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).
Before you can receive a commission or expenses
- There must be a written agency agreement in place before you do any work.
- The agency agreement must be signed by or on behalf of the vendor and the agent.
- You must give a copy of the agency agreement to the vendor within 48 hours of being signed.
Things you must do before an agency agreement is signed
Explain the risk of paying a commission if a previous agency is not cancelled
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.
Provide a written price appraisal of the property
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.
Discuss the different options for selling the property
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.
Provide a clear written estimate of your commission
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, 2.2 MB] [PDF, 2.2 MB] 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.
Explain marketing and advertising costs
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 here.
Disclose rebates, discounts and commission
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.
Read more about disclosures here.
Inform the vendor if you have a conflict of interest
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 here.
Recommend that the vendor seeks legal and other advice before signing
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.
Explain to the vendor when the agency agreement will end
You must explain when the agency agreement ends and how the vendor can cancel it.
Provide information about how to make a complaint
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 here.
Verifying vendors identities
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:
- Primary photo identification, for example, a passport, a certificate of identity or refugee travel document or a firearms licence.
- Non-photo identification such as a birth certificate or a citizenship certificate, accompanied by a supporting form of photo identification such as a driver's licence, an 18+ card, or an international driver’s licence.
- A New Zealand drivers licence supported by evidence such as a bank card, a gold card, or an IRD letter.
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. You can read more about this on the Department of Internal Affairs website.
Cancelling agency agreements
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 here.
Cancelling sole 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 section on our website here.
Cancelling general 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.
Best practice for conjunctional arrangements
Conjunctional sales take place when an agent who doesn’t represent the vendor finds a potential buyer or lessee for a property. The listing agency may come to a mutual agreement to conjunct and share commission if the sale is successful.
The decision on whether or not to have a conjunctional arrangement must be based on the vendor’s best interests. The vendor should be consulted about whether to conjunct, and the advantages and disadvantages should be explained. For example, a conjunctional arrangement may result in a quicker sale, and this may result in reduced personal or financial stress for the vendor.
Agencies may work in a one-off arrangement, or they may have an ongoing relationship that allows access to each other’s listings. For both arrangements, the listing agent will need to state the arrangements in writing to the vendor to help avoid any misunderstanding. The arrangements should include:
- who receives what commission and on what basis
- open home times and management
- marketing information
- signage (shared or separate).
These steps help ensure the marketing and commission-sharing arrangements are transparent and avoid the vendor paying two commissions.
The listing agent must give a copy of the conjunctional arrangements to each party, including the vendor.
It is important that all licensees involved in conjunctional sales remember that they must act in the vendor’s best interests and uphold their fiduciary duty to the vendor or lessor. This means the conjunction agent still has a fiduciary obligation to the vendor, even though they don’t have the listing. It must be made clear to the buyer that the main responsibility of the licensee is to the vendor.
Both licensees are also bound by requirements for disclosure of a conflict of interest and the related requirement to receive consent from the vendor and to provide a valuation.
Communication between agencies during the arrangement
There needs to be clear communication between the agencies while the conjunctional arrangement is in place.
The listing agent needs to:
- pass on all information about the property
- make sure the marketing and open home arrangements are understood by both agents
- keep the conjunction agent informed of progress when a buyer introduced by the conjunction agent makes an offer.
The conjunction agent needs to:
- keep the listing agent informed of any enquiries about the property received by the conjunction agent
- provide feedback to the listing agent after a buyer they introduce views the property
- if conducting open homes, provide feedback to the listing agent regarding the number of visitors and their perceived interest.
- all communication and negotiations with the vendor will be dealt with solely by the listing agent
- usually all communication and negotiations with a potential buyer introduced by the conjunction agent will be dealt with by the conjunction agent
- the regularity and content of communications between the agencies and the contact person need to be agreed.
Buyer’s agents and conjunctional agreements
A buyer’s agent can't negotiate a conjunctional sale arrangement. In a conjunctional arrangement, the agent who has introduced the buyer to the listing agent may be working with the buyer, but they are not working for the buyer because there is no agency agreement in place.
Approaching clients who have an agreement with another agency
Be careful not to undermine their relationship with the current listing agency — don’t make negative comments about how the property has been listed or about the listing agent.
You may be approached by a vendor who wants to sign a sole agency agreement with you while they have an existing sole agency agreement with another agency. We recommend you don’t take on this vendor as a client until their existing agreement ends.
If you choose to take on a client who has another sole agency agreement in place, be sure to:
- explain in writing that there is a high risk they will need to pay two commissions
- give them plenty of time to take legal and expert advice
- provide an appraisal and have a signed listing agreement in place.
Don’t mislead potential buyers by implying or stating they can’t approach the current listing agent directly.