Mr. Kruger was very quick to point out that his comments were his own and that they should not be regarded as comments made by his employer. This was duly noted, but the cat was well and truly out of the bag. However, Mr. Kruger did not stop there. He publicly declared that he had recently been engaged by a purchaser for the purpose of negotiating a real estate purchase and asked if I would report this to Consumer Affairs Victoria!

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OPINION
by Peter Mericka B.A., LL.B
Real Estate Lawyer
Qualified Practising Conveyancer Victoria
Director Lawyers Real Estate Pty Ltd

The Australian Financial Review has today published an article which reports my "conviction" for misleading conduct. This conviction has now been quashed - by me.

Like Mark Twain, who was forced to declare publicly that reports of his death had been greatly exaggerated, I am now forced to declare that reports of my having been "convicted in the Victoria Supreme Court" have been similarly exaggerated.  To be quite clear about it, they are false.

Today's Australian Financial Review (the Property section, not the Legal section), carries an article by property journalist Rebecca Thisleton in which the above false and defamatory statement appears.  In fact, the matter was a civil proceeding, brought by Consumer Affairs Victoria in order to determine whether a lawyer who negotiates the sale or purchase of real estate on behalf of consumers is in breach of the Estate Agents Act.

I will now publish a series of blog posts, giving the background to the campaign waged against me by Dr. Noone, Director of Consumer Affairs Victoria on behalf of real estate agents, and explaining how her failure to properly regulate the real estate industry has given rise to my crusade to bring change and to advance the cause of real estate consumers generally.

My first posting will be a report on the background to the matter, and the strategies that led to its being put before the Supreme Court of Victoria.

WATCH THIS SPACE!

OPINION
by Peter Mericka B.A., LL.B
Real Estate Lawyer
Qualified Practising Conveyancer Victoria
Director Lawyers Real Estate Pty Ltd

A 10 year battle comes to an end. 

 Judgement in the matter of Dr Claire Noone, Director of Consumer Affairs Victoria v Peter Mericka & Ors was handed down today (27 March, 2012). The Court ruled entirely in favour of CAV.

I will have more to say about this in due course.

For the moment, I would like to thank all of those who offered support and encouragement over the past 10 years, and particularly during the struggle of the past two years. Most importantly however, I would like to thank our clients for having put their faith in Lawyers Real Estate and assisting us to develop the concept as far as we have.

To read the full text of the judgement, click here: DR. CLAIRE NOONE, DIRECTOR OF CONSUMER AFFAIRS VICTORIA v PETER MERICKA & ORS

OPINION
by Peter Mericka B.A., LL.B
Real Estate Lawyer
Qualified Practising Conveyancer Victoria
Director Lawyers Real Estate Pty Ltd

Finally, we have a real estate industry commentator who is independent enough to describe the industry as it really is.  Consumer Affairs Victoria and print media reporters take note!

The Corrupting Effect of Conflicting Interests

Philip Soos is a researcher at the School of International and Political Studies at Deakin University.  In this article Mr. Soos confirms what Consumer Affairs Victoria ignores, and what the real estate industry denies, about the corrupting effects of conflicting interests in the real estate industry:

"Conflicts of interest undermine the quality of advice and policy. It is critical to the functioning of markets and government that parties involved are free of conflicts, especially monetary ones. 

We would like to believe others are ethical, engage in honest practices, and do not withhold or manipulate information for selfish reasons.

Sadly, the real estate industry is saturated with such conflicts. Individuals and organisations with direct and indirect connections to the industry are so plagued by conflicts of interest that the industry is a textbook example, along with the defence and pharmaceuticals sectors, of what not to do." 

To read the full article, click on the following link:  Ending the entrenched real estate racket

After a decade of representing vendor clients in the sale of their properties, and after two years of court preparation and the incurring of massive legal costs, the matter of DR CLAIRE NOONE, DIRECTOR OF CONSUMER AFFAIRS VICTORIA and PETER JOHN MERICKA & ORS has been listed for judgment on Friday 23 March, 2012.

