Commission owed after termination of brokerage contract?

Commission owed after termination of brokerage contract?

A (real-estate) broker conducts work based on a brokerage contract. If he effects a sale, he is entitled to commission for his brokerage. Under certain circumstances this fee is also owed after the brokerage contract has been terminated. For example if a deal is concluded shortly after termination. Dutch contract lawyer Sander Schouten discusses a recent ruling in which this ‘residual effect’ of a brokerage contract was addressed.

 

Real-estate brokers: brokerage in purchase and sale of real estate

In this matter the client had instructed a real-estate broker to mediate in the purchase of registered property. After negotiations, it seemed like the parties could not reach an agreement. The brokerage contract was terminated. However, the client requested the broker to resume the brokerage a day later, but the broker refused. In the meantime he had entered into a brokerage contract with a competitor of the client, for the same registered property.

Invoking residual effect after termination of contract

The client had to engage another broker who did succeed in concluding a purchase contract. The client was amazed when not only his new broker but also his former broker charged commission. The broker invoked article 4 of the (terminated) brokerage contract. According to this stipulation, the client also owes commission if the purchase is concluded within 24 months after termination of the contract. The dispute between the parties focuses on the issue whether the broker can still invoke this residual effect.

Haviltex: not only the literal text determines the interpretation

The court finds that according to a strictly linguistic interpretation of the contract, the client owes this commission. But when interpreting a stipulation from a contract not only the linguistic meaning counts. The intentions of the parties and what they could reasonably expect from each other is also important (Haviltex criterion).

Court: broker not entitled to double commission

The court finds that article 4 does not apply to this situation for the following reasons. The client wanted the broker to continue the brokerage activities for him immediately, but the broker refused. He had in the meantime started working for a competitor. The broker impeded the conclusion of a purchase contract for the client because he made competing bids. Under these circumstances the buyer could not be expected having to pay commission to the broker as yet after conclusion of the purchase contract.

Commission after termination brokerage contract

Brokerage contracts usually contain a stipulation as aforementioned. The purpose is to safeguard the right to commission if the contract is terminated before the purchase is concluded, while this purchase contract can (partially) be attributed to the efforts of the broker during the term of the brokerage contract. 

Prohibition on serving two masters

The brokerage contract excludes the broker working for two clients with regard to the same registered property. This prohibition on ‘serving two masters’ is also a legal stipulation and has recently resulted in new case law. Letting agents cannot claim commission from renters if they also act on behalf of the lessor.

Sander Schouten - Advocatenkantoor AMS Advocaten
Sander Schouten Sander both advises and litigates in the areas of corporate law, insolvency law and Dutch employment law. He is very experienced in restructuring, reorganization and litigating in complex civil proceedings. Also follow Sander on Google or LinkedIn. Sander is available via e-mail and +31 (0)20-3080315.
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