When an Agency ends!

In my last article on disputes and dispute resolution I cited a relatively common problem and invited comment. I was delighted to receive a considerable number of replies and further delighted, though not surprised, with the professional and ethical attitudes expressed.

The situation I suggested was where Agent A introduces a client (potential buyer) during their agency and the client comes back to buy the property after the agency is lost to another company. It was my suggestion that if the second company refused to co-operate or was “unreasonable”, the client should be handed over then, after the sale was unconditional, the matter should be notified as a commission dispute.

It is totally unacceptable for the two companies to involve themselves or, more importantly, the members of the public in arguments as to who should do what, or get what. This is especially so before the sale has been made. In fact the most likely outcome of such conduct would be to jeopardise the possibility of the sale.

Priority number one must always be to make every endeavour to secure the sale on behalf of the principal. Their interests are paramount, unless of course they are involved in some devious business, which is another story.

In one case I am aware of, the second salesperson was the brother of the purchaser. The introducing agency became aware that their client had gone back (the same day) to purchase the property through the second agency – the brother. They could have started the fight right away, insisting on being involved, demanding the sale as theirs or advising the Vendor that they would be liable for two commissions etc. The result would probably have been that the sale would not have proceeded. In fact it appeared that the reason the sale could take place was that the second salesperson (brother) was going to subsidise the sale price by giving a share of their commission to the purchaser. The first agency did, in my opinion, exactly the right thing. They waited until the sale was declared unconditional then went to the licensee of the second company, who also did the right thing by immediately agreeing to hand over the total commission.

In the correspondence I received regarding the article there were also a number of questions about the right of the first agency to introduce new business during the period of cancellation, also about the rights of the second agency if the property was sold to a client introduced during the cancellation period.

Obviously there is some confusion about the terms of sole agencies. All sole agencies that I have seen state that the vendor will cancel all existing agencies as soon as they are entitled to do so and that they will not enter into any further agencies. Obviously then if the listing states that all existing agencies will be cancelled, that is an acknowledgment of existing agencies. This must mean that the existing agencies can run their course, normally the cancellation period. The commencement of the new sole agency does not and cannot change the terms of any existing agency or agencies. New business under the existing agency is exactly that, business under the existing agency.

To change the topic, like many people who have been around this profession for many years, I get many calls for advice on a variety of situations. One I received a while ago was quite intriguing and I would love to receive some of your thoughts on it.

Angela (not her real name etc,) received a call at home on the weekend. The callers (the Jones’s) were sitting outside a property and called her from the number on her sign. They were very interested and wanted to see through. Needless to say, Angela was there in a very short time and did all the right things. The people spent a considerable time at the property and asked all the right questions. They were obviously very interested but just would not consider putting in an offer at that time.

They parted with an understanding that Angela would call them the next morning. When she did there was good news and bad news. Yes they had decided to make an offer for the property but through another agency. Angela was somewhat dismayed and asked on what basis. It transpired that the Jones’s had walked into another agency the previous afternoon and met with Tom. Tom spent some time with them discussing their needs and identified the property he thought was perfect for them. Unfortunately he was unable to take them out as he was waiting for clients with whom he already had an appointment. Tom’s other clients did arrive so Tom sent the Jones’s to have a look at the property (from the outside) and the location armed with all the relevant information, advertising material, copy of the title etc.

The property was a joint sole agency and when the Jones’s arrived they were impatient to see through so called Angela.

Angela called me to ask about her rights and chances of a commission.

I would be very interested in any ideas on what advice should have been given to Angela, and, if the facts were absolutely as stated, who should get what. Presumably Tom would argue that his was the effective introduction and cause of the sale, all that is needed to establish entitlement to his commission. Angela would argue that Tom’s introduction was little more than telling the Jones’s what was available and that they could have got most of that information from newspaper advertising. For the sake of this issue, assume that firstly the parties cannot agree and secondly that they both want 100% of the commission. Your thoughts please and I will report in the next article.

Michael Pinkney FREINZ AAMINZ
National Councillor
First Published April 2005