A real estate company has an exclusive agency agreement that expires on Friday. On Thursday, the company introduces a buyer who makes an offer that is declined. The same buyer purchases the property on Monday through another agent. What commission entitlement exists?
Correct Answer
B) Full commission as they introduced the eventual buyer
Under most agency agreements, if the agent introduces a buyer during the agency period who subsequently purchases the property (even after the agreement expires), the agent is entitled to commission. The introduction of the eventual purchaser during the agency period establishes the commission entitlement.
Why This Is the Correct Answer
Option B is correct because the agent introduced the eventual buyer during the valid agency period (Thursday), establishing them as the effective procuring cause of the sale. Under New Zealand agency law and standard exclusive agency agreements, once an agent introduces a buyer who subsequently purchases the property, the agent's commission entitlement is secured regardless of when the actual purchase occurs or whether the agency agreement has expired. The introduction during the agency period creates the legal basis for commission entitlement.
Why the Other Options Are Wrong
Option A: No commission as the agreement had expired
This is incorrect because commission entitlement is not solely dependent on when the sale completes, but on when the buyer was introduced. The agent's right to commission was established when they introduced the buyer during the valid agency period, and this right survives the expiry of the agreement.
Option C: Shared commission with the selling agent
This is incorrect because there is no legal basis for sharing commission when one agent was the effective procuring cause. The original agent introduced the buyer during their exclusive agency period, giving them full entitlement to commission. The second agent merely completed paperwork for an already-introduced buyer.
Option D: Commission only if claimed within 48 hours
This is incorrect as there is no 48-hour time limit for claiming commission in New Zealand real estate law. Commission entitlement is established by the introduction of the buyer during the agency period, not by the speed of claiming it. Such arbitrary time limits are not part of standard agency agreements or legislation.
Deep Analysis of This Agency Practice Question
This question tests understanding of the 'effective procuring cause' principle in real estate agency law. Under New Zealand's Real Estate Agents Act 2008 and standard agency agreements, an agent's commission entitlement is established when they introduce a buyer who eventually purchases the property, regardless of whether the purchase occurs after the agency agreement expires. This principle protects agents from losing commission due to timing technicalities and ensures fair compensation for their marketing efforts. The key factor is the causal connection between the agent's introduction during the agency period and the eventual sale. This concept is fundamental to agency practice as it defines when agents have earned their commission and prevents property owners from avoiding payment through strategic timing of sales completion.
Background Knowledge for Agency Practice
The 'effective procuring cause' principle is fundamental to New Zealand real estate commission law. Under the Real Estate Agents Act 2008 and standard agency agreements, an agent earns commission by being the effective cause of bringing buyer and seller together. This typically occurs when the agent introduces a buyer who eventually purchases, regardless of timing of completion. Exclusive agency agreements grant sole selling rights during the agreement period, but commission entitlement can extend beyond expiry if the agent introduced the eventual buyer during the valid period. This protects agents' legitimate interests while ensuring property owners cannot manipulate timing to avoid paying earned commissions.
Memory Technique
Remember 'I.D.E.A.' - Introduction During Exclusive Agency. If an agent introduces a buyer during the agency period, they have earned their commission regardless of when the sale completes. Think of it like planting a seed - once you plant it during your gardening season, you deserve the harvest even if it grows after your season ends.
When you see questions about commission entitlement and timing, immediately ask: 'Who introduced the buyer and when?' If the introduction happened during the agency period, that agent gets the commission regardless of completion timing.
Exam Tip for Agency Practice
Focus on when the buyer was introduced, not when the sale completed. If introduction occurred during the agency period, the introducing agent gets full commission even if the agreement has since expired.
Real World Application in Agency Practice
Sarah's exclusive listing expires Friday. On Thursday, she shows the property to the Johnson family who express interest but don't make an offer. The following Tuesday, the Johnsons contact another agent and purchase the property. Despite her listing having expired, Sarah is entitled to full commission because she introduced the eventual buyers during her exclusive agency period. This protects agents who invest time and effort in marketing properties and prevents vendors from strategically timing sales to avoid paying commission.
Common Mistakes to Avoid on Agency Practice Questions
- •Thinking commission is lost when the agency agreement expires
- •Believing commission should be shared between introducing and selling agents
- •Assuming there are strict time limits for claiming earned commission
Related Topics & Key Terms
Key Terms:
More Agency Practice Questions
Under the Real Estate Agents Act 2008, what is the primary fiduciary duty that a real estate agent owes to their client?
What type of agency agreement allows a real estate agent to receive commission even if the property is sold by another agent?
Which licence category is required for a person to sign agency agreements on behalf of a real estate agency?
When must a real estate licensee disclose any personal interest in a property transaction?
Sarah, a licensed salesperson, discovers that a property she is marketing has a significant building defect that the vendor has not disclosed. What should she do?
- → Under a sole agency agreement, in which circumstance would the agent NOT be entitled to commission?
- → A real estate agent receives two offers on a property at the same time. What is their primary obligation?
- → Which of the following situations would create a conflict of interest requiring disclosure by a real estate licensee?
- → A branch manager discovers that one of their salespersons has been providing incomplete information to potential purchasers about a property's title restrictions. What is the branch manager's primary responsibility?
- → An agent has an exclusive agency agreement that expires in two days, but the vendor wants to extend it for another month with a different agent. The original agent claims they introduced a purchaser who is still negotiating. What determines the original agent's entitlement to commission?
- → Under the Real Estate Agents Act 2008, what is the primary duty that a real estate agent owes to their client?
- → Which licence category allows a person to carry out real estate agency work on behalf of a licensed agent?
- → What must be included in every agency agreement under the Real Estate Agents Act 2008?
- → When must a real estate agent disclose that they have a personal interest in a property transaction?
- → Sarah, a licensed salesperson, discovers that her vendor client has not disclosed a known leaky roof issue. What should Sarah do?
People Also Study
Property Law & Legislation
130 questions
Sale & Purchase Process
130 questions
Professional Conduct & Ethics
110 questions
Property Management
90 questions
Related Study Resources
Previous Question
A real estate company discovers that one of their salespersons has been taking secret commissions from mortgage brokers for client referrals. What are the potential consequences under the Real Estate Agents Act 2008?
Next Question
A salesperson can only work under the supervision of which type of licensee?