Restraints and Real Estate – what is enforceable

What do post-employ­ment restraints in real estate real­ly mean for agents and employ­ers? In the prop­er­ty indus­try, employ­ment agree­ments often include three key restraints: non-solic­i­ta­tion, non-accep­tance, and non-com­pe­ti­tion. These claus­es aim to pro­tect client rela­tion­ships, con­fi­den­tial infor­ma­tion, and busi­ness good­will, but their enforce­abil­i­ty depends on how they’re draft­ed and applied. This arti­cle explores what each restraint cov­ers, why defin­ing a ​‘client’ mat­ters, and what recent case law tells us about bal­anc­ing legit­i­mate busi­ness inter­ests with fair competition.

There are effec­tive­ly 3 types of restraints that we see in real estate employ­ment agreements. 

1. A non-solic­i­ta­tion pro­vi­sion, pre­vent­ing the agent from solic­it­ing the busi­ness from clients of their pre­vi­ous employer;
2. A non-accep­tance pro­vi­sion, stat­ing that the agent can­not accept an appoint­ment to work for a client who was a client of their pre­vi­ous employ­er; and
3. A non-com­pe­ti­tion restraint of trade, draft­ed in an attempt to pre­vent the employ­ee from work­ing with­in a cer­tain radius, for a set peri­od of time, in the same or sim­i­lar field of work. 

Defin­ing who a ​‘client’ is and who ​‘owns’ the client is often a point of contention. 

Non-Solic­i­ta­tion

These pro­vi­sions act to pre­vent the employ­ee from active­ly tar­get­ing and solic­it­ing clients of their pre­vi­ous employ­er. Irre­spec­tive of how that client was intro­duced to the busi­ness, the client arguably ​‘belongs’ to the employ­er so the agent can­not lay claim to them. 

Solic­it­ing can include call­ing, tex­ting, email­ing – details often stored in an employ­ee’s phone in the ordi­nary course of busi­ness. We have there­fore seen a surge in employ­er’s pro­vid­ing employ­ees with mobile phones and num­bers so that if/​when the employ­ee leaves, the agent no longer has access to the mobile num­ber that they used through­out their employment. 

Non-Accep­tance

The oth­er aspect to a non-solic­i­ta­tion is the non-accep­tance. Often we have seen agents say ​“But the client called me” in an attempt to avoid poten­tial lia­bil­i­ty. The non-accep­tance pro­vi­sion states that you can­not sign some­one up to an agency agree­ment, irre­spec­tive of how that per­son got in touch with you. These are also some­times described as ​“no deal­ing” restraints. 

Non-Com­pe­ti­tion 

When we hear ​‘restraints are not enforce­able’, it is usu­al­ly in rela­tion to a non- com­pete. A prop­er­ly draft­ed non-com­pe­ti­tion restraint, that seeks to only pro­tect the legit­i­mate busi­ness inter­ests of the pre­vi­ous employ­er, will be enforce­able in rea­son­able cir­cum­stances. The Courts will look at, amongst oth­er things:

1. the length of employ­ment for the employ­ee (an employ­ee employed for a num­ber of years is like­ly to have ele­ments of a restraint upheld com­pared to one employed for a few months); 
2. what posi­tion they were in (were they an employed sales agent or a shareholder);
3. what con­fi­den­tial infor­ma­tion they had access to dur­ing their employment; 
4. the risk to the busi­ness if they are per­mit­ted to work in the restrained area dur­ing the restrained peri­od; and
5. the inten­tion of the par­ties when enter­ing into the con­tract of employment. 

Employ­ment agree­ment restraints often con­tain cas­cad­ing claus­es that are to be read down depend­ing on enforce­abil­i­ty. It is our view that there should be no uncer­tain­ty in a real estate post-employ­ment restraint and, ide­al­ly, a fixed term and radius should be adopt­ed in the agree­ment. The Restraints of Trade Act 1976 (NSW) makes it less impor­tant to adopt a cas­cad­ing approach as the court may be able to ​“read down” an oth­er­wise unen­force­able restraint. 

Indus­try Commentary 

Ear­li­er this month, Ivan Brescic (ex co-founder of BresicWhit­ney) post­ed on his social media regard­ing this exact issue. His com­ments appeared to align with the gen­er­al sen­ti­ment in the indus­try – pro­vid­ed you don’t do any­thing wrong, employ­ers should not attempt to pre­vent agents from chang­ing agen­cies. It dam­ages future rela­tion­ships with­in the indus­try itself, and can often breed bad intent. How­ev­er, if an employ­ee does breach oblig­a­tions, par­tic­u­lar­ly relat­ing to con­fi­den­tial infor­ma­tion, then the employ­ment agree­ment, and case law, is there to pro­tect the employ­er. What does recent case law tell us in this scenario?

Recent Case Law 

A few months ago, Belle Prop­er­ty Neu­tral Bay (Belle) com­menced injunc­tive action against Chris Davies (Davies) who had been employed by them for a num­ber of years and left to work at a com­peti­tor. Davies’ employ­ment agree­ment con­tained the stan­dard restraints, non-accep­tance and non-solic­i­ta­tion pro­vi­sions, as well as restric­tions on the use of con­fi­den­tial infor­ma­tion. Pri­or to his res­ig­na­tion, Davies had down­loaded mate­r­i­al from Belle’s CRM, which he accept­ed should be destroyed or returned. 