CAV and the estate agent monopoly

It is almost 10 years since first I offered consumers a genuine alternative to the corrupt and hugely expensive real estate agent monopoly regulated by Dr. Claire Noone and Consumer Affairs Victoria.

Two years ago, spooked by my plans to franchise the concept of Lawyers Real Estate, Dr. Noone launched a Supreme Court action in a bid to stop me. Dr. Noone's plan was to force me to stop providing an holistic one-stop-shop service to consumers by either of two methods:

1. Force me to shut my business down under the threat of prosecution for not holding an estate agent's licence; or if my firm did obtain an estate agent's licence
2. Force me to shut my business down by endorsing my firm's estate agent's licence so as to prohibit it from offering legal services while being the holder of the licence.

Either way, Dr. Noone was determined to ensure that consumers could not have a choice between a real estate agent and their lawyer for the purposes of negotiating the sale or purchase of real estate.

Damage to my business

The past two years have taken a huge toll on my business through attacks on a variety of fronts.

Clients attacked

A well-known rogue and licensed conveyancer obtained a copy of the Supreme Court writ, photocopied it, and used it to upset and intimidate my clients. He attached a false claim stating "DID YOU KNOW Peter Mericka is charged with alleged DECEPTIVE AND MISLEADING CONDUCT BY CONSUMER AFFAIRS". He even sent one to my parents-in-law whose property was being sold through my firm. Some clients remained fiercely loyal, and delivered their copies of the documents to me with good wishes and encouragement to "maintain the rage" and to "keep up the good fight". Others, understandably horrified and confused, promptly ended their retainers with my firm and engaged licensed real estate agents.

Personal attacks in the media

Simon Johanson is the Property Editor of The Age Newspaper. Johanson telephoned me one day, supposedly to get my side of the story, and then completely ignored what I'd told him and printed an article titled, "Lawyer sued over flat-fee house-sale work" the opening paragraph of which reads, "Consumer Affairs Victoria is suing a Croydon lawyer who admits he has reaped $880,000 over the past eight years by acting as a fixed-fee real-estate agent when he does not hold a licence."

Johanson used a simple calculation based on the false assumption that all 200 of the sales had been charged at the rate of $4,400.  He deliberately ignored the fact that our fixed fee is fully inclusive of photography, signage, internet listings conveyancing, GST etc., and that the profits gleaned from our transactions are significantly less than those of real estate agents who pay no more than we do in overheads, but "reap" much higher profits through their commissions.

Johanson made no mention of the hundreds of thousands of dollars saved by consumers who freely chose to use Lawyers Real Estate rather than real estate agents, and there was no analysis of the way in which Lawyers Real Estate actually operates. But then, The Age is not about to keep the gloves on when dealing with someone who criticised its use of rebate bribes to attract consumer funded advertising through its real estate agent clients - those "rivers of gold" are far too important to sacrifice in the name of ethical journalism.

Real estate agent attacks via blogs and social media

Real estate agents had a wonderful time with the court case. Quite unconcerned about his obvious contempt for the Supreme Court, real estate agent trainer Greg Vincent invited real estate agents to judge me publicly in his blog posting, "You be the judge…are Lawyers Real Estate breaking the law or not?" Of course, real estate agents from all over Australia were quick to don their wigs and gowns and judge me. I did my best to defend myself, but I was overwhelmed by similar attacks on Facebook, Twitter and LinkedIn.

Ignored by my professional association

Many people asked me about the Law Institute of Victoria (LIV). What was the LIV's position on all this? The first judge appointed to hear the matter (he was later replaced) advised the parties that they should invite other industry stakeholders to participate in the matter, as it was of great importance to the industry.

I wrote to the LIV, but my letter was ignored. Suffice it to say, the position of the LIV is that it has no position. The LIV just hopes that the matter will disappear. My view is that the LIV is just sitting with those of its members who are lamenting the loss of their Cheese (see Who Moved My Cheese?), and has no interest in, and no stomach for, any form of real change in its industry.

