Legal insights on the sales order for real estate agencies

The real estate brokerage contract can go by as many names as there are agents in our country: sales mandate, assignment sheet, brokerage contract, marketing agreement, etc. However, it is a contract that warrants a careful examination of the common points.

In this article, we shall explore various matters, such as the form that the brokerage contract should take, the capacity of the real estate agent to represent sellers based on the contract, the principal obligations of the agent, and the accrual moment of the contract.

The Form of the Real Estate Brokerage Contract

Whilst it is common for the agency to have a standard contract, outlining the terms of the brokerage, under Spanish law there is freedom of form in contracts. Therefore, it is not specifically required to be a written document, provided it meets the essential requirements of any contract: consent, cause, and subject matter.

For this reason, although a verbal agreement is entirely valid, it will present a clear problem of proof, as it will be difficult to prove the contractual relationship, unless we can resort to other probative elements (witnesses, actions of the parties, etc.). Nevertheless, if existence can be demonstrated, the contract will be valid as recognised by jurisprudence.

Jurisprudence has recognised the validity of verbal brokerage contracts, although there is always a problem of proof.

Furthermore, since the agent is a professional, jurisprudence has understood that the agent cannot be assumed to act for free and, if the agreement on fees cannot be proven, the local customs must be referred to, to define the fees that the client must pay.

For all these reasons, it is always preferable to use written form. But this written form can have very different representations. It could be a standard written agreement of wills, understood as a contract with a usual structure, to a simple exchange of emails, provided the essential requirements mentioned above are met: consent, cause, and subject matter.

It is possible to defend the existence of a brokerage contract with a simple exchange of emails between the agent and the owner.

The Content of the Brokerage Contract

The real estate brokerage contract is an atypical contract, meaning that it is not directly regulated by any specific law. Its content will depend on the specific wording of each contract, interpreted in accordance with the prevailing jurisprudence on the matter.

In this regard, the Supreme Court (SSTS 10th March and 21st May 1992, 19th October 1993, 21st October 2000, 5th November 2004, 13th June 2006, or 21st March 2007) states that “the mediation contract is part of the collaboration and management of foreign interests contracts, whose essence resides in the provision of services aimed at the search, location, and approximation of future contractors, without intervening in the contract or acting properly as an agent.”

For the Supreme Court, the main obligations of the real estate agent would be the search and location of potential buyers or tenants, as well as facilitating contact between the interested parties.

Although the brokerage contract does not grant any representation power to the agent (neither to receive amounts on account nor to sign the contract), jurisprudence has accepted the possibility of incorporating an express mandate within the brokerage contract.

This mandate would endow the agent with the capacity to act on behalf of the owner for the sale of the property, being able to sign on their behalf the relevant documents for the sale, including the public deed (although this will need to be ratified by the principal for its validity).

The brokerage contract may include a mandate for the agent to contract on behalf of the client, signing on their behalf and representation the sales contract.

As lawyers, we do not recommend this option to either agents or consumers, in order to avoid the legal risks inherent in the mandate, although we understand that, on certain occasions - with full information to the parties - it may be interesting to use it.

For all these reasons, regardless of the name or form of the brokerage agreement, it is necessary to thoroughly review the content of the marketing agreement to determine the exact specific content of the contract.

The Obligations of the Estate Agent

As we previously noted, the Supreme Court has clearly defined the obligations of the agent: to act as a bridge between buyers and sellers, that is, a task of intermediation. While an agent is expected to exert effort to conclude a sale, they are not obliged to guarantee its total success, although it is common for their fees to be contingent upon success.

In addition to the obligations under the intermediation contract, the agent's activity is also heavily regulated by numerous legislation, both in terms of consumer and user protection (LGDCyU, RD 515/1989, etc.) and in other areas (energy efficiency, regional housing laws, laws regulating intermediation, etc.). Although the practice of the activity is free, it does not imply that they are not subject to regulations.

There are numerous regulations that the agent must comply with, primarily those related to the protection of consumers and users.

One of the main obligations of the agent is their informative task to consumers who contract through them. There is extensive regulation in the marketing of new buildings, but there is also regulation that applies to second transmissions, so the agent must ensure compliance with all of them.

However, it is important to stress that, despite their informative role, an estate agent is not - nor should they be - a qualified legal advisor, although their intervention may often be essential to ensure that the transaction proceeds without hitches.

Nevertheless, failure by the estate agent to fulfill their obligations can lead to both administrative sanctions, mainly in matters of consumer defense (unfair clauses, non-compliance with the duty of information, not providing mandatory information for marketing - such as the energy efficiency certificate, etc.) as well as civil liability in some cases.

Among the sentences condemning agencies, we highlight SAP Baleares of 29th May 2009, which condemns a real estate agency to respond for the damages caused to the plaintiffs - buyers - for not complying with their duty to "provide information on the physical, legal and registration reality of the property offered."

The accrual of the fees

The prevailing case law indicates that agents are entitled to their remuneration once the agreement is "perfected." More specifically, the Supreme Court has maintained that agents may claim their commission when their intermediation efforts culminate in a transaction they have facilitated. In practice, this means that agents have the right to charge their fees as soon as the private contract is signed (purchase contract with a down payment agreement, promise, option, etc.).

Thus, the right to commission for the estate agent is linked to the signing of the private contract, the moment it is understood that their action has culminated, having brought both parties together, all without prejudice to continuing to contribute until the deed is granted.

The agent's right to charge their fees arises as soon as the private contract is signed, as they have managed to bring the buyer and seller into agreement, although payment may be delayed to another time.

This issue becomes especially relevant in situations where one of the parties, either the buyer or the seller, fails to meet their commitments, and the public deed is not granted. In these cases, and even if the operation is not completed, the agent would be entitled to full payment of their fees.

Supporting this argument, the STS of 20th May 2004 holds that, in circumstances where a real estate agency has fulfilled its professional role and facilitated the materialisation of a purchase contract, but subsequently one of the parties withdraws, the responsibility does not lie with the agency.

In this regard, the ruling states that “In the present case the estate agency acted within the demands of its professional activity as such an agent, bringing sellers and buyers into relation who came to perfect the contract of sale of the dwelling (art. 1450 of the Civil Code) and if the sellers desisted from granting the deed of sale, the cause cannot be attributed to the defendant but to the refusal of the principals to pay the agent's remuneration which they considered did not comply with what was agreed. There was therefore no failure attributable to the estate agent that gives rise to the deprivation of its right to receive the fees earned.”

Despite all of this, we must point out that there are also court decisions where it is ruled that the commission is not accrued until the complete conclusion of the purchase, although it is important to stress that, in these cases, the intermediation contract itself stated that only with the granting would the agent charge their fees.

An alternative would be to contractually establish that the right to commission arises with the signing of the preliminary contract (private purchase contract, option contract), but to postpone the demand for payment until the formalisation of the public deed.

Therefore, it is crucial for the agent to check the specific wording of each agreement and thus see if the contract distinguishes between the moment when the right to commission arises (accrual) and the moment when payment can be demanded (enforceability).

Therefore, whether you are a real estate agent or a seller, it is advisable to have the expert advice of a specialised lawyer to review the content of the intermediation contracts to know exactly the scope of your obligations.

desalvador | Real Estate Lawyers Mallorca