Arbitration, Prior Introduction

One common theme that crops up in disputes, and that I have referred to previously, is where salesperson B sells (leases/lets) a property to a purchaser who had previously been introduced by salesperson A during A’s agency. This can legitimately happen where there are joint agencies or where A’s agency has ended and B’s agency is in effect.


In this article I am not addressing the situation where there is underhand conduct by B as that is easy for an Arbitrator to handle, when uncovered. The issue that I wish to address here is; what should salesperson B do on becoming aware of a prior introduction.


The first reaction of most people is to say that the purchaser should be referred back to A, but this often would be the wrong thing to do. The question that must be asked is, would referring the purchaser back to A adversely affect the chances of a sale and, if the answer is yes, they should not be referred back. The guiding principle must always be to act in the best interests of the vendor.


I realise that this creates probably more questions than it answers but I believe this to be the most professional option.


Reasons given by B for not referring the purchaser back to A usually include one or more of the following:


The purchaser -

• Saw the property weeks/months ago and has never heard back from A.
• Did not like A and doesn’t want to deal with him/her.
• Did not believe that A was capable of handling the negotiations.
• Wanted to make an offer but A said it wasn’t enough and refused to present it.
• Was not properly shown the property and did not appreciate that it had ……. whatever!
(I know of one where there was a substantial income attached to the main house and salesperson A completely missed it).
• Had previously bought/sold with B and wanted to deal only with him/her.


Interestingly the timing can be quite short, in one case I was involved in, the purchaser neither liked nor trusted A and purchased through B three hours later. In another involving blatant underhand work the time was literally ten minutes – the purchaser going from A directly back to the property with B, a friend of theirs. How they expected to get away with it I will never know.


So back to the issue, what should B do where he/she is aware of the prior introduction but for whatever legitimate and professional reason determines that the purchaser should not be referred back to A.


Assuming they secure the sale, which is why they kept A out of the situation, they should notify A of the sale and I recommend that notification should be i) as soon as possible after the agreement is signed and ii) in writing, preferably by fax with proof of transmission. There can then be no suggestion that B was trying to keep the commission by concealing the sale from A.


If I am arbitrating this type of dispute and it is shown that B tried to conceal the sale from A, my decision becomes very easy, my preference being 100% of the commission to A and 100% of the costs charged to B.


But if the vendor has their sale and B has been professional and ethical, it is more likely the parties will reach agreement themselves. There is always a risk for B that they might do all the work and then end up handing all or virtually all of the commission over. Great - I suggest there would be a lifting of trust and mutual respect, particularly on the next occasion when perhaps the roles and actions were reversed.


The notification simply needs to state that i) B has made a sale and acknowledges A’s prior introduction, and that ii) A will be advised when the sale becomes unconditional in order that the parties can consider the respective positions.


Then, when the sale is declared unconditional the parties can commence their hopefully amicable and productive discussions. I might add that in my experience and when handled this way, they usually are both successful and amicable. If the negotiations are not successful then the matter should quickly be referred to the chosen dispute resolution process (normally mediation or arbitration). Speed generally minimises unpleasantness and frustration. It also means better and more meaningful recall of the circumstances.


The trap that catches many salespeople when they are B is that they believe and rely on the purchasers “story”. It is amazing how a purchasers' “we saw the property several weeks ago and have never heard back from “A” is subsequently found to have been three days earlier and A had been in constant contact. If the purchaser were correct (several weeks – never heard back) why would B fear a claim from A. The problem with not notifying A is that A may find out months later, after B has been paid and perhaps even left their agency. This leaves agency B at risk of refunding the commission and not being able to recover from their salesperson.


Another relatively common reason given for not advising A is that the purchasing entity had changed. This usually involves trusts and trustees. There can be valid argument in this situation but it often fails as the person introduced to the property can be deemed to be an agent for the trust. Again, it is surely far better to advise A of the sale and get the matter sorted out once the agreement has become unconditional, rather than after the commission has been spent and the matter become emotive.


Finally I want to emphasise again what I believe is the most important aspect in this situation, the only time to notify an agency that has made a prior introduction (A) is as soon as possible after the signing of the agreements, preferably immediately.




Responses to the previous article (When an agency ends).    This was where one salesperson gave purchasers an address but they called another salesperson to view the property then went back to the first to purchase it.


An interesting selection of opinions varying from Tom being considered effective if he qualified the purchasers and receiving 70% through to scathing comments about Tom and therefore Angela being considered the effective salesperson receiving 100%. One person suggested that if it were sufficient to give an address to a purchaser we would not need to physically show properties.


There were a number of “what-ifs” and questions for the two parties and a criticism of “Joint” sole agencies. It was also pointed out that Tom must have known of Angela’s involvement and therefore put the Vendor at risk of two commissions.


The moral of this factual occurrence is that there are many ways of looking at this and many other situations of conflict. It is therefore dangerous for any of us to assume that we are 100% right and the other part is 100% wrong until we have at the very least heard the other version of what happened, and the reasons the other party acted as they did.

Michael Pinkney FREINZ AAMINZ
National Councillor
First Published August 2005