One observation that I make regarding the LIV is the fact that one of the members of the Property Law Committee, which is highly influential in formulating LIV policy, is none other than the Corporate Solicitor for the Real Estate Institute of Victoria. Furthermore, another member of the same committee was procured by Consumer Affairs Victoria to give evidence against me (evidence which, as it turned out, was of little value to the court).

Personal toll

We have lost staff because we were unable to provide them with security into the future. In the beginning we had no idea as to whether this matter would drag on for 1 year, 2 years, 3 years or more. People need security in their lives, they need to be able to make plans. Fortunately, the staff who left us have been able to find security elsewhere. Those who remain are where we have been for the past two years - on tenterhooks.

Of course, the emotional and financial stress of the entire ordeal has had a profound affect on our family and our lives generally.  I won't go into details, but I would not wish this experience on anyone.

Conclusion

Well, the waiting will soon be over. The matter of DR CLAIRE NOONE, DIRECTOR OF CONSUMER AFFAIRS VICTORIA and PETER JOHN MERICKA & ORS has been set down for hearing as follows:

Date: Friday, 23 March 2012

Time: 10:00am

Location: Courtroom 13 of the Supreme Court of Victoria

I invite anyone and everyone who has an interest in this matter to be in attendance. Whether you are a supporter, detractor or whatever, you are quite welcome to attend as far as I am concerned.

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

This unsolicited letter is currently being sent by email to Re/Max agencies around the world:

“As a fellow Re/Max Broker, I'm writing to ask if you or perhaps a colleague might be interested in a U.S. referral opportunity in Chicago.

Many International real estate investors are purchasing cash flowing houses, condominiums, and apartment buildings at 50% of what they were once selling for in Chicago.  Couple this with the weak U.S. Dollar, and you will find annual returns and monthly cash flows that are off the charts.

I know in these uncertain economic and financial times many people are looking for a safe investment they can feel and touch such as income producing real estate.  Properties are professionally managed and rents are direct deposited into investor's accounts each month.

If you have investors in your area looking for cash flowing properties in the U.S., we would like to speak with you.  Please email or call so we can discuss in more detail the opportunity and the lucrative commissions packages available to you.

Take a moment to visit our website at to learn more about this opportunity connecting investors in your area with these income producing properties in our area.  Most investors are purchasing multiple properties because the prices are so low.  The commissions on these properties are fantastic and we invite you to come to Chicago this spring or summer for a firsthand look.

Also, if it is difficult for you to communicate in English, we probably have an agent in our office that speaks your language.  We hope to hear from you soon.  Here's to a great 2012!”

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

During 2008 the Commonwealth Bank made loans totalling $13.5 million to Matthew Perrin, his wife Nicole and their family company.   Among other securities, the bank relied on guarantees and mortgages apparently signed by Nicole. Some of these encumbered Perrins’ (previously unencumbered) sprawling Cronin Island family home held in Nicole’s name. 

Within six months Matthew, but not Nicole, was bankrupt.  When the bank eventually sued Nicole under the guarantees and mortgages for $10.7 million outstanding, she claimed her signatures were forgeries. 

After the bank had delivered various sets of documents to Matthew for execution by him and Nicole, he returned the signed documentation and Nicole’s title  deed (which he collected from their solicitors).  All signatures were apparently witnessed by Bill’s brother, Fraser, who later asserted his signatures were forged.  (The bank offered no explanation for these undisputed forgeries consistent with its claim that Nicole had signed personally.)

The bank’s case rested on several bases:  Firstly, the signatures were Nicole’s.  Secondly, if Matthew signed instead, he had authority under a Power of Attorney.  Thirdly, Matthew signed under an implied authority.  Fourthly, Nicole ratified the transactions and documents.  Fifthly, the bank claimed an equitable mortgage by receiving Nicole’s title deed. 

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

What do you do when a property you have contracted to sell is damaged (by flood, fire or whatever) before settlement?  What do you do if you are the buyer of that property?  These critical questions arose for more than a few sellers and buyers across Queensland during the State’s extensive flooding of December 2010 and January 2011.

