Protect Yourself: Will You Pay Commission if Your Property Sale Falls Through?

The Convergence of Two Legal Frameworks

Queensland property vendors face a new and potentially costly risk at the intersection of two critical legal instruments: the Form 6 appointment of real estate agent and the mandatory Form 2 Seller Disclosure Statement. While most vendors focus on marketing strategies and sale prices, few understand how defects in their Form 2 disclosure could trigger tens of thousands of dollars in commission liability - even when the property never settles.¹

Since 1 August 2025, Queensland’s Property Law Act 2023 (Qld) has fundamentally changed the property landscape by introducing mandatory pre-contract disclosure requirements.² Simultaneously, the Property Occupations Act 2014 (Qld) continues to govern real estate agent appointments through Form 6 agreements.³ The dangerous overlap between these two frameworks creates commission traps that most vendors never see coming.

Understanding Form 6: The Agent Appointment Contract

A Form 6 is far more than a simple marketing agreement. It is a legally binding contract under the Property Occupations Act 2014 (Qld) that appoints a real estate agent to act on behalf of a property owner.⁴ Without a valid, properly completed Form 6, an agent cannot lawfully advertise or market property, and more critically, cannot claim commission.⁵

The Form 6 must specify numerous critical details: the type of appointment (open listing, sole agency, or exclusive agency), the term of appointment (up to 90 days for sole or exclusive appointments), the list price or price range, and crucially, the commission structure and when that commission becomes payable.⁶

When Standard Form 6 Terms Require Commission Payment

Most Queensland agents use the Real Estate Institute of Queensland (REIQ) standard terms and conditions, which are typically annexed to the Form 6.⁷ These standard terms generally require vendors to pay commission in four distinct circumstances:

1. When the contract of sale settles
2. If the vendor defaults under the contract and the contract is terminated because of that default
3. If the buyer defaults and any part of the deposit is liable to be forfeited to the vendor
4. If the contract is terminated by mutual agreement between vendor and buyer

The second scenario - vendor default triggering commission - is where the Form 2 issue becomes critically dangerous.⁸

Understanding Form 2: The Seller Disclosure Statement

Effective from 1 August 2025, sellers must provide prospective buyers with a completed Form 2 Seller Disclosure Statement and prescribed certificates before the buyer signs a contract.⁹ This disclosure regime represents a fundamental shift from Queensland’s traditional “buyer beware” approach to mandatory seller transparency.

Form 2 requires disclosure of extensive information including title details, unregistered encumbrances, tenancy agreements, zoning, rates and water charges, contamination notices, building work under owner-builder permits, and numerous other matters affecting the property.¹⁰ Sellers must also attach prescribed certificates such as title searches, survey plans, body corporate certificates (if applicable), pool safety certificates, and various government notices.¹¹

The Critical Form 2 Preparation Reality

Here lies the first problem: Form 2 is typically prepared not by the vendor personally, but by their representatives - either the real estate agent or the vendor’s solicitor/conveyancer.¹² While vendors must sign the Form 2, they often rely heavily on the professional preparing it to ensure accuracy and completeness.¹³

Buyer Termination Rights Under Section 104

Section 104 of the Property Law Act 2023 (Qld) grants buyers powerful statutory termination rights when disclosure fails.¹⁴ These rights cannot be contracted out of and override any contrary provisions in the contract.¹⁵

Ground 1: Failure to Provide Disclosure

If the seller fails to provide the Form 2 or any prescribed certificate before the buyer signs the contract, the buyer may terminate the contract at any time before settlement.¹⁶ This is an absolute right - the buyer needs to prove no loss, disadvantage, or materiality. The mere absence of proper disclosure suffices.¹⁷

Ground 2: Inaccurate or Incomplete Disclosure

If the seller provides Form 2 and certificates but they contain inaccuracies or omissions, the buyer may terminate if all three conditions are satisfied:¹⁸

1. The Form 2 or certificate is inaccurate or incomplete regarding a material matter affecting the property at the time given to the buyer
2. At the time the contract is signed, the buyer is not aware of the correct state of affairs concerning the matter
3. If the buyer had been aware of the correct state of affairs, the buyer would not have signed the contract

Material matters include facts that could reasonably influence a buyer’s decision, such as undisclosed easements restricting development, zoning classifications prohibiting intended use, contamination notices, unregistered leases, or significant body corporate issues.¹⁹

Critically, buyers can exercise this termination right at any time before settlement.²⁰ This means a contract that has progressed through building inspections, finance approval, and is days from settlement can still be terminated if a Form 2 defect emerges.

