How to Manage the Sharing of Fees in the Delegation of Mandate?
In the real estate sector, delegated mandates are a common practice that allows real estate agencies to share the management of a property. This is done by transferring part of the responsibility to another agency (the delegated agency), while maintaining the primary management of the mandate within the delegating agency. However, a frequently complex aspect of this inter-agency relationship concerns the management of fees and commissions . How should agencies allocate fees within the framework of a delegated mandate? What are the common practices and criteria used to determine commission allocation? This article aims to clarify these questions to facilitate fee management within this collaborative context.
1. What is Real Estate Mandate Delegation?
Before discussing fee sharing, it's essential to understand what real estate agency mandate delegation . This practice allows a real estate agency (the delegating agency) to delegate some of its responsibilities to another agency (the delegated agency), while remaining solely responsible for the mandate vis-à-vis the property owner. In practical terms, this can involve tasks such as managing viewings, negotiating with buyers, and handling contracts.
2. The Legal Framework for Fees in Real Estate
In France, agency fees are regulated by the Hoguet Law (Law No. 70-9 of January 2, 1970) and its implementing decree. Fees charged by agencies must be justified by actual services rendered and must be specified in a contract signed between the agency and the client. There is no fixed rate for agency fees, which are freely determined, but they must be stated in a mandate agreement or a rental agreement signed with the client (the landlord or the tenant).
In the context of a delegated mandate, fees are shared between the delegating agency and the delegated agency, but the terms of this sharing are not defined by law. This allows agencies some flexibility to negotiate and define the conditions of this sharing.
3. Common Practices Regarding Fee Sharing
The distribution of commissions between agencies during the delegation of mandates can vary depending on the agreements established between the parties. Here are the common practices observed in this area.
3.1 The 50/50 Sharing
One of the most common practices is to split the fees 50/50 between the delegating agency and the delegated agency. This split is considered equitable, as it assumes that both agencies contributed equally to the success of the transaction. The delegating agency retains overall responsibility for the mandate and handles the contract signing with the client, while the delegated agency is in charge of viewings, negotiations, or other specific tasks.
This type of fee-sharing arrangement is often used for transactions where both agencies are equally involved. It can also be a widely adopted practice in real estate agency networks or franchises , where collaboration between agencies is common.
3.2 Sharing Based on Each Agency's Involvement
In some cases, the fee sharing may be proportional to each agency's involvement . For example, if the delegating agency carried out the bulk of the work (e.g., posting the listing online, managing initial contact with the client), it may receive a larger share of the fees. Conversely, if the delegated agency handled a significant portion of the viewings or negotiations, it could receive a larger share.
In this case, the agencies must agree from the outset on the criteria for distributing commissions, based on each agency's involvement in managing the property.
3.3 Sharing with Performance Bonus
Some agencies choose to offer a performance bonus as part of a delegated mandate agreement. This means that if the delegated agency manages to sell or rent the property faster or at a higher price than anticipated, it could receive an additional bonus on its commissions. This type of revenue sharing is particularly advantageous for the delegated agency, as it allows it to maximize its income based on results.
The bonus can be negotiated in advance or be based on specific performance criteria, such as the number of visits made or the speed of closing the sale.
3.4 Sharing Based on Mandate Type
The terms for sharing fees can also vary depending on the type of real estate mandate. For example, in the case of an exclusive mandate , the delegating agency might be more inclined to retain a larger share of the commissions, as it has complete control over the property and the entire transaction. Conversely, in the case of a non-exclusive mandate , where several agencies are likely to work on the sale of the property, the fee sharing could be more equal between the delegating agency and the delegated agency.
4. Commission Allocation Criteria
The criteria used to determine commission allocation can vary depending on several factors. Here are the main elements to consider in this allocation.
4.1 Nature of Services Provided
The distribution of commissions depends largely on the services provided by each agency. For example, if the delegating agency primarily worked on promoting the property, handling photography, writing advertisements, and posting on platforms, while the delegated agency focused on viewings and negotiating with potential buyers, the commission could be divided proportionally to the extent of the services provided by each agency.
4.2 The Role of Each Agency in the Transaction
The role played by each agency in the final transaction is also a key criterion. If the delegated agency found the client or negotiated a higher price for the property, it could claim a larger share of the fees. Conversely, if the delegating agency initiated the connection, it could retain a larger share.
4.3 Workload
The volume of work performed by each agency is also an important criterion for commission allocation. For example, if the delegated agency has managed a large number of visits and devoted considerable time to client support, this justifies a larger share of the commission for that agency. Conversely, if the work carried out by the delegating agency is more substantial, it will be able to receive a higher share.
4.4 Preliminary Agreements Between Agencies
Finally, written agreements between agencies are a key element in managing fee sharing. Before signing a mandate agreement, the agencies must agree on the terms of fee allocation. This agreement must be clear, transparent, and specific to avoid any ambiguity or conflict in case of disagreement.
5. Tax Implications of Fee Sharing
The sharing of fees between agencies also has tax implications. Each agency must declare its share of the commissions in its tax returns , in accordance with current legislation. It is therefore essential to clearly define and document the commissions received for each completed transaction.
Agencies must also ensure they comply with tax rules regarding VAT on commissions, particularly if they are subject to this tax. The commission allocation must be documented and clearly stated in agency agreements, as poor tax management could lead to penalties or tax adjustments.
Sharing fees within a delegated real estate mandate requires sound organization and transparent practices. Whether it's an equal split, a proportionate share based on each agency's responsibilities, or a performance bonus, the commission allocation must be clearly negotiated and documented in a written contract. Communication between the agencies , as well as with the property owner, must be fluid and transparent to ensure all parties agree on the fee-sharing terms.
The allocation criteria, such as each agency's role, the volume of work performed, and the services rendered, must be taken into account to determine each party's commission fairly and equitably. Finally, it is essential that agencies comply with tax regulations and legal obligations regarding fee management to avoid any administrative or tax issues.
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Read our articles in this file 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 of the Real Estate Mandate Delegation
Read the article - The Advantages of Mandate Delegation for Agencies and Owners
Read the article - Should the Owner of the Mandate Delegation be Informed?
Read the article - How to Manage the Sharing of Fees in the Delegation of Mandate?
Read the article - How to Collaborate Well Between Agencies for a Successful Mandate Delegation?
Read the article - Mistakes to Avoid When Delegating Mandates Between Agencies
Read the article - Key tips for successful delegation of mandate
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These links will allow you to provide a complete and fluid reading on the subject of delegation of mandate between real estate agencies, covering all the essential aspects.
