Double Commission Payable to French Estate Agent
Tuesday 09 April 2019
A French court has ruled that there is no legal restriction on an estate agent obtaining a commission from both seller and buyer.
Just who pays the fee to the estate agent on the sale of a property in France depends on the terms of the sale and purchase agreement between buyer and seller.
Rarely would the commission be shared, or would the agent be entitled to a commission from both the buyer and seller.
However, where the agent had been engaged by a buyer to find a property for them, for which they had agreed a finder's fee would be payable, the law does not outlaw the practice of a commission from both buyer and seller, as was confirmed in an important recent court ruling.
In the case heard in the French Supreme Court, the Cour de Cassation, an estate agent had been instructed by an owner to sell their property for €310,000. The commission was to be payable by the seller, estimated at €20,000.
Two months later a couple entered the agent’s office and signed a contract with the agent (mandat de recherche) to pay them a commission of €10,000 if the agent was able to obtain for them the same property, presumably on favourable terms.
The negotiations with the seller did not take too long, for the same day buyer and seller signed a contract (compromis de vente) for a purchase price of the property for €270,000, in which the buyer paid a commission to the agent of €20,000, double the originally agreed sum.
However, the seller later refused to complete on the sale, instead entering into another sale contract with the same buyer for €280.000, who duly purchased the property.
As a result of being excluded from the sale the estate agent brought an action in the courts against both buyer and seller for the commission that was due to them.
The court of appeal sitting in Pau rejected the claim by the agent citing the Loi Hoguet (the law that governs the operation of estate agents), which does not permit agents to request or receive, for a specific transaction, commission payments that were not part of the sale mandate, the mandat de vente.
The court stated that, for the same transaction, the agent could not demand double commission. As the sale instructions agreed with the seller mentioned only one commission that would be payable it excluded the payment of a finder’s fee commission by the buyer.
This decision was later overturned by the Cour de Cassation, who ruled that there if there were two mandats there was nothing in law that prevented a double commission being paid for the same transaction, irrespective of the fact that neither of the instructions to the agent mentioned this possibility, stating: 'Le droit à commission existe pour chacun des mandats dès lors que sont satisfaites les exigences prescrites.'
The ruling may be considered to be a surprising one, as no consideration appears to have been given to the potential conflict of interest surrounding such a sale, as it is clearly questionable whether the agent could act impartially for both parties, without at least informing both of them of their own double engagement.
This article was featured in our Newsletter dated 09/04/2019