More on introduction

It seems to me that it is time to address an area of concern, controversy and the cause of many disputes!

What should happen when a Salesperson from one Agency (A) introduces a party to a property but before they sell it, a Salesperson from another Agency (B) secures a sole agency and A’s appointment is cancelled (or expires). Meantime Agency A’s client returns to them and advises that they want to buy the property?

In the previous article I wrote on the significance of “Introduction”. In particular I explained that introduction, subject to certain criteria, is the income-earningevent for most of us in that our agency appointments state that we will be paid our commission if the purchaser of the property is one who was introduced by us.

This is supported by the Courts, provided it can be shown that our introduction was a material cause of the sale and this can be relatively easy to show where a private sale eventuates. But, the matter becomes more difficult when a second agency becomes involved, as suggested above, and this is often the basis of commission disputes.

The first consideration is that despite Agency A having an entitlement to a commission by virtue of the introduction, under REINZ Rule 14.19, they do not have the right to approach the Vendor regarding a sale.

That means that Agency A must contact Agency B and endeavour to come to a mutually acceptable compromise. This is not always easy or even possible. B may have just secured the sole agency for a lengthy period and possibly have substantial vendor funded advertising.

In the worst-case scenario (for A), B could refuse to concede any conjunctional rights to A.

This leaves Agency A in a dilemma that many of us have faced and there is no clear instruction as to what they should do.

It is my belief that the first consideration must always be the interests of our client, the Vendor, which means do whatever it takes to get the sale for them.

Again, in the worst-case scenario, if B absolutely refuses to co-operate or makes an offer which, in A’s opinion is unreasonable, I believe that A should send the Purchaser to B to buy the property.

Once the agreement is concluded, A should advise B that the matter is a commission dispute as provided for under REINZ Rule 15. 

The matter may then end up in Mediation or Arbitration. Awards from both of these processes are confidential therefore there are no precedents in the public arena for us to learn from. However most experienced Mediators and Arbitrators will have experience of this type.

An Arbitrator would then have to consider:

1 The introduction by A, did it remain a material cause of the sale.
 

2 The conduct of A and their demands and reasons for them.
 

3 The conduct of B and the quantum and reasons for their offer, or refusal to cooperate.
 

4 Any other factors raised by the respective agencies.

As to what B should offer, I would love to receive some comments on this situation, in writing please to mpinkney@remax.net.nz. Also any experiences of this type that anyone would like to share (anonymously) and that we could learn from. Please note that it is not my intention to make judgements on what should or should not have happened so overviews only please, not pages of detail.

I will report back in the next article.

>>>>>

The New Zealand Herald of 12th May 2004 carried a report on an Arbitration between two of our Members. It was certainly newsworthy because of the size of the disputed commission, $500,000. Obviously a significant commercial transaction!

While it is not clear what ramifications there are for disclosing the outcome of an Arbitration (or passing details to the media). Awards are confidential to the parties (Arbitration Act 1996 Sect 14 headed “Disclosure of information relating to arbitral proceedings and awards prohibited”) therefore anybody involved in an Arbitration, or a Mediation, should be very mindful of this requirement.

The only exceptions to this are that the parties can consult their respective professional or other adviser or if they are both in agreement as to the release of the award.

Michael Pinkney FREINZ AAMINZ
National Councillor
First Published November 2004