Understanding Procuring Cause in California: The Key to Earning a Real Estate Commission
In the world of California real estate, the phrase “procuring cause” is more than just industry jargon—it is the legal and ethical cornerstone of how and why a real estate agent earns their commission. For sellers and buyers alike, understanding this concept is critical to navigating potential disputes, especially when a transaction closes after a listing agreement has expired.
This article breaks down the doctrine of procuring cause, its relationship with “protection clauses,” and what everyone involved in a real estate transaction needs to know.
What is Procuring Cause?
At its core, procuring cause refers to the real estate agent whose actions were the “efficient and proximate cause” of a real estate transaction. In simpler terms, it answers the question: “Which agent’s efforts directly and continuously led to this sale?”
The California Department of Real Estate (DRE) defines it as the cause that originates a series of events which, without a break in continuity, result in the accomplishment of the broker’s prime objective: producing a buyer ready, willing, and able to purchase on the seller’s terms.
It is not merely about who first showed the property. It’s about who created the unbroken chain of causation that led to a successful closing.
The Core Elements: Proving Procuring Cause
For an agent to successfully claim they are the procuring cause, they must typically demonstrate a combination of the following factors:
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Initial Introduction: The agent was the first to introduce the buyer to the property in a meaningful way, sparking their interest through a showing, open house, or marketing effort.
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Continuous and Diligent Effort: The agent maintained contact with the buyer, provided additional information, facilitated negotiations, and took steps to move the transaction forward. They did not abandon the process.
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No Break in the Chain: There was no significant, unexplained gap in the process where another agent could legitimately step in and take over. The original agent’s involvement was a continuous thread.
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Good Faith and Professionalism: The agent acted in accordance with their fiduciary duties and the standards of the profession.
As the publisher firsttuesday often emphasizes, an agent earns a commission not simply by having a signed contract, but by producing a result through their diligent efforts.
The Classic Point of Contention: The Expired Listing
This is where most disputes arise between homeowners and their former agents. Consider this common scenario:
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Your listing agent markets your home for six months, showing it to dozens of buyers, including one named John Doe.
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The listing expires without a sale, and you decide not to renew.
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Two months later, John Doe—who first learned of your home through the agent’s efforts—contacts you directly and you agree to a sale.
The Homeowner’s Perspective: “The agent failed to sell the house during the contract. Why should I pay them now?”
The Agent’s Perspective: “I found the buyer and did all the foundational work. I am the procuring cause of this sale.”
This is where the Protection Clause (also known as a Safety Clause or Tail Clause) comes into play.
The Protection Clause: A Contractual Right to Claim Procuring Cause
A Protection Clause is a standard provision in an Exclusive Right to Sell listing agreement (such as the CAR RLA or RPI Form 102). It protects the broker’s investment of time and money by stating:
For a specified period (typically 90 days to one year) after this agreement terminates or expires, the client agrees to pay the broker the full commission if they enter into a transaction with a buyer who was introduced to the property during the listing term.
The clause does not grant an automatic commission. Instead, it grants the broker a window of time to prove they were the procuring cause. The key steps are:
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Formal Identification: Upon expiration, the broker must provide the homeowner with a written “Identification of Prospective Buyers” list (like RPI Form 122). This document formally names the prospects, like John Doe, whom the broker claims to have procured.
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The Demand: If a sale with a named prospect occurs within the protection period, the broker will send a formal “Demand for Payment of a Fee” (like RPI Form 123-1), initiating collection.
How to Defend Against a Procuring Cause Claim
A homeowner is not without defenses if they receive a demand. A claim can be contested by proving:
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The Buyer Was Not Procured by the Agent: The buyer was a true “For Sale By Owner” (FSBO) lead, found entirely through the homeowner’s own efforts (e.g., a neighbor, coworker, or personal contact).
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A Break in the Chain: The buyer’s interest was rekindled by a new, independent event after the listing expired, and the original agent had abandoned follow-up.
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The Protection Period Expired: The sale closed after the clause’s time limit (e.g., 366 days after a one-year clause).
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Agent Breach of Contract: The agent failed to perform their contractual duties (e.g., no marketing, failure to present offers), which voids the agreement. Merely not selling the house is not a breach.
Official Guidance and the Law
It is crucial to understand that “procuring cause” itself is a doctrine developed through common law and industry practice, not a specific statute.
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California DRE: The DRE Reference Book, particularly Chapter 7, discusses broker compensation and the principles behind procuring cause, framing it as a standard of professional conduct.
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California Association of REALTORS® (CAR): CAR provides the forms and arbitration procedures used to resolve most procuring cause disputes. Their guidelines emphasize the “unbroken chain of events” and provide a structured mediation and arbitration process for members.
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Underlying Law: While no law defines procuring cause, an agent’s claim must be made in good faith. Frivolous claims could violate the California Business and Professions Code (§ 10176 and § 10177), which govern licensee conduct.
Key Takeaways for Homeowners and Agents
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For Homeowners: Before signing a listing agreement, read and understand the Protection Clause. You can even negotiate its terms, such as a shorter protection period. Upon expiration, review the “Protected Parties List” carefully so you know who you cannot sell to without potentially owing a commission.
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For Agents: Your right to a commission is built on your actions, not just your contract. Meticulously document all showings, communications, and negotiations. Upon expiration, always provide the formal Protected Parties List to preserve your rights under the clause.
In conclusion, procuring cause is the legal principle that ensures commissions are paid for actual results and professional effort. The Protection Clause is the contractual tool that allows a diligent agent to secure a fee for the value they created, even if the final deal closes after their formal employment ends. Understanding this interplay is essential for anyone involved in a California real estate transaction.
This article is for informational purposes only and does not constitute legal advice. For specific legal guidance on a real estate matter, please consult with a qualified California real estate attorney.