Despite this promise, Belle com­menced pro­ceed­ings and ini­tial­ly obtained orders for relief relat­ing to Davies’ abil­i­ty to pro­vide ser­vices for a com­pet­ing busi­ness with­in a defined area. At the fol­low­ing inter­locu­to­ry hear­ing, Belle sought to restrain Davies from solic­it­ing Clients (as defined) or accept­ing any instruc­tions to pro­vide real estate ser­vices in respect of any Client (as defined). 

Davies opposed the orders and instead offered an under­tak­ing not to accept instruc­tions to enter or cause his new employ­er to enter into any agency agree­ment with any indi­vid­ual who had entered into an agency agree­ment with Belle between 1 Jan­u­ary 2025 and 2 June 2025, until 1 April 2026. 

The Court crit­i­cised word­ing of the employ­ment agree­ment and Belle’s pro­posed orders. The Court held that Belle’s pri­ma facie case for injunc­tive relief went beyond what is rea­son­ably nec­es­sary to pro­tect its good­will or con­fi­den­tial infor­ma­tion, and an injunc­tion in the terms sought appeared to serve only to pre­vent legit­i­mate com­pe­ti­tion. Belle Prop­er­ty’s case was ​“not a strong one”.

The pro­posed order 2 sub­mit­ted by Belle also act­ed to pre­vent Davies from act­ing in respect of any prop­er­ty in the iden­ti­fied sub­urbs even if the own­er was not a cus­tomer of Belle. As such, for exam­ple, if Belle act­ed for the ven­dor on a sale of a prop­er­ty, it would have pre­vent­ed him pro­vid­ing ser­vices to the pur­chas­er in respect of that prop­er­ty, even though the pur­chas­er was not a cus­tomer of Belle.

The order would effec­tive­ly restrain Davies from deal­ing with ​“hun­dreds, if not thou­sands, of ​‘Clients’ (as broad­ly defined in cl 18.3(b)) iden­ti­fied in the [CRM], includ­ing per­sons who mere­ly attend­ed an open for inspec­tion of the prop­er­ty.” Belle also required Davies to delete or return the CRM infor­ma­tion. The Court not­ed: ​“It is dif­fi­cult to see what legit­i­mate inter­est there is in restrain­ing the defen­dant from deal­ing with such a large num­ber of peo­ple in cir­cum­stances where he is to be denied the oppor­tu­ni­ty to retain a copy of the lists record­ing their names and there­by know whether he is restrained from deal­ing with them.”

The Court also not­ed that Davies was a real estate sales agent and did not have a man­age­r­i­al or strate­gic role. Much of the ​“con­fi­den­tial infor­ma­tion” in the CRM was names of prop­er­ties and prop­er­ty own­ers which formed part of Belle’s ​“know how” and was not infor­ma­tion with the nec­es­sary qual­i­ty of con­fi­dence requir­ing pro­tec­tion under the equi­table duty of con­fi­dence, or capa­ble of pro­tec­tion in a post-employ­ment con­trac­tu­al restraint.

On the bal­ance of con­ve­nience, the Court declined to order the inter­locu­to­ry relief, specifically:

1. The Court accept­ed Davies’ sub­mis­sion that dam­ages would be an ade­quate rem­e­dy if breach is estab­lished at the final hear­ing, because such dam­ages would be read­i­ly quan­tifi­able, being the lost com­mis­sion on sales made by Davies. 
2. The injunc­tion would put Davies at a finan­cial dis­ad­van­tage, as he would be unable to earn income in his area of exper­tise until the final hearing.
3. Davies’ offered under­tak­ing was rea­son­able pro­tec­tion for Belle’s goodwill. 

This case is a good reminder for the indus­try to ensure that what they are try­ing to pro­tect goes no fur­ther than try­ing to pro­tect its legit­i­mate busi­ness inter­ests, such as con­fi­den­tial infor­ma­tion and goodwill. 

The fed­er­al gov­ern­ment has announced restric­tions on post-employ­ment restraints to take effect in 2027. These amend­ments, the spe­cif­ic scope and details of which are present­ly being set­tled, are like­ly going to have a sig­nif­i­cant impact on the use of restraints in most indus­tries, includ­ing real estate. 

Prem­prop Sales Neu­tral Bay Pty Ltd atf Neu­tral Bay Sales Unit Trust t/​a Belle Prop­er­ty Neu­tral Bay v Davies [2025] NSWSC 725 

Con­clu­sion 

It is always rec­om­mend­ed that agents and agen­cies alike approach these issues open­ly, with trans­paren­cy, hon­esty and with a view of resolv­ing it ami­ca­bly with­out the need for legal inter­ven­tion. We often see suc­cess­ful com­mis­sion shar­ing arrange­ments work where the exit­ing agent agrees to pay their old employ­er a per­cent­age of their com­mis­sion for a peri­od, in exchange for relax­ing the restraints in the employ­ment agree­ment. We can assist in prepar­ing these types of agreements. 

If you have any ques­tions about the real estate indus­try and restraints, or require fur­ther infor­ma­tion, please do not hes­i­tate to con­tact us.