The Queensland State Government announced earlier this week plans to further deregulate real estate commissions.
This will affect the amount of real estate commissions payable in relation to the sale, letting and management of properties in Queensland.
The current situation
Sale of property
Currently, real estate commissions for the sale of residential and rural properties are regulated under the Property Agents and Motor Dealers Act 2000 (Act) and the Property Agents and Motor Dealers Regulation 2001 (Regulation) and are limited to a maximum of:
· for residential or freehold rural property, 5% of the first $18,000 and 2.5% of the balance, plus GST and plus out of pocket expenses, and
· for leasehold rural property, 10% of the first $1,000, 5% of the next $4,000 (that is the amount between $1,000 and $5,000) and 2.5% of the balance, and
Real estate commissions for the sale of commercial property are not regulated and are the subject of negotiation between the parties.
Letting of property
Currently, real estate commissions for the letting (that is, finding a tenant) of residential and rural properties are regulated under the Act and the Regulation and are limited to a maximum of:
· for a residential tenancy for more than one year:
- if more than five years, 7.5% of the average annual rental, or
- if not more than five years, 5% of the first year’s rental.
· for a residential tenancy for not more than one year:
- if more than three weeks, one week’s rental,
- if more than two weeks and not more than three weeks, 75% of one week’s rental, or
- if not more than two weeks, 50% of one week’s rental.
· for rural property:
- if the rental is not more than $200, 10% of the first year’s rental, or
- if the rental is more than $200, $20 and 5% of the part of the rental that is more than $200.
An agent is not entitled to commission payable on the letting of a residential property under a tenancy for holiday purposes.
Real estate commissions for the letting of commercial property are not regulated and are the subject of negotiation between the parties.
Managing of property
Currently, real estate commissions for the management (including collecting of rents) of residential properties are regulated under the Act and the Regulation and are limited to a maximum of:
· for a tenancy for residential purposes:
- if commission has not been paid on the letting of the property, 7.5% of the rental collected, or
- if commission has been paid on the letting of the property, 5% of the rent collected for the first year and 7.5% from then on.
· for a tenancy for holiday purposes:
- if the tenancy is not more than three months, 12% of the rent collected, or
- if the tenancy is more than three months, 9% of the rent collected.
Real estate commissions for the management of commercial and rural property are not regulated and are the subject of negotiation between the parties.
Scope to negotiate
In Queensland, the rates of commission are prescribed maximums. It has always been possible to negotiate a lower rate. Having said this, except in the case of commercial property where no rates are prescribed, the prescribed rates are generally accepted as the “standard rates” without reduction.
The proposed position
The exact changes have not yet been released although the current, albeit limited, commentary from the Government would indicate that the proposed position will involve all real estate commissions being deregulated and open to negotiation between the parties and:
· is expected to lead to increased competition in the industry, which will benefit both consumers and agents. The Government has indicated that the experience in other jurisdictions shows that deregulation has not lead to increases in commissions and QCAT is there as an added protection
· allows, more fairly than the current position, the circumstances such as the saleability of a property or the amount of effort required for it ultimately to be sold to be taken into account;
· is being adopted following numerous national and state reviews recommending the deregulation of real estate commissions
· will bring Queensland into line with other Australian jurisdictions, and
· will have strong consumer protections including strong disclosure and the Queensland Civil and Administrative Tribunal (QCAT) will be given the jurisdiction to deal with situations where it is alleged that a commission is harsh and unconscionable. It is suggested that QCAT will be an accessible and affordable option where parties can represent themselves in dealing with such disputes.
The Process
The Government has indicated that it will shortly commence consultation with relevant interested groups about the proposed changes. After that consultation process is completed, appropriate changes to the Act and the Regulation will need to be made.
Until the process is completed, the current position mentioned above will remain in force. We also expect that there will be some transitional arrangements for appointments of agents which span the timing for commencement of the changes.
For more information on the changes, please contact:
