Property problems: When does an agent qualify for a sale commission?

Q: I recently found a property I would like to purchase. I discussed my offer with a real estate agent but the agent refused to take it to the vendor, saying it was too low. I told the agent I would take the offer to the vendor myself, which I did, and the vendor accepted my unconditional offer. The agent is now arguing with the vendor that he is entitled to his commission. The vendor, in turn, is concerned about this and trying to renegotiate the deal with me. I feel the whole deal is in jeopardy because of the agent's insistence he is entitled to commission. Can I insist the vendor goes through with the deal we agreed and/or reassure him that the agent is not entitled to commission?

A: The most important inquiry from your perspective is whether you can enforce your unconditional agreement or not. We assume you have disclosed to the vendor your earlier unsuccessful dealings with the agent or at least have not misrepresented this if questioned directly by the vendor about how you were introduced to the property.

We have also assumed the agreement does not contain a clause inserted by the vendor in which the purchaser warrants they were introduced to the property by the vendor and that the purchaser will be responsible for the commission payable if it is subsequently shown that an agent introduced the purchaser. If these assumptions are true, the issue of commission should be one for the vendor and the agent. After all, you indicated that you have a valid and binding agreement between yourself and the vendor.

If the vendor continues to insist that they do not wish to complete the sale, you should immediately consult a lawyer. The next step would be to consider registering a caveat against the title to the property to prevent the vendor being able to transfer the property to another purchaser.

In terms of reassuring your vendor about the liability to pay commission, the first step is always to check the existence of a signed agency agreement between the vendor and the real estate agent but, as a purchaser, you are unlikely to be privy to this information. We have not had the benefit of reviewing the specific wording of the agency agreement either, so we cannot advise you fully and can only comment in general terms.

The terms and conditions of many agency agreements specify that the real estate agent must simply introduce the actual purchaser to the property (unless it is an exclusive listing, in which case it should be enough they were introduced during the exclusive period). So, if the real estate agent can show you were introduced to the property through his agency there is a presumption that commission will be payable to the agent. The question is whether the agent has done anything to rebut the presumption that commission is payable.

There may be an argument there has been a break in the chain of causation between your introduction and the eventual sale. This break must be sufficient to destroy the connection between the two events. However, it may be difficult to argue on your particular facts that there was break in the chain of causation. You may also find the vendor advised the agent of the lowest price he would accept and instructed the agent not to bother him with anything less.

This does not mean there are no consequences for the agent. Under the Real Estate Institute of New Zealand rules, any agent appointed by a vendor who receives notice of any inquiry or negotiation relating to the property must immediately refer it to the vendor. REINZ provides a complaints procedure for any made against an agent.