Common Legal Loopholes That Kill Agent Commissions
How Developers, Landlords, or Buyers Escape Payment — and How to Protect Yourself
Every property agent knows the feeling — the deal is closed, the buyer’s happy, the keys are handed over… and then the payment never comes.
You’ve done all the legwork — marketing, viewings, negotiations, paperwork — yet somehow, your commission vanishes.
In Malaysia, this happens more often than agents admit — not because clients refuse to pay, but because the law allows them to escape, and agents don’t know how to close the legal gaps.
Let’s break down the common legal loopholes that kill commissions. More importantly, let's outline the exact steps you can take to protect yourself before the deal even starts.
1. No Appointment Letter (or Wrongly Drafted One)
The most common — and fatal — mistake.
Without a properly signed Letter of Appointment, your claim is weak. Verbal promises, WhatsApp chats, or casual “agreement” screenshots mean nothing in court.
Even worse, some agents use appointment letters without clear commission clauses, or with terms that are easily disputed.
How clients escape:
- “I never agreed to pay this much.”
- “You were not the procuring cause.”
- “This is between you and the buyer, not me.”
Protection Steps:
- Always issue a formal Appointment Letter (Form A/B) before any marketing.
- Ensure it clearly states:
- Your name, REN/REA number, and agency
- The property address
- The commission rate (fixed or percentage)
- The trigger for payment (e.g., upon signing SPA or tenancy)
- Get it signed and dated by the legal owner or authorized representative.
- Remember: Without a valid contract, your work is considered voluntary.
2. Developer Contracts That Exclude You
Many developers love agents when it’s time to sell — but ghost them when it’s time to pay.
How? By using Sales Agency Agreements with clauses that quietly disqualify your commission.
For example:
- “Commission payable only upon full loan disbursement.”
- “Developers reserve the right to withhold or cancel commission.”
- “If the buyer cancels, no commission shall be payable.”
Sounds fair — until the developer delays disbursement, changes projects, or sells under another channel, and your deal becomes “invalid.”
How developers escape:
- “Your buyer booked through us directly later.”
- “Your name is not in the system.”
- “The sale didn’t proceed fully — the clause says no payment.”
Protection Steps:
- Read the Sales Agency Agreement (SAA) before signing.
- Negotiate or strike out unfair forfeiture clauses.
- Keep a copy of booking forms, buyer details, and evidence of your procuring role.
- Always submit buyer info in writing to the developer — even via official email — before handover.
- Remember: If your name isn’t officially tied to the buyer, you don’t exist in their system.
3. Tenancy Deals Without Black-and-White Terms
Landlords often agree to a commission verbally — but change their mind later. Especially if they renew with the same tenant directly.
In Malaysia, if you didn’t record the tenancy terms, you may not be entitled to renewal commissions.
How landlords escape:
- “I didn’t renew — I just extended.”
- “No clause about renewal commission.”
- “You didn’t collect the deposit — you’re not the agent.”
Protection Steps:
- Always issue a Tenancy Appointment Letter before preparing an agreement.
- Include a renewal clause (e.g., “If the tenancy is renewed or extended with the same tenant, the same commission structure applies”).
- Get the landlord’s IC copy and signature — never rely solely on WhatsApp.
- Keep a PDF copy of all signed agreements in your ListingMine portfolio.
- Remember: If it’s not written, it’s not enforceable.
4. Buyers Who Cut You Out Last Minute
You introduce the buyer, arrange viewings, handle negotiations — and suddenly, the buyer goes directly to the owner or another agent to “save” commission.
If you didn’t document your role, you can’t claim procuring cause.
How buyers escape:
- “We found it ourselves.”
- “He only showed me once — I closed myself.”
- “No contract with him.”
Protection Steps:
- Record all viewings via signed viewing forms or WhatsApp acknowledgements (e.g., “Confirming viewing for Property A on Date”).
