Agents, their duties and secret commissions

When we hear the word agent our first thoughts are of real estate agents. However, an agent in a legal sense actually covers an expansive range of relationships between a person or company (an agent) and another (referred to as a principal) who has undertaken to serve their best interests.

Whether or not a relationship of agency exists is a question which the courts approach objectively. There are many examples of established agency relationships. Here are a few;

·         Real estate agent and client

·         Solicitor and client

·         Employee and employer

·         Joint venturers (to each other)

·         The director of a company (to the company)

Scope of an agent’s duties

While the scope of the duties owed by an agent to their principal will vary depending on the type of agency, a fundamental duty of an agent is not to use their position to make a gain for themselves without the knowledge and assent of the principal.

An agent should consider if there is any personal interest in the matter which might conflict with the duty owed to the intended principal and, if so, he or she should decline to act as agent without the fully informed consent of the principal.

Profit from position and secret commissions

If an agent is aware of any circumstances which might influence their client’s decision to enter into a negotiation, and fails to disclose that information to their client, the commission may be forfeited.

If the agent does receive profit as a result of that non-disclosure, these profits are recoverable by the principal on learning the true facts.

Should an agent receive a secret commission or profit the principal may recover it as well as dismiss the agent.

Application to Real Estate

Let’s apply this to a real estate transaction, where agencies most commonly arise.

Perhaps you have heard of agents who desired to act for both a buyer and seller and to obtain commission from both. It is the duty of the agent to make full disclosure to both the buyer and seller of an intention to act for, and receive payment from, the other party. Both parties must be made fully aware of this intention and agree to the agent doing so. In the event the agent does not tell both parties, or does not gain their consent, the commission will be lost.  These obligations apply in addition to any PAMDA or POA obligations.

Abandonment of Land

Have you ever considered what happens when someone abandons a property? Imagine a scenario where someone with good legal title to a property decides to walk away and not return. If a squatter then decides to take up residence in the property, and lives there for 15 years before the owner returns, who owns the property? In actual fact, it is possible that the squatter has acquired a good title to the property, enforceable even against the original owner!

From a legal position, an action cannot be brought by an owner to recover land after the expiration of 12 years from the date on which the right of action accrued. A right to recover land accrues when the land is in the possession of someone who is not entitled to it (for example, a squatter).

Let’s say the squatter takes a property, puts up a fence, changes the locks, declares it is home and excludes all others from the property. If the owner subsequently brings an action to recover possession the squatter can bar that action by the owner as long as;

·         They have been in constant, visible occupation for at least 12 years,

·         The possession is open, not secret, and peaceful, not by force,

·         The owner did not give them consent to be on the property (as an employee or contractor), unless the owner did but then revoked that consent, and

·        They intended to possess the property.

The court will consider such things as; 

·         paying rates,

·         erecting and maintaining fences, and

·         cultivating the land

highly convincing, but not definitive in determining whether a person has possessed the land.

To establish a requisite intention to possess the land, the person in actual occupation must show an intention to exclude the world at large, including the registered owner, but it is not necessary to prove a conscious intention to exclude the registered owner.

There are interesting considerations within this, most notably;

·         where a person derives ownership of the dispossessed property via a will or intestacy,

·         where the interest gained in the property is by some assurance or guarantee,

·         where action to recover land is based on fraud,

·         If a person has a future interest in the land (a right to ownership at some point in the future),

·         Where the owner holds the land as trustee, and

·         Where the squatter used the property as a weekender/vacation home.

All of these instances require a more thorough explanation of the law.

If anything you have read here applies to you or a relative, or if you are interested in a more thorough explanation, make an appointment to speak with one of our experts.