What does REBNY have to say about procuring cause?
Here’s what Neil B. Garfinkel, REBNY Broker Counsel & Partner-in-charge of real estate and banking practices at Abrams Garfinkel Margolis Bergson, LLP had to say about the topic:
Question: Is a buyer’s broker entitled to a commission by virtue of introducing the buyer to the property?
Answer: No, simply showing a buyer a property does not necessarily entitle a REBNY member to a commission. A broker is only entitled to a share of the commission if he or she is considered the “procuring cause” of the transaction.
Question: What is “procuring cause?”
Answer: There is no specific definition of “procuring cause.” However, case law suggests that in order to be considered the procuring cause, a real estate broker must show a “direct and proximate link between the bare introduction of the buyer and seller and the consummation [of a sale].” In other words, a REBNY member must bring together a meeting of the minds between the buyer and seller and show that he or she generated a chain of circumstances which led to the sale. The ultimate determination of whether or not the REBNY member procured the buyer, and thus can be considered the procuring cause, is a fact-sensitive inquiry that turns on the specific facts and circumstances of each case.
Question: May a buyer switch real estate brokers at any time during a transaction?
Answer: Yes, absent an exclusive representation agreement, a buyer may switch real estate brokers at any time during a transaction. However, the buyer’s decision to change brokers does not necessarily dictate which broker is the procuring cause of the buyer. For example, let’s assume that Broker A represented the buyer for the entire transaction and, on the night before closing, the buyer instructs Broker A not to come to the closing because the buyer wants to bring Broker Z to the closing. The buyer has the right to change to Broker Z, but doing so does not negate the fact that Broker A was the “procuring cause” of the buyer. In this case, Broker A would still be entitled to share in the commission even though the buyer has changed brokers. Once again, the determination of who is the procuring cause of the transaction is a fact-sensitive inquiry that turns on the specific facts and circumstances of each case.
What if the broker isn’t a REBNY member?
If one of the brokers is not a REBNY member, then the dispute is not required to be submitted for arbitration by REBNY, and either side will be free to pursue litigation.
As you can imagine, litigation is quite expensive in NYC and is not good for business. Brokers should carefully weigh the pros and cons of pursuing litigation vs trying to come to a settlement with the other party.