Recently a client asked me about the legal effect of an exclusive agency agreement with their real estate agent. There have been many cases in this area, usually involving expensive properties (with high commissions) where two real estate agents believe they are entitled to commission. As you can imagine, the owner of the property does not want to pay commission twice, so the matter eventually goes to court.
Usually there is only one agent entitled to commission upon the sale of a property. This is because of the requirement that the agent be ‘the effective cause of the sale’ in order to claim the commission. Unfortunately, being the ‘effective cause of sale’ is not something that is specifically defined anywhere, and always depends on the surrounding circumstances.
There was a recent case where an agent was engaged as the exclusive agent and when the exclusive agency ended the owners engaged another agent to attempt to sell the property. The second agent ultimately sold the property to a buyer introduced by the first agent, but for a higher price. Who here is entitled to the commission?
When making its decision, the court considered all of the circumstances and ultimately held that the second agent was the effective cause of sale and therefore entitled to the commission. This was because a mere introduction of a buyer is not enough to be the effective cause of sale because the agent must show their efforts were instrumental to the buyer agreeing to purchase the property.
The majority of real estate agents will require you to engage them exclusively initially so it is difficult to avoid this however after a period of time (usually around three months) that exclusive agency will come to an end. At this time, we recommend clarifying with your agent in writing that you are terminating their appointment before engaging another agent to assist with the sale.