An agent's sole agency expires in two days, and the vendor plans to list with a different agent next month. The original agent says a buyer it introduced is still negotiating. What determines the original agent's entitlement to commission?
Correct Answer
B) The terms of the original agency agreement dealing with sales after it expires
The entitlement to commission after an agency agreement expires depends on the specific terms written into the original agreement, particularly any 'tail' or 'holdover' clauses. These clauses typically specify time periods and conditions under which the agent remains entitled to commission for purchasers they introduced during the agreement period.
Why This Is the Correct Answer
Commission after an agency ends depends on the agreement's post-expiry terms. Rule 9.11 also requires an agent, when an agreement is cancelled, to give the client in writing the names of customers it would claim commission on, and Rule 9.10 requires licensees to warn that signing a second agreement can mean paying two commissions.
Why the Other Options Are Wrong
Option A: The original agent is automatically entitled to commission on any future sale
Entitlement after expiry is not automatic; it exists only if and as the agreement provides.
Option C: The new agent is required by law to share its commission with the original agent
No law makes a new agent share commission with a former agent; each agent's claim rests on its own agreement.
Option D: The vendor may simply choose which of the two agents will receive the commission
Commission is a contractual debt, not something the vendor allocates; the vendor may owe both agents if both agreements say so (Rule 9.10).
Deep Analysis of This Agency Practice Question
The scenario involves an original agent whose sole agency is ending and a new agent the vendor intends to engage. The principle is that entitlement after expiry is governed by the contract, not by fairness, sharing, or the vendor's preference. Well-drafted agreements protect the agent for buyers it introduced during the term, and the Rules make sure the vendor knows the risk of owing commission twice.
Background Knowledge for Agency Practice
Agency agreements in New Zealand must be in writing under the Real Estate Agents Act 2008. Key terms include duration, commission rates, and post-expiry provisions. 'Tail' or 'holdover' clauses protect agents by extending commission entitlement for specified periods after agreement expiry, typically for purchasers introduced during the agency period. These clauses balance agent protection with vendor flexibility. The Act emphasizes clear documentation to prevent disputes. Commission entitlement is contractual, not automatic, requiring specific provisions to survive agreement termination. Understanding these principles helps agents draft protective agreements and advise clients appropriately.
Memory Technique
Remember CONTRACT: 'Commission depends on CONTRACT terms, not automatic Rights After Contract Termination.' Think of a contract as a rulebook - when the game (agency) ends, you can only claim points (commission) according to the rules written in the book, not based on what seems fair or what the referee (vendor) prefers.
When a question asks about commission after an agency ends, think CONTRACT: the agreement's written post-expiry terms decide, not automatic rights, sharing or vendor choice.
Exam Tip for Agency Practice
Commission after expiry turns on the agreement's written terms; no statute splits it or leaves it to the vendor's choice.
Real World Application in Agency Practice
An agent's sole agency ends on Friday. On Thursday she introduced a buyer who asked for time. The vendor signs with a new agent on Monday and the buyer offers on Tuesday. Whether the first agent is owed commission depends on her agreement's clause for buyers introduced during the term; if it covers this buyer, she has a claim, and the vendor may owe the new agent as well.
Common Mistakes to Avoid on Agency Practice Questions
- •Assuming agents automatically retain commission rights after agreement expiry
- •Believing vendors can choose which agent to pay based on preference
- •Thinking commission must be shared between competing agents
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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