When you enter into an agency agreement (including a joint sole agency) with someone who is selling a property, you need to meet a number of requirements that are set out in the Real Estate Agents Act 2008 and the Real Estate Agents Act (Professional Conduct and Client Care) Rules 2012 (Code of Conduct).
As a licensee, you have to meet these requirements before you can receive a commission or expenses for real estate agency work carried out:
You need to warn the vendor they could be at risk of paying two commissions if the buyer has been introduced by another agent or if they have an existing agency agreement that has not been cancelled. You must also warn them that, if they cancel the agency agreement with you and then sell privately to a person introduced by you, they may still be liable to pay a commission.
This is your estimate of the sale price of the property. It must reflect current market conditions realistically and be supported by comparable information about sales of similar properties. This applies to all transactions, including commercial leases. If it is not possible to provide comparable information, you should say so in the appraisal.
Explain the sale options, for example, by tender, auction or at an advertised price. You must also explain any rebates you receive from each sale method. Download Form 1: Agent's statement relating to rebates, discounts, and commissions [PDF, 223 KB]
This should explain how the commission will be calculated, the conditions under which it must be paid and the estimated total sum they will pay based on the estimated sale price. Be clear about whether the figures are inclusive or exclusive of GST.
Provide a copy of the agency agreement guide (if it's a residential sale) You must give the vendor a copy of the New Zealand Residential Property Agency Agreement Guide [PDF, 275 KB] before they sign the agreement and ask them to confirm in writing that they have received it. You can email the guide or give them a printed copy.
You must explain how the property will be marketed and advertised. Make it clear what advertising you provide as part of your service and what the vendor would be charged for. Read more about marketing and advertising
You must include a statement about any rebates, discounts or commission you will receive and specify the amount. You are not entitled to receive any expenses from a vendor if this information is not included in the agency agreement. Download Form 1: Agent's statement relating to rebates, discounts, and commissions [PDF, 223 KB] Read more about disclosures
If you have a conflict of interest, for example, if you or someone connected to you is interested in buying the property, you must inform the vendor and follow the prescribed process. Read more about conflict of interest
You must recommend that the vendor seeks their own legal advice and give them a reasonable amount of time to do this before signing the agency agreement. Make sure they are aware they can and may need to seek technical or other advice and information. On settled.govt.nz (external link) , we recommend that sellers get legal advice before signing the agency agreement.
You must explain that your agency has an internal complaints procedure for dealing with complaints and that the vendor may complain to REA without first using your in-house complaint process. Read more about the complaints process
To help protect New Zealand’s reputation and economy from money laundering and the financing of terrorism, before conducting certain activities, real estate agents, lawyers and conveyancers and even banks must confirm vendor identity under the Anti-Money Laundering and Countering Financing of Terrorism Act 2009 (the AML/CFT Act).
You will need to confirm the vendor's identity as you are selling a property on someone else’s behalf.
You will need to verify their identity by using:
In certain circumstances, you may need to obtain and verify identity information about the vendors if you receive a deposit of $10,000 or more in cash or by cheque into your trust account.
Even if the vendors have been clients for a long time, you will need to confirm that they are who they say they are.
When an agency agreement is cancelled, you must give the vendor the names of any potential buyers you introduced to the property and tell the vendor that, if any of these potential buyers purchase the property, this may result in you being entitled to a commission.
This applies even if you are using the standard clauses for residential or rural agency agreements. Learn more about our recommended standard clauses for residential and rural agency agreements
The 5.00pm window for cancelling a sole agency agreement
If the vendor changes their mind after signing a sole agency agreement, they can cancel it (in writing, by letter, fax or email) by 5.00 pm on the first working day after they have been given a copy of the agreement.
However, if you carry out any work before the agreement is cancelled that results in the sale of the property, the terms of the agency agreement will be legally binding.
If the client signed the agreement after an unsolicited approach from you, they may cancel the agreement within 5 working days of receiving a copy of the agreement. Cancellation does not need to be in writing in this case.
Cancelling a sole agency agreement after 90 days
If the sole agency agreement is for a residential property and for a term longer than 90 days, you or the vendor can cancel the agreement any time after 90 days.
What happens once a sole agency agreement is cancelled depends on what the agreement says. If your agency uses the standard clauses, refer to the standard clauses for residential and rural agency agreements
Most general agency agreements will specify the notice period for cancelling the agreement. The notice period is designed to give the agency the chance to conclude any introductions.
There is nothing in the Act or the Code that specifies how long the notice period for the cancellation of a general agency should be. Industry practice is usually between 7 and 14 days.
You may be at risk of breaching the rules if you make your notice period longer than 14 days.