The importance of letting appointments

19 December 2016

A letting appointment is a manager’s contract with an owner. That contract authorises a manager to let an owner’s lot. If there is no valid contract in place, or the manager is charging fees that aren’t noted in the contract, then the manager has a problem. That problem usually arises at the time of a sale, at the time of an audit or in some cases, if a complaint has been made to the Office of Fair Trading.

From what I see on a day to day basis it seems that most managers don’t appreciate or understand the importance of having lawful, compliant and assignable letting appointments in place with every owner in their letting pool.

In matters I am currently involved in the following issues are present in almost all cases:

  • Forms 20a are not assignable, either because the assignment box has not been ticked or that it has not been initialled by the owner (sometimes both);
  • GST being imposed on commission, fees and/or charges when the appointment doesn’t allow the manager to do so;
  • Letting appointments not being signed by owners and/ or managers;
  • Letting appointments not being “continuing” appointments;
  • Some of the charges don’t appear in the letting appointment; and
  • There is no valid letting appointment in place at all.

When I query our clients as to why their letting appointments are riddled with the above problems I almost always get the following responses:

  • It’s too hard to get them all – all managers have at least one that’s not in place;
  • The owner lives overseas;
  • The owner has been in the pool for years, there’s no need to get them to sign an appointment;
  • They can be terminated on 30 days notice anyway; and
  • I haven’t looked at the appointments. I inherited them from the previous owner.

I can tell you from experience that the above issues have caused, numerous times over, the following:

  • Sale contracts to fall over;
  • Sale prices to be reduced;
  • Further fees being paid to accountants and lawyers to correct issues;
  • Warnings and prosecutions being given/ made by the Office of Fair Trading;
  • Stress, lack of sleep and health issues due to points 1-4 above.

Regardless of whether you are selling or intend to sell in the near future, I encourage every manager to conduct a thorough review of their letting appointments to ensure that they are compliant. If you aren’t sure about your letting appointments then make a call or send an email to your accountant and/or lawyer. With a little diligence, time and effort the above issues can be avoided.