Procuring Cause – Who Gets the Money?

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19th Jun 2015

Procuring cause, when disputed, can be one of the most contentious issues that arise in the real estate profession.

As all brokers and agents in Arkansas know, the procuring cause doctrine is used here to determine whether a real estate broker is entitled to a commission. (Farm Credit Bank of St. Louis v. Miller, 316 Ark. 388, 392, 872 S.W.2d 376, 379 (1994).) To be considered the procuring cause, an agent or broker must be the proximate cause of the eventual sale. In other words, the actions taken by the agent or broker must, in their natural and continuous sequence, unbroken by any new independent cause, result in the sale of the subject property. Notice that I used the word “actions”, because in Arkansas the court has “long recognized that a broker is not allowed to recover a commission when he merely performs one event in a chain of actions.” (Ibid.) The mere introduction of the parties, for example, is not enough to be considered the procuring cause, nor is being responsible for the prospective purchaser’s presence in the vicinity of the property, nor is answering an inquiry about whether the property is still on the market. (Hatchett v. Story, 221 Ark. 120, 122-23, 252 S.W.2d 78, 79 (1952).) To be considered the procuring cause, the sale must be the result of the broker’s or agent’s continuous course of conduct rather than a mere incidental link. (Farm Credit Bank of St. Louis, 316 Ark. at 392-393.) Some of the factors that the court may consider are:

1. whether the prospect who ultimately purchased the property knew about the property before being contacted by the broker;

2. the relative success or failure of the negotiations conducted by the broker, including the continuity or discontinuity of the original and final negotiations, the length of time elapsing between the broker’s negotiations and the final sales agreement, and the development of a new, independent motive for prospect to purchase;

3. whether or not the broker abandoned efforts to negotiate the transaction with a particular prospect; and,

4. the good or bad faith of the principal and the broker.

(Farm Credit Bank of St. Louis, 316 Ark. at 393.)
This list is by no means exclusive. The determination of whether a broker is entitled to a commission is highly fact dependent, and the court in Arkansas looks at the whole context of the subject transaction in order to make its decision. (Farm Credit Bank of St. Louis, 316 Ark. at 392.)
If you are a broker or agent with a procuring cause issue, you need in-depth legal analysis of the transaction before getting involved in a long drawn-out dispute. Give us a call. We can help.

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