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Estate Agent receiving commission from both seller and buyer

In this article David Anderson at Sykes Anderson Perry Limited Solicitors and Tax Advisers makes UK buyers aware of French estate agents double commissions.

This article is for general information only and should not be relied upon in particular cases.

A recent French Supreme Court case (Cass civ, 9 avr. 2015 14-13-501) has established that a French estate agent can receive a commission from both the buyer and the seller in the same sale. This is unusual in England but can easily arise in France.

Facts of the case

In the case the owner of a property signed a mandate with an estate agent in which he agreed to pay a commission on sale. Three months later the agent found a buyer and the buyer signed an agreement with the estate agent agreeing to pay a buyers’ commission on the particular property. The parties then exchanged contracts.

Just before completion the seller withdrew from the sale. A year later without telling the estate agent they concluded the sale. The estate agent sued both the buyer and seller for their respective commissions. The defendants said it was unjust for the agent to be paid twice for the same work and that this was improper. The court however decided they both had to pay the estate agent and there was no legal bar to the agent receiving two commissions.

UK buyers

For UK buyers this could easily arise especially as they will often have no local contacts with people connected to the seller and so the risk of the parties comparing notes is small. French asking prices are often considerably overstated and so there is room for agents as part of the negotiations to ask the buyers to pay their commission. Buyers should remember that French estate agents are unlikely to incur the costs of marketing a property without the seller signing a mandate to pay their commission. Buyers are also often told that by paying the agents commission they reduce the notaire’s registration costs which is sadly of no benefit if the agent has caused the sale price to be inflated by taking a double commission!

This practice is abusive for the buyer as it increases the price and many people would also view is as unethical.

What to do

  • Ask the agent to confirm to you in writing only one commission is being paid. This could be put in the mandate he asks you to sign. It could say that any commission he may receive from the seller can be deducted from what you have agreed to pay.
  • Ask the seller before you sign the agent’s mandate.
  • Do not sign anything with the estate agent in haste.

June 2015

David Anderson Solicitor Advocate, Chartered Tax Adviser and barrister (unregistered)

Sykes Anderson Perry Limited