Who Pays the French Estate Agent Fees?
Wednesday 01 July 2009
Is it the seller, or is it the buyer who is responsible for the commission payable to a French estate agent?
One of the regular queries we receive into the office concerns the issue of liability for the payment of estate agent fees.
In some cases the sellers pay the fees, although a number of buyers report that they have been required to pick up the bill. Practice does not appear to be uniform.
So what does the law say on this matter?
Mandat de Vente
In order for an estate agent in France to act on behalf of a seller, they are required to enter into a written contract with them, called a ‘mandat de vente’.
The contract will state the price at which the agent is required to offer the property, together with the commission that will be payable and who will pay it – seller or buyer. The contract can say either.
Many of the mandats do, in fact, state that responsibility for the fees is to be met by the buyer, but this clause is only enforceable if it is accepted by the buyer! The buyer is not a party to the contract between the seller and the agent, and cannot be bound by it.
In reality, the clause is used by estate agents to try and persuade sellers that using their services will cost them nothing! This would only be the case if the property was sold at the asking price, and the buyer also agreed to pick up responsibility for the commission.
Whilst many buyers baulk at the idea of having to accept responsibility for the agent’s fees, in practice, it is normally to their advantage to do so, as it reduces the level of stamp duty payable on the property.
If the buyer accepts responsibility for the agent fees, and they are also then listed separately as such in the sale contract, they are excluded from the calculation of the stamp duty that is payable. They also reduce the level of the notaire's fees.
As the amount of stamp duty and notaire's fees are a percentage of the sale price, the lower the sale price, then the lower the level of stamp duty and fees that are payable.
Only if the agents fees were not separately identified in the sale contract would be total sum be then used in the calculation of the notaire's fees and taxes.
Accordingly, although a purchaser may well feel aggrieved about having to accept responsibility for the agent's commission, it can be used to reduce the total purchase costs!
Of course, the situation may well be more difficult where the seller is unwilling to negotiate on the purchase price, but as most sellers place their property on the market in the expectation that they will be beaten down on the asking price, this can normally be achieved, particularly in current market circumstances.
If, as a buyer, you object to accepting responsibility for the fees, then you are under no legal obligation to do so; if the seller or agent insists that you do so, then your response is going to depend on the level of the negotiating position you think you hold. If there is some margin for negotiation, then you should seek to reduce the purchase price of the property by at least an equal amount.
Commission is Negotiable
Neither is the level of the commission regulated; it is entirely for the seller and the agent to agree between them.
The level of the fee might range from around 4% up to 10% of the value of the property, with the rate lower in relation to value.
By European standards these commission levels are high, but there is nothing to stop the seller negotiating down a rate that may be demanded by an agent, as part of the discussions concerning the mandat. Much will depend on market circumstances and the desirability of the property. If the agent thinks they can sell it quickly, they are more likely to offer a lower commission!
Smaller independent agents are likely to be more flexible in the negotiation of their rates than the national networks.
You can read more in our comprehensive guide to Buying Property In France.
This article was featured in our Newsletter dated 01/07/2009