Under what circumstances can a real estate agent continue to act for a client after their agency agreement has expired?
Correct Answer
B) Only under a new or continuing written agency agreement with the client
Once an agency agreement expires, the agent's authority ends unless a new written agreement is signed, or a written term of the existing agreement continues it (for example, a sole agency that carries on as a general agency). Section 126 gives no entitlement to commission for work that is not done under a written agency agreement signed by the client and the agent.
Why This Is the Correct Answer
An agent's authority comes from the agency agreement, and section 126 denies commission unless the work is done under a written agreement signed by the client and the agent. Once an agreement ends, the agent needs a new one, or a written term that continues (such as a sole agency that carries on as a general agency), to keep acting.
Why the Other Options Are Wrong
Option A: Whenever there are active negotiations with interested buyers still under way
Interest from buyers does not revive the agent's authority; commission requires a written agency agreement (s 126).
Option C: For up to 30 days after expiry so that pending transactions can be finished
There is no statutory 30-day grace period after an agency agreement ends.
Option D: Whenever the client agrees verbally that the arrangement can continue
Section 126 requires a written agreement signed by the client and agent for commission, so a verbal extension is not enough.
Deep Analysis of This Agency Practice Question
This question addresses the fundamental principle of agency authority and its termination under New Zealand real estate law. When an agency agreement expires, the legal relationship between agent and client ceases, meaning the agent no longer has authority to act on behalf of the client. This principle protects both parties from unauthorized actions and potential liability. The Real Estate Agents Act 2008 emphasizes the importance of clear, documented authority for all agent actions. Continuing to act without proper authority could constitute a breach of fiduciary duty and expose the agent to professional misconduct charges. This concept connects to broader agency law principles about the need for clear mandate and the risks of acting ultra vires (beyond one's authority). Understanding this helps agents maintain professional standards and avoid regulatory breaches.
Background Knowledge for Agency Practice
Agency agreements in New Zealand real estate are governed by the Real Estate Agents Act 2008, which establishes the framework for agent-client relationships. These agreements create a fiduciary relationship where the agent has legal authority to act on behalf of the client within defined parameters. When an agency agreement expires, this authority ceases unless explicitly renewed or extended. The Act emphasizes transparency and proper documentation to protect both parties. Agents must ensure they have clear, ongoing authority before continuing to act for clients. This principle aligns with general agency law concepts about the need for proper mandate and the risks of unauthorized actions.
Memory Technique
Remember CLEAR: Ceased authority requires Legal Extension And Renewal. When an agency agreement expires, the authority has CEASED and needs to be made CLEAR again through proper legal documentation or explicit ongoing authority.
When you see questions about expired agency agreements, think CLEAR - has the authority been made clear again through proper documentation? If not, the agent cannot continue acting.
Exam Tip for Agency Practice
No written agency agreement, no commission (s 126): an expired agreement needs a new or continuing written one.
Real World Application in Agency Practice
An agent's sole agency with a vendor ends on Friday and a buyer wants to offer on Monday. The agent checks the agreement: it continues as a general agency after the sole term, so she can keep acting. Had it simply ended, she would need the vendor to sign a new agreement before presenting the offer.
Common Mistakes to Avoid on Agency Practice Questions
- •Assuming active negotiations provide automatic authority to continue
- •Believing there's an automatic grace period after agreement expiry
- •Thinking verbal agreements are sufficient for ongoing authority
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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