Estate Agents in France
- Choosing an Estate Agent
- Carte Professionnelle
- Mandat de Vente
- Property Description
- Code of Conduct
We set out below the main aspects of the law and practice concerning the fees/commission payable to an estate agent.
As we have stated in an earlier section, the commission is only payable if there is a contract in place between the seller and the agent.
This mandat de vente must indicate the level of the fees or commission (honoraires) that will be payable and just who will pay it, the buyer or the seller.
A contract that does not clearly state the percentage level of commission is invalid.
ii. Who Pays the Fee?
The contract may well state that the commission is to be paid by the buyer, although practice varies and increasingly, it is the seller who is responsible.
In law, if the mandat does state that the buyer is to pay the commission, this is something to which the buyer cannot be held, as they are not party to the contract. It is entirely for negotiation at the point of sale and the terms of the sale and purchase agreement. The clause is only enforceable if it is accepted by the buyer!
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.
Since 2017 the law has been tightened on the information that is provided in the sale advert and particulars as to responsibility for the fees, with the aim of making it more transparent.
Thus, in terms of the sale advert/particulars:
If the fee is to be the responsibility of the buyer the advert must state 'honoraires à la charge de l’acquéreur' and must clearly indicate whether the advertised price is inclusive or exclusive of the fee. The fee (including taxes - toutes taxes comprises) must also then be clearly stated, expressed as a percentage of the sale price. Two prices should then be displayed; one which includes the fee and one excluding the fees, although the latter is permitted in smaller font.
If the fee is the responsibility of the seller only the sale price of the property should be shown, in which case the advert will merely state 'honoraires d'agence à la charge du vendeur'. However, as we indicate below, sometimes the advertised sale price includes the commission, a practice which is questionable.
If the fees are to be shared, then the sale advert must make clear how this will occur.
In addition, in order to protect the buyers, the fees must also be clearly shown on the website and in the offices of the estate agent.
The somewhat clumsy and contradictory legal text on this issue states:
Toute publicité effectuée par l'un des professionnels visés à l'article 1er et relative à la vente d'un bien déterminé, doit, quel que soit le support utilisé, indiquer :
1° Le prix de vente du bien objet de la publicité. Le cas échéant, ce prix comprend obligatoirement la part des honoraires du professionnel à la charge de l'acquéreur et est exprimé à la fois honoraires inclus et exclus. La taille des caractères du prix du bien mentionné honoraires inclus est plus importante que celle du prix du bien hors honoraires. Le prix de vente ne peut en aucun cas inclure la part des honoraires à la charge du vendeur ;
2° A qui incombe le paiement des honoraires du professionnel à l'issue de la réalisation de la transaction ;
3° Le montant toutes taxes comprises (TTC) des honoraires du professionnel qui sont à la charge de l'acquéreur, exprimé en pourcentage de la valeur dudit bien entendue hors honoraires ; ce montant est précédé de la mention « Honoraires ».
Although the law on advertising has changed, in practice many adverts fail to use the adopt the form that is required.
In addition, the buyer often remains responsible for the agents commission. This is either because it is clearly stated on the advert, or, even if the fees are stated to be the responsibility of the seller, the fees are integrated into the advertised sale price by estate agents.
Thus, if the advert states that the sale price is €200,000 'honoraires d'agence à la charge du vendeur', but the commission is included in the advertised price, the buyer will pay that sum to the notaire, who will then pay the agents commission from the sale proceeds, with the balance to the seller.
If the advert states that 'honoraires à la charge de l’acquéreur' the fee must be separately stated in the advert, although both the inclusive and exclusive sale prices will normally be given. So if the inclusive price was given as €200,000 and the agents fee was stated as 5%, the buyer would pay €190,000 for the property and €10,000 to the agent, via the notaire.
If the advert states that the commission is to be paid by the seller (or the advert is simply silent on the point), but they are integrated in the sale price and thereby paid by the buyer, it is unlikely it complies with the requirements of the new law, which does clearly state: 'Le prix de vente ne peut en aucun cas inclure la part des honoraires à la charge du vendeur'.
The problem, of course, is that even if the fees are not integrated into the sale price it may only mean that some head-room is being given in the valuation of the property.