A year later, with Queenslanders currently remembering and revisiting those dark days, these questions are still of concern to all involved in selling, buying or renting a home.

In one instance last year, the buyer and seller of a flood-damaged property could not agree on what to do.  So they took the matter to court.  Queensland’s Court of Appeal in the recent case of Dunworth v Mirvac ultimately ruled that a woman buying a $2.155 million river-front apartment in Mirvac Queensland Pty. Ltd’s up-market Tennyson Reach development had validly terminated her 2007 off-the-plan contract because of significant damages caused to the apartment by the January 2011 flooding.   Despite quite technical legal arguments raised by the seller/developer’s Queen’s Counsel and Senior Counsel during two hearings the appeal court finally found for the buyer.    Even before the flooding took place, every apartment in Mirvac’s complex of high-rise buildings had dropped drastically in value from the 2007 off-the-plan sale prices.  Needless to say values on most, if not all, flood-affected Queensland properties have dropped drastically since the floods.  Sales of such properties have, of course, been very few and far between.

After Mrs Dunworth had earlier attempted to escape her by now over-priced purchase contract on the basis of alleged false, misleading and deceptive representations by Mirvac particularly regarding the apartment’s elevation, Mirvac obtained a Supreme Court order obliging Mrs Dunworth to settle the contract (and pay some $500,000 interest) by 8th February, 2011.  Less than a month before that date, along with thousands of other  Brisbane and Ipswich properties on or near the river,  the Brisbane River flooded this ground-floor apartment (as it had similarly in 1974 inundated the land on which Mirvac built more than 30 years later).

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

TALE ONE (FROM NEW ZEALAND):

Warren and Rose West’s New Zealand home had been on the market for some time, but they received only one low offer despite reducing their price.  Then they became motivated, if not desperate, sellers when they contracted to buy another home subject to selling their own.  Their “window of opportunity for an advantageous sale” (as one judge subsequently put it) was limited, if they were to proceed with that purchase.  So they quickly sold for $2.75 million, even though they felt their home was worth about $3 million.

Five years, one court hearing and two legal appeals later Wests’ selling agent, KiwiRealty,was ordered to pay them almost $1million for damages, interest, costs and refund of commission.

Wests had discovered, to their dismay, that within six months their buyer, Dave Dagg, on-sold through KiwiRealty to an overseas buyer for $3.555million.   Admittedly Dagg made some improvements, conducted an aggressive international sales campaign in a rising market, but Wests felt betrayed.

They then sued KiwiRealty after dismally discovering further that its saleslady Jenny Spink had not revealed while handling their sale, that she knew Dagg often purchased properties to resell at a profit.  Nor did she disclose KiwiRealty’s ongoing “bird-dog” relationship with Dagg and, in particular, its involvement in several of his previous wheeler-dealing purchases and resales. 

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OPINION
by Peter Mericka B.A., LL.B
Real Estate Lawyer
Qualified Practising Conveyancer Victoria
Director Lawyers Real Estate Pty Ltd

In my last blog posting I wrote about Consumer Affairs Victoria's failure to address bribe induced corruption in the real estate and conveyancing industry. I concluded that posting by saying that I had written to Consumer Affairs Victoria (CAV) again, drawing attention to my blog posting, and promising that I would publish CAV's response. The response that I received confirms the moribund state of CAV's policy on corruption in the real estate and conveyancing industries it supposedly regulates.

CAV's failure to act on the corrupting effects of bribes

In my blog posting "Why Corruption Flourishes Under Consumer Affairs Victoria" I outlined the problem of bribe payments made by licensed conveyancers to real estate agents, and how this has a detrimental effect on both industries and on the consumers CAV is charged with protecting.

I had made a formal written complaint to CAV, providing full details including the names of two licensed conveyancers who openly advertise the fact that they offer bribe payments to real estate agents, together with the name of a real estate agent who had admitted to receiving bribe payments, and requesting that the problem be investigated. I received an arrogant and dismissive response which stated,

"In order for Consumer Affairs Victoria to determine if any breach of the relevant legislation has occurred, Consumer Affairs Victoria would require evidence that a conveyancer has not disclosed the payment or receipt of a commission in relation to a conveyancing transaction to his or her client."

