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?
Correct Answer
B) Yes, if it was explained in writing and the buyer was introduced in the term
Such clauses are enforceable provided they are clearly disclosed and explained to the vendor, and the agent can demonstrate they introduced the eventual buyer during the agency period. This protects agents from vendors deliberately delaying transactions to avoid paying commission while ensuring vendors understand their potential ongoing obligations.
Why This Is the Correct Answer
A post-expiry protection clause is a contractual term. If it was explained and set out in writing before signing (Rule 10.6) and the buyer was introduced during the agency period, the agent can rely on it even though the sale settles after the agency ends.
Why the Other Options Are Wrong
Option A: No, commission can never be claimed once an agency agreement has expired
Nothing in the Act voids post-expiry commission clauses; they are common and enforceable when properly agreed and explained.
Option C: Only if settlement takes place within 30 days after the agency agreement expires
There is no statutory 30-day window; the agreement itself defines any post-expiry protection period.
Option D: Only if the vendor signed a formal extension of the agency before it expired
The clause operates on its own terms; an extension is not needed for it to apply to a buyer introduced during the term.
Deep Analysis of This Agency Practice Question
This question examines the enforceability of 'tail clauses' or 'protection clauses' in agency agreements under New Zealand real estate law. These clauses protect agents from vendors who might deliberately delay settlements to avoid commission payments after agency expiry. The Real Estate Agents Act 2008 requires agents to act with due care, skill, and diligence, which includes protecting their legitimate business interests through properly drafted agreements. The key principle is that contractual obligations can extend beyond the agency period if clearly disclosed and the agent can prove their contribution to the eventual sale. This reflects the balance between protecting agents' rights to fair compensation and ensuring vendors understand their ongoing obligations. Such clauses are common in practice and serve to prevent manipulation of timing by vendors while maintaining transparency in the agency relationship.
Background Knowledge for Agency Practice
Tail clauses (protection clauses) in agency agreements allow agents to claim commission on sales that settle after agency expiry, provided they introduced the buyer during the agency period. Under the Real Estate Agents Act 2008, agents must ensure all terms are clearly disclosed and explained to vendors. These clauses prevent vendors from manipulating settlement timing to avoid commission payments. The enforceability requires: clear disclosure, vendor understanding, and proof of buyer introduction during the agency period. This balances agent protection with vendor transparency requirements.
Memory Technique
Remember TAIL: Transparent disclosure, Agent introduced buyer, In agency period, Lawfully enforceable. Like a dog's tail that follows the body even after the dog stops moving, commission can follow after agency expires if properly attached.
When you see questions about commission after agency expiry, think TAIL. Check if the clause was Transparent, the Agent introduced the buyer, it happened In the agency period, and it's Lawfully structured. This helps identify valid tail clauses.
Exam Tip for Agency Practice
Post-expiry commission depends on a clause that was explained to the vendor and a buyer introduced during the term; there is no statutory time window.
Real World Application in Agency Practice
An agent lists a house under a 90-day sole agency that protects buyers introduced during the term. On day 85 she shows it to a family; the agency expires; three weeks later the family buy directly from the vendor. Because the clause was explained in writing at signing and she can show she introduced them, the agent claims her commission.
Common Mistakes to Avoid on Agency Practice Questions
- •Assuming commission rights automatically end when agency expires
- •Thinking tail clauses need specific time limits to be valid
- •Believing agency extension is required for commission after expiry
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?
- → 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?
- → A licensed real estate agent operates as a sole trader and employs two salespersons. One salesperson engages in misleading conduct during a property sale. Who bears primary legal responsibility for this conduct under the Real Estate Agents Act 2008?
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