Consequences of Section 104 Termination

When a buyer terminates under section 104, the seller must refund any deposit paid, along with any interest earned, within 14 days.²¹ The buyer is not liable for any costs or penalties.²²

The Commission Trap: Is Form 2 Termination a “Vendor Default”?

This is where the legal uncertainty creates enormous financial risk. When a buyer terminates a contract under section 104 due to Form 2 defects, does this constitute a “vendor default” that triggers the agent’s entitlement to commission under the Form 6, even though the sale never settles?

Arguments Supporting Commission Liability

Real estate agents could argue that a Form 2 defect represents a vendor default because:²³

• Providing accurate Form 2 disclosure is a statutory obligation imposed on the seller under section 99 of the Property Law Act 2023 (Qld)
• This statutory obligation becomes part of the contractual framework
• Failure to provide accurate disclosure constitutes a breach of the vendor’s statutory duties
• The standard Form 6 clause requires commission payment when “the vendor defaults under the contract and the contract is terminated by reason of that default”
• The termination flows directly from the vendor’s failure to meet disclosure obligations

In the landmark case of Trappando Pty Ltd v Sunshine Group Pty Ltd [2023] QSC 87, a vendor was held liable for $1.65 million in commission on a contract that terminated - despite the entire deposit being only $750,000.²⁴ The court enforced the standard REIQ terms requiring commission payment when the contract failed to settle in circumstances covered by the agent appointment.

Arguments Against Commission Liability

Vendors could counter-argue that:²⁵

• Section 104 provides a statutory termination right that is fundamentally different from traditional contractual default
• The termination is based on the buyer exercising a protective statutory remedy, not on vendor breach in the traditional sense
• “Default” in Form 6 contemplates intentional or negligent breach, not good faith errors in complex disclosure
• Where the Form 2 was prepared by the agent or vendor’s lawyer, the vendor may have no personal fault
• The agent (if they prepared the Form 2) should not benefit from their own error by claiming commission
• Professional negligence by the preparer, not vendor default, caused the termination

This legal question remains untested in Queensland courts, creating significant uncertainty for vendors.

Additional Risk Factors Vendors Face

The Professional Preparation Dilemma

Many vendors instruct their real estate agent to prepare the Form 2 on their behalf.²⁶ Agents commonly request vendors complete a “Disclosure Instructions and Search Authority” form, then the agent coordinates searches and compiles the Form 2.²⁷ Similarly, vendors may engage their conveyancer or solicitor to prepare these documents.²⁸

This creates a puzzling scenario: the vendor signs a Form 2 prepared by their representative, the Form 2 contains an error or omission (perhaps due to incomplete information provided by the vendor, search errors, or professional oversight), the buyer discovers the defect and terminates under section 104, and the agent then claims commission for a sale that never settled - potentially arguing the vendor defaulted by providing defective disclosure.²⁹

The “Good Faith” Error Problem

Even sellers who act entirely in good faith face exposure. Complex properties may have disclosure requirements that are difficult to identify.³⁰ Body corporate schemes involve extensive documentation and potential issues.³¹ Historical contamination or environmental matters may not be within the vendor’s actual knowledge.³² Zoning and planning matters can be technical and evolving.³³

A vendor who diligently instructs professionals, provides all information within their knowledge, and signs disclosure documents in good faith could still face commission liability if those documents prove defective and trigger buyer termination.³⁴

Timing Creates Maximum Exposure

Because buyers can terminate under section 104 at any time before settlement,³⁵ vendors face prolonged uncertainty. A sale might progress for weeks or months, incurring agent marketing costs and opportunity costs, only to terminate days before settlement due to a Form 2 issue discovered late in the process. Under standard Form 6 terms, commission could still be payable despite this late-stage collapse.³⁶

Protecting Yourself: Critical Steps Before Signing Form 6

1. Seek Independent Legal Advice

Form 6 contains a prominent warning: “THE CLIENT IS ADVISED TO SEEK INDEPENDENT LEGAL ADVICE BEFORE SIGNING THIS FORM”.³⁷ This warning is not mere formality - it reflects the serious legal and financial implications of the document.³⁸

Before signing any Form 6, vendors should have their solicitor review the entire appointment, including all annexed terms and conditions. This review should specifically address commission payment provisions and their interaction with Form 2 termination rights.³⁹

2. Negotiate Commission Payment Terms

The standard REIQ terms are not mandatory. Vendors can request amendments to limit commission liability.⁴⁰ Specifically, vendors should consider:

Commission on Settlement Only: Insert a special condition in Part 7 (Commission) of Form 6 stating that commission is payable only if and when the contract of sale settles.⁴¹ This eliminates commission liability for contracts that terminate for any reason, including Form 2 defects.

