The Legal Framework for the Delegation of Real Estate Mandates Between Agencies
The delegation of a real estate mandate between agencies is an agreement that allows one real estate agency (the delegating agency) to entrust part of the management of a mandate to another agency (the delegated agency). This practice is common in the real estate sector, particularly for complex properties or those located in specific geographic areas, where collaboration between agencies can increase the chances of a successful sale or rental. But what are the legal aspects governing this delegation, and what best practices should be adopted to ensure this collaboration runs smoothly?
1. Delegation of Mandate: An Agreement Between Real Estate Professionals
Delegating a real estate mandate is based on a contractual relationship between two real estate professionals . This allows one real estate agency to entrust another agency with the responsibility of selling or renting a property. Delegation is often used to broaden the property's visibility in a wider market or to leverage the specific expertise of another agency (for example, an agency specializing in luxury properties or located in a particular geographic area).
2. The Legal Framework for the Delegation of Mandate
From a legal standpoint, the delegation of agency is a practice governed by the French Civil Code and the Hoguet Law, which regulates real estate transactions in France. However, there are specific rules governing inter-agency relationships. Unlike a relationship between an agency and an individual (such as a seller or buyer), agreements between agencies are not subject to the same formal requirements.
2.1 The Hoguet Law and Delegation between Professionals
The Hoguet Law regulates the activities of real estate professionals, but it does not directly apply to transactions between real estate agencies. This means that, unlike a mandate given to a private individual , the delegation of a mandate between two agencies can be done verbally , without any legal obligation to draw up a written contract.
3. Verbal Agreement: A Legal but Risky Option
The possibility of concluding a verbal agreement between agencies is explicitly recognized by the Court of Cassation . A ruling by the Court on January 9, 2019 (no. 17-27841) clarified that the Hoguet Law does not apply between real estate professionals , and that it is therefore possible to conclude a delegation of mandate without a written contract. This option offers a degree of flexibility in inter-agency relations. However, although the law permits it, this entails certain risks.
A verbal agreement can lead to misunderstandings, particularly regarding each agency's responsibilities , the allocation of fees , and the property management arrangements . In the event of a dispute, proving the exact terms of the agreement will be much more difficult, which can jeopardize the proper management of the mandate.
4. The Written Agreement: A Recommended Practice to Ensure Clarity
Even though the law allows for verbal delegation, it is strongly advised to formalize the agreement in writing. This approach clarifies each party's responsibilities , defines the compensation terms , and ensures greater transparency between the agencies. A written contract serves as proof in case of a dispute and protects the interests of both agencies involved.
4.1 The Content of a Delegation Agreement
The written delegation of authority agreement must include several key elements:
- Information about the agencies involved : name, address, SIRET number, etc.
- The responsibilities of each agency : who manages which tasks (e.g., viewings, negotiation, advertising the property, etc.).
- Fee allocation : how commissions will be shared between agencies, as a percentage or as a fixed amount.
- The duration of the delegation : the period during which the delegated agency will be able to intervene.
- Termination conditions : how to end the collaboration if necessary.
This contractual clarity is a guarantee of security for both parties, but also for the property owner who will know exactly who to contact and which agencies are involved in the management of their property.
5. The Obligations of the Delegating Agency and the Delegated Agency
5.1 The Delegating Agency
The delegating agency, as the owner of the primary mandate, retains certain responsibilities towards the property owner. For example:
- Informing the owner : The delegating agency must, in a transparent manner, inform the owner that the mandate is being delegated to another agency, although the law does not require formal notification.
- Supervising the proper execution of the mandate : The delegating agency remains responsible for the proper execution of the mandate, even if certain tasks are entrusted to the delegated agency.
- Check the quality of the delegated agency's work : The delegating agency must ensure that the delegated agency acts in the client's interest and respects the terms of the mandate.
5.2 The Delegated Agency
The delegated agency, for its part, must respect the instructions of the mandate and act in accordance with professional standards. It is responsible for managing the transaction within the scope of the tasks assigned to it, such as finding potential clients, managing viewings, or negotiating.
The delegated agency also has the obligation to transmit to the delegating agency all relevant information concerning the progress of the sale or rental, in order to ensure total transparency towards the owner.
6. Fee Sharing: Commission Allocation
The allocation of fees between the delegating agency and the delegated agency is one of the most important aspects of a delegated mandate. Generally, fees are shared as a percentage of the transaction amount or as a fixed sum agreed upon by the parties.
It is essential that this distribution be clearly defined in the delegation agreement. This helps avoid misunderstandings and disputes regarding remuneration. The commission is generally divided according to the work performed by each agency: if the delegated agency takes on certain tasks (for example, managing viewings), it will receive a proportional share of the fees.
The owner must also be informed of this allocation in the mandate contract, so that it is clear to him that he will pay the fees to the delegating agency, but that the latter will share the commission with the delegated agency.
7. Best Practices for Successful Collaboration
For a delegation of authority between agencies to be successful, several best practices must be followed:
- Transparency : Each party must be perfectly clear about their responsibilities and the fees to be shared.
- Regular communication : Effective collaboration relies on good communication between the agencies involved. It is essential to keep each other informed of developments in the transaction.
- Respect for commitments : A delegated agency must respect the mandate entrusted to it and act in the interest of the owner while respecting the terms of the contract.
Delegating real estate mandates between agencies is a common and legal practice, but it must be managed carefully. While a verbal agreement is possible, a written contract is strongly recommended to avoid conflicts and ensure transparency in the collaboration. By adhering to sound legal and professional practices, this collaboration can offer significant advantages, not only for agencies but also for property owners, by maximizing their chances of selling or renting their property.
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Read our articles in this series on Delegation of mandate between real estate agencies:
- Delegation of Mandate between Real Estate Agencies
Read the article - Understanding the Delegation of Real Estate Mandate Between Agencies
Read the article - Why Delegate a Mandate to Another Real Estate Agency?
Read the article - The Legal Framework for the Delegation of Real Estate Mandates
Read the article - The Advantages of Delegating Mandates for Agencies and Owners
Read the article - Should the Owner Be Informed About the Power of Attorney?
Read the article - How to Manage Fee Sharing in a Delegation of Mandate?
Read the article - How to Collaborate Effectively Between Agencies for a Successful Delegation of Mandate?
Read the article - Mistakes to Avoid When Delegating Mandates Between Agencies
Read the article - Key tips for a successful delegation of authority
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