Procuring Cause – When are you entitled to a commission?

You made the introductions or you have finalized the sale, you must be entitled to a commission, right?  Not so fast! What was your involvement in between these two events? Have you really done enough to warrant being paid a commission?   With a rise in commission disputes being brought to the managing broker’s attention, we must look to the guidelines set out in Florida case law as to the determining factors known in the industry as the “procuring cause.”

The National Board of Realtors defines procuring cause to be “the broker as the procuring cause of a sale is ‘sine qua non’ of the sale – the sale would not have occurred but for the broker’s efforts.”  Simply put, the procuring cause refers to the Broker’s efforts to match a ready, willing and able buyer with a seller, and for a sale to take place as a result of the Broker’s continuous unbroken chain of negotiations and involvement.

Whether a broker/agent is the procuring cause of a sale must be factually determined on a case-by-case basis. Many factors influence the determination of who is the procuring cause, and not one factor by itself is determinative. It is important to remember that there is no automatic conclusion to be drawn from the presence or absence of any one factor. Just as there is no preconceived formula or rule used to determine procuring cause, each factor is weighed in conjunction with the other factors relevant to your case.  Here are a few, but not all, of the factors to be considered:

  • Was there a listing agreement or agency agreement signed? Were they exclusive?
  • When did the Broker/agent make the initial contact with the Buyer? Did they inquire if another broker/agent was already involved?
  • Did the Broker/agent conduct themselves appropriately ?
  • Was there a continuous relationship between the Broker/agent and the Buyer? Or lack thereof?
  • Did the Buyer/Seller conduct themselves appropriately by disclosing their relationship with a broker/agent?

Real Estate brokerages try to avoid procuring cause disputes by requiring clients to sign a buyer’s agency agreement, with the length of the agreements varying from three to twelve months. These agreements help mitigate disputes because they usually remove the procuring cause question from the above equation entirely – the broker/agent is entitled to a commission based on the contractual terms provided in the listing agreement rather than the fact-intensive procuring cause analysis above. So, the most important thing that a broker/agent can do to avoid a procuring cause battle is to ensure that every client is bound by an agreement. Moreover, we recommend to brokers/agents to communicate with your clients, make sure they understand the terms under which a seller is willing to pay a commission, be diligent, stay in constant contact and always follow up. These practices will make it clear to everyone who you are representing and will clearly define your expectation that you receive a commission for your efforts.

If you ever have a question about whether or not you are the procuring cause, or you want to be proactive and minimize the opportunity for a commission dispute in the future, you should consult with a real estate attorney

Sincerely,

Berlin Patten Ebling, PLLC

Article Authored by Elizabeth Wexler, Esq.  ewexler@berlinpatten.com

This communication is not intended to establish an attorney client relationship, and to the extent anything contained herein could be construed as legal advice or guidance, you are strongly encouraged to consult with your own attorney before relying upon any information contained herein.

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