Does a franchisor need a real estate agent’s licence to assist a franchisee to sell their business?

If the franchisor (or anyone else for that matter) is getting a fee for the sale, then the answer is “yes”.

In Queensland, the Property Agents and Motor Dealers Act 2000 (“PAMDA”) provides for the licensing of real estate agents.

Relevantly, section 128(1) of PAMDA authorises the holder of a real estate agent’s licence to perform the following activities as an agent for others for reward:

(a)     to buy, sell, exchange, or let businesses or interests in businesses;

(b)     to negotiate for the buying, selling, exchanging, or letting of something mentioned in paragraph (a).

Furthermore, section 160 of PAMDA makes it an offence to act as an agent without a license:

A person must not, as an agent for someone else for reward [emphasis added], perform an activity that may be done under the authority of a real estate agent’s licence unless the person:

  • holds a real estate agent’s licence and the performance of the activity is authorised under the person’s licence; or
  • is otherwise permitted under this or another Act to perform the activity.

So if a franchisor (whether a person or corporation) sells a franchisee’s business in Queensland for a “reward” and does not have a licence, then the franchisor may have committed an offence under PAMDA (unless the franchisor qualifies for an exemption).

The determining factor is whether the franchisor is acting on behalf of the franchisee for a “reward”.  Any franchisor that acts as an agent in the sale process as a free service to the franchisee will not be doing anything illegal.  However, once a franchisor is getting some form of benefit, which could be viewed as a “reward”, the franchisor might be breaking the law by doing so without a licence under PAMDA.

Unless the arrangement does not involve a “reward”, a person or company unlicensed under PAMDA should not be acting for a seller in the sale of a business.  Otherwise, they might face serious consequences: the maximum penalty under PAMDA is currently $20,000 for individuals ($100,000 for corporations) or 2 years imprisonment.

Joe Kafrouni, Legal Practitioner Director, Kafrouni Lawyers

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