Sunday, January 17, 2010

Paying the agent's commission

A subject that sometimes comes up on the French property forums is that of agency commissions - and what happens if a buyer attempts to byepass the agent and deal direct with the vendor.

First, when taking a property onto his books, the French estate agent enters into a legally binding contract, known as a 'mandat', with the owner/vendor. The 'mandat' authorises the agent to market and try and sell the property on behalf of the owner, against an agreed commission, payable to the agent and based on a percentage of the property sale price.

Most 'mandats' are for an initial three or six month period, that is renewable, but can be valid for up to two years, binding the vendor to payment of the commission in the event that a buyer originally introduced by the agent buys the property - either passing through the agent or dealing direct with the vendor.

Second, in order to protect the agent against an unscrupulous vendor attempting to deal direct with the buyer, buyers are required to sign a 'bon de visite' when visiting a property with the agent, as evidence that they were introduced to the vendor by the agent.

There is considerable French statute (notably Code civile art: 1165) and case law (eg Cour de Cassation 9 November 1999, no. 292) where the courts have obliged a vendor to pay the agent's commission, in situations where buyer and seller have got together and agreed a sale, and attempted to defraud the agent of his commission. It is also possible for the sale to be blocked by the courts until this issue is resolved, thereby causing lengthy delays for both vendor and purchaser, and locking both parties into a transaction they cannot complete.