CAV completely ignored the role of the real estate agent, and the failure of real estate agents to disclose the bribe payment to the party being referred, and the fact that such failure constitutes a serious criminal offence to which the licensed conveyancer becomes a party.

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OPINION
by Peter Mericka B.A., LL.B
Real Estate Lawyer
Qualified Practising Conveyancer Victoria
Director Lawyers Real Estate Pty Ltd

Consumer Affairs Victoria (CAV) has a sorry history when it comes to regulating Victorian real estate agents and, in more recent times, licensed conveyancers. It is one thing to be powerless to stop corruption, however it is something completely different when the government regulator not only fails to act, but also refuses to investigate. In this article I will explain how CAV has refused to use its statutory powers, and has itself become a part of the problem.

The bribery problem

Bribes paid to real estate agents for conveyancing referrals - a short history

Client trafficking is a particularly grubby part of the real estate industry, and it has a long history. Long before licensed conveyancers came onto the scene, it was common practice for lawyers to schmooze with local real estate agents in order to win conveyancing referrals. Initially the currency used in the trade of conveyancing clients was the occasional free lunch, supplemented by a bottle of Scotch at Christmas time. If a real estate agent ever had trouble with a client, the "pet" lawyer would quickly step in with some free advice, and may even come to the estate agent's aid with correspondence on the law firm's letterhead.

The more successful conveyancing legal practices tended be those with close ties with real estate agents, and the staff of these law firms came to understand the need to favourably consider the real estate agent's position if a dispute should arise between the firm's client and the real estate agent. It was not uncommon for a client to wonder why his or her lawyer could not see any wrongdoing on the part of the estate agent, even in the most extreme of cases.

These close relationships between lawyers and real estate agents saw real estate agents gain more and more power over real estate transactions. Eventually, real estate agents in the Melbourne metropolitan area gained almost total control over the contract stage of the real estate transaction. Today, real estate agents in Melbourne expect to be permitted to prepare contacts, draft special conditions, and provide legal advice to vendors and purchasers alike. In fact, a real estate agent who is provided with a contract document that is not to his or her liking feels entitled to "switch" the contract without conferring with the vendor's lawyer or conveyancer...

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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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OPINION
by Peter Mericka B.A., LL.B
Real Estate Lawyer
Qualified Practising Conveyancer Victoria
Director Lawyers Real Estate Pty Ltd

Readers may or may not be aware that Google has announced a new social networking facility that will compete wit Facebook, but is entirely different.

Google+ in a nutshell

Google+ has similar functions to Facebook, such as sending messages to friends, sharing links, chatting, and sharing pictures, but the big difference is that with Google+, you can choose who you want to share these things with. Unlike with Facebook where posting a link will show up on your profile for all of your 500 “friends” to see, Google+ lets you do things a little differently.

For example, the concept of Circles is a major part of Google+. This is where you choose who you want in your contacts. You can have a family Circle, a friends Circle, a co-workers Circle, and so on.

Most of us are friends with a lot of family members and colleagues on Facebook, and we enjoy seeing what they’re up to. However, we don’t always want to share everything with them. Google+ lets you to choose which people you want in what Circle. You then use those Circles for all of your Google+ activity.

Get an invitation

I am one of the early adopters of Google+ and I intend to use it to provide information and updates in future.  At this stage of the Google+ roll out it is necessary to be invited to participate.  I am sending invitations to those who want them.  If you would like to try Google+ by being included in my Real Estate Industry News Circle and/or my Conveyancing Information & Updates Circle, just click on the following link:

Google+ Invitation

Of course, the Australian Real Estate Blog will continue in its present form but Google+ will fill in the gaps between postings.

