If you are familiar with property law, you may have heard of a conjunction agreement. And though they may not be as popular today as they once were, their legality still stands.
Say you are in the real estate business, and a client comes to you wanting to sell their property. Ideally, you’ll be able to find the right buyer for your client’s property, but what happens if you can’t find a buyer? That’s where a conjunction agreement comes into play.
What Is a Conjunction Agreement?
A conjunction agreement is a contract that can be drawn up between two real estate agents and a property vendor. This contract allows real estate agent A to transfer their obligation to sell a property to agent B, while ensuring both agents are monetarily compensated for the sale.
As such, the commission earned during the sale of the property will be divided between the signatory agents of the conjunction agreement. The commission does not have any set rules and doesn’t have to stick to the industry standard. The percentage of commission is entirely up to the agents that are signing the agreement.
How Does It Work?
A conjunction agreement is not quite as complicated as one would imagine it to be. It is a simple form to be completed and signed by both parties. The form begins with the personal information of both the listing agent (the one that the property is originally supposed to be sold by) and the co-joined agent (the new agent that sells the property).
The details of the property and the vendor (seller) are listed in clear terms. Any demands set forth by the vendor or mentioned previously are mentioned in the conjunction agreement once again.
The main section of the agreement outlines the selling price of the property, the agent’s selling fee, and commission percentages that are mutually agreed upon. The document will become legally binding once all conditions are agreed upon and the contract is signed by both parties.
How Is a Conjunction Agreement Enforced?
While it is always preferred for agreements to go according to plan, it is possible that sometimes they may not, commonly due to miscommunication.
In such situations, the case may go to court, and if that happens, only the written clauses of the conjunction agreement will be enforced. Things that were “obvious” will not be legally binding to either party, as they are based on assumption rather than clarity.
As such, regardless of whether you are the listing agent or the co-joined agent, make sure to get every agreement in writing, from the percentage of the commission you are entitled to, to the date by which your commission must be paid. This will help you have legal backing if you’re taken to court.
What’s Included in a Conjunction Agreement?
A conjunction agreement must be formatted correctly and include every essential aspect to not fall prey to loopholes. The following things must be included in a conjunction agreement:
Parties
Information related to the Listing Agent and the Co-Joined Agent must be present. Important inclusions are ABN/can and the Licensee’s Licence Number.
Address of Property for Sale
Property address including the postal code must be mentioned. Any special conditions, if specified within the sale contract, must also be specified in the conjunction agreement.
Vendor Information
Personal information about the person putting up the property for sale is necessary. If any arrangements are required for property inspection, they must be mentioned.
Price
The price at which the property is to be sold must be written. If GST is exclusive, it must be mentioned. The selling fee for the agent is also to be mentioned along with the date of conjunction.
Conjunction Basis
Why is conjunction needed in this particular case of a property sale? The basis for the conjunction must be mentioned clearly, with no ambiguity.
Conditions
All conditions related to the termination of the agreement, taxation regarding money and the agreement, communications to and from the vendor, and also the privacy policy must be clearly stated in the conjunction agreement.
Signatures
Signatures of both parties (Listing Agent and Co-Joined Agent) must be included at the end of the form, as well as the date of execution.
Do You Need a Conjunction Agreement?
Are you a real estate agent? If yes, chances are that you will need to make use of a conjunction agreement sooner or later. If you find yourself caught in a pickle and cannot seem to get a property off your hands at the right rates, a conjunction agreement can save you.
You may even need a conjunction agreement if you are aware of another real estate agent who can use their connections and help you sell your property.
Key Takeaways
- A conjunction agreement allows a real estate agent to transfer their obligation to sell a property to another agent. The agreement is drawn up between two parties: the Listing Agent and the Co-Joined Agent.
- The commission earned from the sale can be divided between both agents. If this is the case, it must be mentioned in the conjunction agreement. The percentage of the commission that both the agents are entitled to is negotiable.
- If due to a misunderstanding, a conjunction agreement leads to a court case, the court will only be liable to enforce what is written in this contract. Anything besides or beyond that scope is open to interpretation, so “implied” knowledge is not acceptable.
- A conjunction agreement includes information about the parties, the vendor, the price of the property, the commission, the address of the property, the basis of conjunction, conditions, and the signatures of the parties.
- You will need a conjunction agreement if you want another agent to sell the property that you’re responsible for selling.
Hire an Expert to Draft a Conjunction Agreement
There are a lot of technicalities when it comes to property rights and real estate law. This is why drafting legal documents is best done by experts in the field who have years of experience. At Lazarus Legal, we have solicitors who have had long-term exposure to property law and can assist with creating your bulletproof conjunction agreement. Contact us today to get started.
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Mark Lazarus
Mark Lazarus, the visionary behind the business and the fresh blood of the Lazarus Legal team, Mark (or Laz as he is often known) owes much of his success to his past experiences. And he’s made it his personal goal to bring that wisdom and formula to the firm.
1 thought on “What Is a Conjunction Agreement and Do You Need It?”
So if this conjunction agreement is signed by only the two real estate agents and not the vendor, how can it be enforced if it goes to court? In other words, if the property sells and then both agents want commissions and/or extras they put into getting the sale, the vendor loses as these costs are taken out of the proceeds before the residue is banked?
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