Nevertheless, until there is greater legal clarity, whilst many buyers baulk at the idea of having to accept responsibility for the commission, in practice it can be to their advantage to do so, provided the seller is willing to negotiate on the purchase price, 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. That can be a significant saving.
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 notaire fees that are payable.
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 transaction costs.
In addition, it may be a better tactic for buyers to negotiate on the sale price, rather than the commission, in order to keep the agent on-side during the negotiations. In the end, what matters is the total cost, including fees and taxes.
iv. Level of Fees
The amount of the commission is entirely a matter for negotiation between the estate agent and the seller, contrary to popular belief on this point.
Indeed, even where the fees are given in the sale mandat they remain negotiable as part of the wider negotiations that take place on the sale of the property with prospective buyers.
The commission may be anything from 4% to 10%, but the highest commission would normally only be payable on lower valued properties. A study carried out in 2018 showed that the national average level of fees payable are around 5%.
A new breed of mainly on-line ‘low-cost’ agents have moved into the market to try and break the high fee culture that exists, and it is beginning to make an impact, particularly in urban areas.
The commission is only payable when completion of a sale takes place, and only provided the buyer who has been introduced to the property by the agent.
Article 6 de la loi du 2 janvier 1970 n°70-9 states that: « aucun bien, effet, valeur, somme d’argent, représentatifs d’honoraires, de frais de recherche, de démarche, de publicité ou d’entremise quelconque, n’est dû [à l’agent immobilier] ou ne peut être exigé ou accepté par lui, avant qu’une des opérations visées ait été effectivement conclue et constatée dans un seul acte écrit contenant l’engagement des parties. »
The statutory law is completed by Article 73 du décret du 20 juillet 1972, which states that the estate agent « perçoit sans délai sa rémunération une fois constatée par acte authentique l'opération conclue par son intermédiaire. »
However, as we said previously, if you have entered into an exclusive contract with the agent the agent is due their commission, whether or not they introduced the buyer to the property.
In addition, where all the conditions in the sale contract are fulfilled, but the sale does not subsequently proceed to completion, then the agent may well still be entitled to either their commission or damages, depending on the circumstances of just why it did not proceed to completion.
Thus, in a case in the French Supreme Court in 2018, a buyer signed a contract for the purchase of a property but refused to proceed to completion. The court ruled that signing of the contract was sufficient for the estate agent to be entitled to their fee.
There are also risks in trying to avoid paying the estate agent by buyer and seller dealing directly between themselves.
French courts have established that where the seller deals directly with a buyer who has been introduced to them by their agent, in order to avoid paying the commission that is due, then it is more often than not the seller (not the buyer) who is obliged to pay damages and interests to the agent. In some recent cases both buyer and seller have been made liable.
Thus, in an important legal case in the French Supreme Court the estate agents had been instructed by the sellers on the sale of their property, for which they had a formal written contract (mandat de vente).
Although the contract had been terminated by the seller, the terms still required they pay the agent’s commission for potential buyers introduced to them up the end of the contract period.
Indeed, the commission continued to be payable for a period of 18 months for any clients who had been introduced to the seller up to expiration of the contract.
By dealing directly with a buyer introduced by the agent during this period, the court decided that the seller had committed a breach of contract.
The commission payment due under the contract was €15,400, and as the court considered that this sum was not excessive and reasonably justified, it was due by the seller.
Indeed, the court went further, by examining the responsibility of the buyer in the matter.
They had dealt with the seller directly less than two months after having been introduced to the property by the agent.
The sale price agreed between the buyer and seller was €230,000, some €10,000 less than a previous offer made by the purchaser through the auspices of the agent.
The court ruled that the buyer could not escape their own responsibility for the commission by arguing that they were not party to the contract between the seller and the agent, for they signed a bon de visite which bound the buyer to deal irrevocably with the agent in their dealings with the seller.
On this basis the buyer was equally complicit with the seller in defrauding the agent of their commission.
As a result, the court decided that the buyer was concurrently liable with the seller for the payment of damages.
You should take your time to read and understand the contract with the estate agent and ensure, in particular, the terms on which you would be liable for payment of their commission.
Next: Code of Conduct
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