Exclude Form 2 Terminations: Add a specific exclusion stating that no commission is payable if the contract is terminated by the buyer exercising rights under section 104 of the Property Law Act 2023 (Qld).⁴²

Cap Commission at Deposit Amount: If unable to negotiate settlement-only commission, consider capping the commission at the deposit amount forfeited (if any), ensuring vendors are never out-of-pocket for commission on failed sales.⁴³

Agents may resist these amendments, as they reduce their commission protection.⁴⁴ However, vendors have negotiating power and should not simply accept standard terms that expose them to significant financial risk for sales that never complete.⁴⁵

3. Address Form 2 Preparation Responsibility

The Form 6 or a separate written agreement should clarify who will prepare the Form 2 and what happens if that preparation is defective.⁴⁶ Consider including provisions that:

• Specify whether the agent, vendor’s solicitor, or vendor personally will prepare Form 2
• Require the preparer to maintain professional indemnity insurance
• Allocate liability if Form 2 defects cause contract termination
• Exclude or limit commission entitlement if the agent prepared defective disclosure

4. Require Early Form 2 Preparation and Review

Do not wait until a buyer emerges to prepare Form 2. Vendors should prepare disclosure documents as soon as they sign the Form 6, ideally before marketing commences.⁴⁷ This allows time for thorough review, correction of any issues, and reduces pressure during contract negotiations.

Engage a solicitor to review the completed Form 2 before it is provided to any prospective buyer.⁴⁸ This independent review can identify errors or omissions before they cause problems.

5. Document Everything

Maintain comprehensive records of all instructions given to agents and solicitors regarding Form 2 preparation.⁴⁹ Keep copies of all documents provided to support Form 2 disclosure.⁵⁰ Retain evidence of professional advice received.⁵¹ If commission disputes arise, this documentation will be crucial.

The Broader Implications

The intersection of Form 6 commission provisions and Form 2 termination rights represents a significant shift in risk allocation in Queensland property transactions. Previously, vendors primarily worried about commission when sales settled. Now, vendors face potential commission liability even when sales fail - if that failure results from disclosure defects that trigger section 104 termination rights.⁵²

Real estate agents have legitimate interests in protecting their commission after investing time and resources in marketing property.⁵³ However, vendors equally deserve protection from commission liability for sales that never complete, particularly when defects arise from complex disclosure requirements or errors by professional preparers.⁵⁴

Until courts provide definitive guidance on whether Form 2 terminations constitute “vendor defaults” triggering commission, vendors must assume worst-case scenarios and negotiate Form 6 terms accordingly. The stakes are too high to simply sign standard forms and hope for the best.⁵⁵

Conclusion

Queensland’s new seller disclosure regime provides important buyer protections but creates unforeseen commission traps for unwary vendors. The mandatory Form 2 requirements, combined with broad buyer termination rights under section 104 and standard Form 6 commission clauses, create scenarios where vendors could pay full commission on sales that never settle.⁵⁶

Vendors must recognise that Form 6 is not a simple marketing agreement but a binding contract with potentially significant financial consequences. Before signing any Form 6 appointment:

• Obtain independent legal advice about commission payment provisions
• Negotiate amendments limiting commission to settled sales only
• Clarify Form 2 preparation responsibilities and liability
• Prepare disclosure documents early with professional review
• Document all instructions and advice meticulously

The cost of legal advice before signing Form 6 is minimal compared to the potential cost of paying commission on a sale that never completes. In an environment where buyers can terminate for Form 2 defects at any time before settlement, vendor vigilance and careful contract negotiation are essential protections.

Bell and Senior Lawyers can review your Form 6 appointment before you sign and advise on protecting your interests in light of Queensland’s new seller disclosure requirements. Contact us before appointing an agent to ensure you understand and minimise your commission exposure.