By: Daniel T. Pascale, Esq.
Offices located in Delray Beach and Coral Gables, FL
As the amount of South Florida real estate transactions continue to reach new records, real estate brokers and agents find themselves in more and more commission disagreements. As such, we thought it would be a good idea to post a new article on the doctrine of procuring cause.
The Doctrine of Procuring Cause
Procuring cause refers to a broker’s efforts to match a ready willing and able purchaser with a seller and for a sale to take place as a result of the broker’s continuous negotiation and/or involvement. Stated differently, to be the procuring cause of a sale or lease of real estate, a broker or agent must have brought the parties together and effected the sale or lease assignment as a result of continuous negotiations inaugurated by the broker. Whether a real estate broker or agent is the procuring cause of a sale must be factually determined on a case-by-case basis. Many factors can impact a determination of procuring cause, but no one factor is by itself determinative.
Important Factors to Evaluate in Broker Commission Disputes
- What was the nature of the listing or other agreement: was there an exclusive right to sell or exclusive agency?
- Was the listing agreement in writing?
- Was the listing agreement in effect at the time the sales contract was executed?
- Was the property listed subject to a management agreement?
- Is the aggrieved broker a party to whom the listing broker’s offer of compensation was extended?
- If an offer of cooperation and compensation was made, how was it communicated?
- Were the broker’s actions in accordance with the terms and conditions of the agreement or offer of cooperation and compensation (if any)?
- Did the listing agent breach the listing agreement in any way?
Frequently Asked Procuring Cause Questions
Q: Can a broker still be the procuring cause of a sale if the purchase price is different than what was originally agreed to?
A: Yes. For a broker to be the procuring cause of a sale, the final agreed-upon price need not be the same as that specified in the listing agreement. Courts recognize that the buyer and seller will negotiate and that the seller’s agreement to a lesser price than originally asked for should not negate the broker’s efforts.
Q: Can a broker still be the procuring cause of a sale if the property is ultimately sold under different terms?
A: Probably not. If the terms are material terms of the transaction and the parties cannot reach an agreement on them, then the broker is not considered to be the procuring cause of the sale. For example, in cases where one broker introduces the parties but is unable to bring the buyer to the seller’s terms and another broker subsequently brings the buyer to the terms specified in the listing agreement, the first broker is not the procuring cause of the transaction.
Q: Does a broker who makes the initial contract with the purchaser automatically become the procuring cause of the sale?
A: No. There is no automatic entitlement to a commission based upon who obtains the initial contract with the purchaser. However, when and how the initial contract is made can be an important factor in determining whether a broker is the procuring cause of a sale.
There are a great number of factors to consider when determining procuring cause. However, it is just as important to remember that no automatic conclusions should be drawn from the presence or absence of any one factor. Procuring cause is not always achieved by introducing the parties. It is not always achieved by finalizing the transaction. No preconceived formula or rule should be used to determine procuring cause. Rather each factor should be weighed in conjunction with the other factors relevant to your case.