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Commission Disputes Part I: “Procuring Cause”

When someone works on commission, if the other party fails to hold up their end of the deal, there are often large sums of money on the line. Most often, the individuals who find themselves in this type of bind are real estate agents.

Today, we begin a two-part series on a unique area of employment law: Commission Disputes. First, we’ll cover New York’s “procuring cause” principles for real estate agents.

Most real estate agents already know that they must act as the “procuring cause” of a transaction to be contractually entitled to their commission. But what does it mean to be the procuring cause?

 

 

Understanding procuring cause

In the most general sense, the procuring cause agent is the person who caused the buyer to purchase the home. The National Association of Realtors provides some guidance, suggesting the following factors:

  • Whether the agent made reasonable efforts to develop and maintain an ongoing relationship with the purchaser
  • Whether inactivity, or perceived inactivity, caused the purchaser to seek out another agent
  • The nature of the listing or transaction

More specific guidelines come from state realtor association guidelines and state law.

New York’s approach to procuring cause

In one New York case, Green v. Hellman, the court found a broker had earned their commission by producing a purchaser who was ready, willing and able to buy. However, as the court found in ERA Joseph Green Real Estate v. Daubert, a mere introduction is not enough to count as procuring cause.

Bottom line: showing procuring cause is a fact-intensive endeavor. An attorney skilled in both real estate and employment law can help agents develop a strategy to claim the commission they are due.

In Part II, we will discuss one of the ways a broker who establishes they were the procuring cause can recover their commission: liquidated damages.

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