A salesperson's agency holds a sole agency over a property. During the term, the owner negotiates directly with a buyer who first viewed the property through the agency, and wants to complete the sale without paying commission. What is the correct position?
Correct Answer
B) Commission is payable, since the agency introduced the buyer during the sole agency
Under a sole agency, commission is payable on a sale during the term, and here the agency also introduced the buyer. The owner cannot avoid commission by taking over the negotiations.
Why This Is the Correct Answer
Under a sole agency, commission is payable on a sale made during the term, and here the agency also introduced the buyer, so the owner cannot avoid commission by negotiating directly. Section 126 makes the entitlement depend on a written, signed agency agreement, which the sole agency provides.
Why the Other Options Are Wrong
Option A: No commission is payable, because the owner handled the final negotiations
Who negotiates the final terms does not matter under a sole agency; a sale during the term to a buyer the agency introduced attracts commission.
Option C: Only a pro-rata fee is payable, reflecting the marketing work the agency actually did
Neither the Act nor standard sole agency terms provide for a pro-rata fee; the agreed commission is payable.
Option D: The Real Estate Authority must rule on whether commission is payable before settlement
The Authority deals with conduct complaints, not commission disputes; entitlement is a contractual matter under the agency agreement, ultimately for the courts.
Deep Analysis of This Agency Practice Question
Two principles point the same way. The sole agency term makes commission payable on any sale during the agency period, and the agency introduced this buyer, so it would be the effective cause of the sale in any event. An owner who cuts the agency out of the final negotiation does not escape the contract.
Background Knowledge for Agency Practice
New Zealand vendor agencies are usually sole or general agencies; 'exclusive agency' is a United States and Australian label, not a New Zealand category. Section 126 of the Real Estate Agents Act 2008 requires a written agency agreement signed by the client and agent for commission to be recoverable.
Memory Technique
Remember INTRO: 'If I INTROduced them, I get paid.' Think of a matchmaker who introduces two people - even if they plan their own wedding, the matchmaker still deserves credit for bringing them together. The agent who makes the introduction is the effective cause, regardless of who handles the paperwork later.
When you see questions about commission disputes where someone else completes the sale, ask yourself: 'Who made the INTRO?' The person who introduced the buyer to the property is typically entitled to commission under the effective cause principle.
Exam Tip for Agency Practice
Under a sole agency, commission follows a sale during the term; who handled the final negotiation is irrelevant.
Real World Application in Agency Practice
A couple view a house at an open home run by the listing agency, then meet the owner at a local café and agree a price privately. Because the agency holds a sole agency and introduced them, the owner still owes the agreed commission.
Common Mistakes to Avoid on Agency Practice Questions
- •Thinking final negotiator determines commission entitlement
- •Believing direct owner involvement negates agent commission
- •Assuming pro-rata payment applies in effective cause situations
Related Topics & Key Terms
Key Terms:
More Agency Practice Questions
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?
Sarah is a licensed salesperson working for ABC Real Estate. When showing a property to buyers, who does she primarily represent?
Under the Real Estate Agents Act 2008, what is the primary duty that a real estate agent owes to their client?
Which licence allows a person to carry out real estate agency work for an agent, but only under supervision?
- → Under section 126 of the Real Estate Agents Act 2008, what must happen after the client signs an agency agreement for the agent to be entitled to commission?
- → A licensed agent discovers that their salesperson has been providing advice about tax implications of a property investment without appropriate qualifications. What is the agent's responsibility?
- → An agency agreement contains a clause stating that the agent's commission is payable even if the property is sold by the vendor directly to a buyer introduced by the agent during the agency period, but the sale settles after the agency expires. Is this clause enforceable?
- → What must a real estate agent disclose to a potential purchaser when showing a property?
- → Under a sole agency agreement, when is the vendor still liable to pay commission to the agent?
- → Sarah holds a salesperson's licence and works for ABC Real Estate. When presenting an offer to a vendor, who is legally responsible for ensuring all disclosure obligations are met?
- → A real estate agent discovers that a property has a leaky roof after the agency agreement is signed but before any offers are received. What is the agent's obligation?
- → Which of the following allows an agent to end an agency agreement before its expiry date?
- → Under the Real Estate Agents Act 2008, what is the primary fiduciary duty that a real estate agent owes to their client?
- → What must a licensee do when they become aware of a material defect in a property they are marketing?
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