Earlier this year, the Supreme Court issued a ruling on the liability of brokerage fees in the event that a seller agrees to a wrongful reliance by the buyer on a financing reservation. The ruling illustrates that brokerage agreements between brokers and their clients are often insufficiently clear, leading to discussions about mutual obligations.
Broker would mediate sale
The broker and client in question had agreed that the broker would mediate the sale of the client's home. I suspect that the broker used the General Consumer Conditions NVM 2015 - or similar general conditions - in doing so (although this does not appear in so many words from the judgment). These general terms and conditions are often declared applicable to such brokerage agreements.
Article 14 of the 2015 NVM General Consumer Conditions stipulates, among other things, the following:
"The consumer owes the broker a brokerage fee if during the term of the brokerage assignment a contract relating to immovable property is concluded. [...] In the case of contracts, the final conclusion of which or the obligation to perform, pursuant to a clause belonging to the contract, depends on a suspensive or resolutory condition, the right to brokerage commission shall also depend thereon, unless one or both of the parties does not apply the condition in question in accordance with its purport.
Unclear wording
What stands out is the somewhat unclear wording of the first sentence. The client (consumer) owes a brokerage fee if "a" contract relating to "a" property is concluded.
Strictly speaking, with the applicability of this provision, the client also owes commission if he has his house painted while it is for sale. After all, also in that situation an agreement is concluded with regard to the house to be sold. This is perhaps a somewhat theoretical example, but it does indicate that the wording does not improve clarity.
This is especially true now that these terms are widely used. It would be better for the parties to agree that the client owes a brokerage fee if, during the term of the brokerage assignment, the agreement intended by the brokerage assignment comes about. After all, at that moment the client gets what he has asked for. At the same time, this covers the situation in which the client manages to conclude an agreement during the mediation assignment, but without mediation. Also in that case the client will owe a broker fee.
Dependence on resolutive and suspensive conditions
The judgment concerns the second part of the quoted text, in which the right to brokerage commission was made contingent on any agreed suspensive or resolutory conditions. The mediation of the broker in question led to a purchase agreement between his client and a buyer. The sales contract contained a financing condition, in the sense that the buyer was entitled to rescind the sales contract if he could not obtain adequate mortgage financing by a certain date. The purchase agreement also provided that in the event the buyer invoked the financing reservation, he would have to hand over two written rejection statements from recognized lending institutions.
The buyer apparently failed to obtain financing and sent an e-mail to the broker in time indicating his desire to rescind the purchase agreement. However, in doing so, the buyer only sent along one rejection statement. Thus, the buyer did not meet the conditions for a legally valid invocation of the financing reservation.
Since the buyer had not properly invoked the financing reservation, the purchase agreement was still in full force and effect. Legally, nothing stood in the way of delivery of the home. However, oddly enough, the seller did not enforce the purchase agreement. Nor did the seller claim the (in all likelihood) agreed-upon penalty of 10% of the purchase price in the event of culpable default. When the broker subsequently claimed payment of the brokerage fee, the seller took the position that he did not owe a brokerage fee, as the purchase agreement had been dissolved.
Supreme Court ruling
The parties litigated up to the Supreme Court over whether the seller owed the broker a brokerage fee despite the rescission. The Supreme Court ruled that the broker's right to commission does not lapse on the sole ground that the seller accepted the buyer's reliance on the financing reservation. After all, if the buyer made this appeal on insufficient grounds, the circumstance that the seller nevertheless accepted this appeal cannot affect the broker's right to the brokerage fee agreed for his services.
This opinion of the Supreme Court seems to me to be correct. The seller's acquiescence in the buyer's reliance on the financing reservation leads to a termination by mutual consent that is not provided for in the purchase agreement. This is a completely new legal act that may not affect the brokerage agreement and the brokerage fee agreed therein.
Addition to general terms and conditions
It should go without saying that it is best for the broker and his client to make some clearer arrangements in their brokerage agreement. This can prevent time-consuming and expensive discussions. Now that the General Consumer Conditions NVM 2015 do not (explicitly) provide for the situation in which the client proceeds to voluntarily terminate an already concluded agreement, the parties could agree the following in addition to these general conditions:
To clarify Article 14 paragraph 4 of the General Consumer Terms and Conditions NVM 2015, which has been declared applicable, the broker and the consumer agree that the right to brokerage commission is payable without prejudice if the consumer agrees to a termination that does not result from a clause belonging to the contract.
With the above addition to the brokerage agreement, the parties create clarity regarding the liability of brokerage fees in the event of an extra-contractual termination.
For your information
In a consideration for the sake of completeness, the Supreme Court states that - apart from the above - it follows from the broker's duty of care that the broker must acquiesce in a buyer's (whether or not unjustified) appeal to a resolutive condition, if his client acquiesces in that appeal. According to the Supreme Court, if the broker does not do this, there would be a conflict of interest and the broker would be acting in violation of his duty of care.
I cannot follow this reasoning of the Supreme Court. In my opinion, there is no conflict of interest in the situation mentioned. After all, both the broker and his principal have an interest in selling the property in question. I do not see what actual interests the principal can have in agreeing to a wrongful reliance on a resolutive condition. Both the seller and the broker can take the position in such a situation that the sale should go through. If the buyer cannot subsequently fulfill his obligations due to a lack of financing, the seller will be able to claim the penalty of 10% of the purchase price. From this, the seller will be able to pay the brokerage fee to the broker and give the broker a new commission for mediation. This is also fair, since the broker has already made efforts that have led to a legally valid, now unconditional purchase agreement.
Conclusion
Any ambiguity regarding the indebtedness of brokerage fees should be covered in the brokerage agreement. Our tip: include the suggested addition in the brokerage agreement. Logically, the broker must always put the interests of his client first. This contributes to the fact that both the broker and the client must be clear in advance about the payable broker fee.
The judgment discussed can be found here.