- Send a post-viewing follow-up stating: “As per viewing, this unit is handled exclusively through me.”
- Keep records in a cloud-based system like ListingMine — not just your phone.
- If possible, get the buyer to sign an Offer to Purchase that names you as agent.
Remember: Documentation is your insurance policy.
5. Advance Commission Traps
Sometimes, agencies or leaders advance commissions to agents before developer payment — a good gesture that can turn ugly.
If the deal cancels, refunds, or disputes, the developer claws back the commission — and the agency claws it from you.
How it backfires:
- “Buyer cancelled — you owe us back.”
- “Commission reversed.”
Protection Steps:
- Read your agency’s ERP rules carefully — know when clawbacks apply.
- Don’t spend advance commissions until the transaction legally completes.
- Use systems like ListingMine ERP that track commission versioning, approval, and release events — so you know what’s provisional vs. final.
- Remember: Cash in hand doesn’t mean cash earned.
6. Lack of Legal Standing (Unlicensed Agents)
If you’re not a REN (Real Estate Negotiator) or REA (Registered Estate Agent) under the Board of Valuers, Appraisers, Estate Agents and Property Managers (BOVAEP), your agreements may not be legally enforceable.
Courts can dismiss claims from unlicensed agents — no matter how much work they’ve done.
How this kills payment:
- “He’s not licensed — contract invalid.”
- “Illegal practice — no standing to sue.”
Protection Steps:
- Always include your REN/REA number in documents and advertisements.
- Operate under a registered agency.
- Avoid side deals that bypass your firm’s trust account or Letterhead.
- Keep your license status verifiable with BOVAEP.
Remember: Legality equals leverage.
7. Verbal Rebates or Side Deals
Rebates can seem like a smart way to secure a deal — but undocumented “off-the-record” arrangements can destroy your credibility and commission rights.
How it backfires:
- “We never agreed on this rebate.”
- “You breached your own agency’s policy.”
Protection Steps:
- Never promise rebates without written approval.
- Include all incentives in the official deal documentation.
- Remember: unrecorded rebates violate Act 242 and can jeopardize your license.
Remember: Shortcuts today, suspensions tomorrow.
8. Missing Abortive Fee Clause in the Appointment Letter
Many agents spend weeks marketing a property, arranging viewings, and negotiating offers — only for the owner to suddenly pull out, change price, or rent to another party directly. Without an Abortive Fee clause, all that time and cost vanish without compensation.
An Abortive Fee is a small, pre-agreed amount payable if the client withdraws, sells through another agent, or cancels after you’ve invested work and resources. Without it, you have no legal recourse — even if you’ve clearly done your job.
How clients escape:
- “I changed my mind — I’m not selling anymore.”
- “I’ll handle it myself now.”
- “Another agent closed it — you didn’t.”
Protection Steps:
- Include a clearly worded Abortive Fee clause in every Appointment Letter.
- Define the trigger: e.g., if the client cancels, engages another agent, or withdraws after marketing begins.
- State a reasonable fee (RM500–RM2,000, or a fixed percentage of the asking price).
- Ensure the clause is signed and acknowledged before you start work.
Remember: Abortive fees don’t replace commission — they protect your time, effort, and marketing expenses when clients walk away.
The Perfect Storm: When Multiple Loopholes Combine
The most dangerous scenario? When multiple loopholes overlap — like a tenancy deal without a signed appointment, handled by an unlicensed negotiator, paid on handshake.
In such cases, even your moral right won’t translate into a legal claim.
Final Thoughts: Protect Before You Sell
You don’t lose commission after a deal — you lose it before the deal begins, when you skip the paperwork.
In an industry where your income depends on trust, legal protection isn’t optional — it’s survival.
The good news? With ListingMine, your documents, appointments, and viewing records are stored, timestamped, and searchable — giving you proof when it matters most.
Because true professionalism isn't just about closing the deal — it's about making sure you get to keep what you've rightfully earned.
