In the hot Sydney property market, neighbours are now joining together to offer to sell their properties as a group, with the view of maximising their sale price by becoming part of a larger site offering to submit to developers. Often, real estate agents approach the parties individually, or as a group, with a suggestion that they sign up with the real estate agent to sell their properties.

What came first - the chicken or the egg?

This is a typical scenario we often encounter with clients - should we sign an agreement with the real estate agent first and then enter into a Deed of Agreement to Joint Sale, or, should it be the other way around?

We recommend that a Deed of Agreement to Joint Sale be put in place between the neighbours before entering into any real estate agency agreement.The purpose of the Deed of Agreement to Joint Sale is to set up a structure and rules by which the group will operate.This is important as there needs to be a unified approach by all neighbours as to the terms and conditions that will establish their actions in relation to any offers submitted by the real estate agent to the group. For example, there should be some agreement in place in the Deed of Agreement to Joint Sale about the minimum offer the group would be prepared to accept for their properties, as well as how that split should be divided between the members of the group (based upon each lot owner's land size or an equal split between all parties)?

Issues in relation to real estate agency agreements

The following issues need to be considered, amongst other matters, when reviewing the real estate agency agreement:

  • Whether the agency agreement will be exclusive or non-exclusive;
  • How long the agency agreement will be for. For example: three months;
  • The commission the agent will charge;
  • The type of agency agreement being used - even though the properties will be earmarked as a development site, the agreement used should still be for residential as opposed to commercial/industrial sales; and

The sale should, in general terms, be described as GST free as residential houses that are still used as residences are GST free (under GST Ruling 2012/5) regardless of the fact that it may be a development site.

Speak to a lawyer before signing anything

Group sales can be complex and for this reason it is best to speak to a lawyer before signing on the dotted line!

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.