Disputes About Deposits: How to Claim Your Commission

For business brokers, the following scenario is becoming more common:

• You have sold a business.
• The contract is unconditional.
• The buyer breaches the contract and does not complete.
• As a result, the seller terminates the contract.
• The seller is demanding that you release the deposit to them as they are in the right.
• The buyer advises you not to release the deposit as it is in dispute, often with made up allegations or no explanation at all.
• You want to be paid your commission from the deposit.

What can you do?

Legally, you may take your commission from the deposit provided you follow a strict procedure prescribed by the Property Agents and Motor Dealers Act (PAMDA) but only when you are properly appointed to sell the business pursuant to a PAMD Form 21a in Queensland.

You must follow the following procedure strictly:

1. form the date of getting the notice from the buyer putting the deposit in dispute (“dispute notice”), wait 30 days;
2. once that 30 days is up, within the next 7 days (i.e. no later than 37 days from receipt of the dispute notice) you need to write to the buyer and seller advising them that you will pay the deposit to the seller unless further notice is received:
   1. from both parties agreeing that you do otherwise; or
   2. advising that a legal proceeding has been commenced concerning the entitlement to the deposit.

If you don’t receive any further notice from the parties within 30 days of your letter, you are then entitled to deduct your commission from the deposit and release the balance to the seller. Obviously, it is a matter for you whether you ultimately decide to take your commission from the deposit or release the full deposit to the seller. Some business brokers would prefer not to take their commission in these circumstances.

However, if you do receive a further notice from both parties within 30 days of your letter advising of an agreement or court proceeding, this option is no longer available to you. You must then pay the money as per their agreed instructions or into court. In those circumstances, you will still be entitled to your commission, but will have to pursue the seller for it if you wish.

Dealing with trust monies can be tricky and the consequences and penalties high. If in doubt, you should get legal advice.

Joe Kafrouni, Legal Practitioner Director, Kafrouni Lawyers

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