How to Manage the Sharing of Fees in the Delegation of Mandate?
In the real estate sector, delegation of mandate is a common practice which 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, an often complex aspect of this inter-agency relationship concerns the management of fees and commissions . How should agencies distribute fee costs within the framework of the delegation of mandate? What are the common practices and criteria used to determine the distribution of commissions? This article aims to clarify these questions in order to facilitate the management of fees within the framework of this collaboration.
1. What is the Real Estate Mandate Delegation?
Before discussing the sharing of fees, it is essential to understand what the delegation of real estate mandate . This practice allows a real estate agency (the delegating agency) to entrust part of its responsibilities to another agency (the delegated agency), while remaining solely responsible for the mandate vis-à-vis the owner. Concretely, this may concern tasks such as managing visits, negotiating with buyers or even managing contracts.
2. The Legal Framework for Real Estate Fees
In France, agency fees are regulated by the Hoguet law (law no. 70-9 of January 2, 1970) and its implementing decree. The fees collected by agencies must be justified by actual services and must appear in a contract signed between the agency and the client. There is no fixed rate for agency fees, which are free, but they must be mentioned in a mandate contract or a rental contract signed with the client (the owner or tenant).
As part of the delegation of mandate, the fees are shared between the delegating agency and the delegated agency, but the terms of this sharing are not fixed by law. This leaves a certain freedom to agencies to negotiate and define the conditions of this sharing.
3. Common Fee Sharing Practices
The distribution of commissions between the agencies during the delegation of mandate may vary depending on the agreements established between the parties. Here are the common practices observed in this area.
3.1 The 50/50 Split
One of the most common practices is to share fees 50/50 between the delegating agency and the delegated agency. This sharing is considered fair because it assumes that both agencies contributed equally to the success of the transaction. The delegating agency retains overall responsibility for the mandate and takes care of signing the contract with the client, while the delegated agency is in charge of visits, negotiations or other specific tasks.
This type of sharing is often used for transactions where both agencies are equally involved. It may also be a practice widely adopted in real estate agency networks or real estate franchises , where collaboration between agencies is common.
3.2 Sharing Depending on the Involvement of Each Agency
In some cases, the sharing of fees may be proportional to the involvement of each agency . For example, if the delegating agency has carried out most of the work (for example, putting the ad online, managing the first contacts with the client), it may receive a larger share of the fees. On the other hand, if the delegated agency has taken charge of a large part of the visits or negotiations, it could receive a larger share.
In this case, the agencies must agree from the start on the criteria for distributing commissions, based on the involvement of each in the management of the property.
3.3 Sharing with Performance Bonus
Some agencies choose to offer a performance bonus as part of the delegation of mandate. This means that if the delegated agency manages to sell or rent the property faster or at a higher price than expected, they could receive an additional bonus on commissions. This type of sharing is particularly advantageous for the delegated agency, as it allows it to maximize its revenues 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 Depending on the Type of Mandate
The fee sharing conditions may 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 keep a larger share of the commissions, because it has complete control over the property and the entire transaction. On the other hand, in the case of a simple mandate , where several agencies are likely to work on the sale of the property, the sharing of fees could be more equal between the delegating agency and the delegated agency.
4. Commission Distribution Criteria
The criteria used to determine the distribution of commissions may vary depending on several factors. Here are the main elements to take into account in this distribution.
4.1 The Nature of the Services Provided
The distribution of commissions largely depends on the services provided by each agency. For example, if the delegating agency mainly worked on promoting the property, taking care of taking photos, writing ads and disseminating it on the platforms, and the delegated agency is focused on visits and negotiations with potential buyers, the commission could be distributed proportionally to the importance 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 was at the origin of the connection, it could retain a greater share.
4.3 The Volume of Work
The volume of work carried out by each agency is also an important distribution criterion. For example, if the delegated agency managed a large number of visits and devoted considerable time to supporting the client, this justifies a larger share of the commission for this agency. Conversely, if the work carried out by the delegating agency is more significant, it may receive a higher share.
4.4 Prior Agreements Between Agencies
Finally, written agreements between agencies are a key element in the management of fee sharing. Before signing a mandate contract, the agencies must agree on the terms of distribution of fees. This agreement must be clear, transparent and specific to avoid any ambiguity or conflict in the event of disagreement.
5. The Tax Implications of Fee Sharing
Sharing fees between agencies also has tax implications. Each agency must declare its share of commissions in its tax returns , in accordance with current legislation. It is therefore essential to clearly define and document the commissions received for each transaction carried out.
Agencies must also ensure that they comply with tax rules regarding VAT on commissions, particularly if they are subject to this tax. The distribution of commissions must be documented and clearly indicated in mandate contracts, as poor tax management could result in penalties or tax adjustments.
Sharing fees as part of a delegation of real estate mandate requires good organization and transparent practices. Whether in the form of an equal sharing, proportional to the responsibilities of each agency, or with a performance bonus, the distribution of commissions must be clearly negotiated and documented in a written contract. Communication between agencies , as with the owner, must be fluid and transparent to ensure that stakeholders are in agreement on the terms of fee sharing.
Distribution criteria, such as the role of each agency, the volume of work provided, and the services rendered, must be taken into account to fairly and equitably determine each party's commission. Finally, it is essential that agencies comply with tax rules and legal obligations regarding the management of fees in order to avoid any administrative or tax problems.
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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.