OPINION
by Peter Mericka B.A., LL.B
Real Estate Lawyer
Qualified Practising Conveyancer Victoria
Director Lawyers Real Estate Pty Ltd

Real estate agents have no automatic right to lodge a caveat over a client's property to secure the payment of commission. So some cunning real estate agents are adding a clause to the agency contract by which the client gives the real estate agent permission to lodge a caveat. If a real estate agent adds a caveat clause, the client may be able to argue that the conduct of the real estate agent is misleading and deceptive. Even more so if the clause is inserted into the contract in a manner that makes it downright sneaky!

Bell Real Estate Belgrave is a real estate agency in the Dandenong Ranges, east of Melbourne. My firm was completing the conveyancing for a vendor client who had been a long-standing client of Bell Real Estate, and who had sold his property through that agency. He had always paid his accounts on time and without dispute, and there was never any suggestion that he would not pay Bell Real Estate their commission on this occasion. Thus, my client had a history of paying Bell its proper commissions. So, it came as quite a shock when the real estate agent telephoned our office on the Friday and told us that settlement would not be allowed to proceed on the following Monday because Bell Real Estate were concerned about the payment of their commission.

Commission Rage

Commission rage is a common phenomenon in the real estate industry, and it is often the cause of desperate behaviour on the part of real estate agents who fear the loss of commission. It is particularly prevalent in lean times, and the real estate industry is experiencing lean times at present.

Commission rage may well have been a factor in this case, because when Glen Chandler of Bell Real Estate Belgrave telephoned my office to complain that he did not have enough deposit money in the Bell Real Estate trust account to cover the commission, I could sense that he was both anxious and angry. Chandler called our office and asked if the vendor had instructed our firm to draw a cheque for commission payable to Bell Real Estate Belgrave, and when he was told that we had not been instructed to make any of our client's funds payable to his office, he was put through to me. Chandler demanded that we arrange for a cheque to be made payable to Bell Real Estate Belgrave, as he had not been able to get in touch with the vendor and he did not want settlement to proceed before he had been paid.

The staff member handling the file informed me that she had spoken with the purchaser's conveyancer, but it was too late to have the settlement cheques changed. (Ordinarily the cheques delivered at settlement are payable to the vendor's mortgagee and the vendor, not to the real estate agent. It is usual for the real estate agent to deduct commission from the deposit held by the real estate agent, and to invoice the vendor for any amount outstanding. But these are tough times for real estate agents, and this may be encouraging some to grant themselves another privilege.)

It was Friday afternoon, the cheques had been ordered for settlement on the Monday, and the purchaser's lender had confirmed that it was not possible to change them. There was nothing further that could be done to have the cheques changed at such short notice, and so close to settlement.

I explained to Chandler that the commission would have to be paid after settlement had taken place, as the vendor would be relying on the settlement proceeds to pay it. Chandler was furious. He screamed into the phone, demanding that the commission be paid before settlement, otherwise settlement would not proceed at all. I asked Chandler if the vendor had given any indication at all that he couldn't or wouldn't pay the commission, and he admitted that the only reason he was so concerned was that the vendor may change his mind after settlement and decide not to pay. When I suggested to Chandler that perhaps he was being a little unreasonable, he screamed again, adding that Bell Real Estate would lodge a caveat over the vendor's property so that settlement couldn't take place at all.

Knowing that a debt of commission does not give rise to a caveatable interest in a client's property, I explained to Chandler that he was being rather extreme and that he really wasn't entitled to lodge a caveat over his client's property. In any case, lodging a caveat would be self-defeating, ensuring that the commission would not be paid, because the proceeds of the sale were needed for this purpose. In other words, by stopping the settlement, Chandler would also be stopping the payment of his own commission - a rather silly strategy.

Chandler would have none of it. He was in a heightened state of anger and he screamed into the phone again, "No cheque, no settlement, we'll slap a caveat on that place right now, we've got a clause in the sale authority that says we can!"

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OPINION
by Peter Mericka B.A., LL.B
Real Estate Consumer Advocate
Real Estate Lawyer
Qualified Practising Conveyancer Victoria
Director Lawyers Real Estate Pty Ltd

I would like to hear from lawyers who would be interested in selling real estate in competition with real estate agents.  This is a service offered by lawyers in a number of other countries, and it is time to develop the concept here in Australia.