From the numerous letters that we have received (28) and are keep coming, it appears that, especially foreign people, have problems with the commissions involved in a sale and there is a complete confusion as to what the sellers/ estate agents rights and responsibilities are.
For this reason we will attempt in this article, within the time and space allowed in this paper, to set out a brief guideline for the parties involved. This information is drawn both for the Cypriot estate agents law as well as local and U.K. case law.
- An estate agent must be so registered with the Registrar of the Estate Agents in Cyprus, he must have a professional indemnity insurance of at least £100.000 and he must have a registered office.
- An estate agent must be a person and not a company.
- The agent must carry out an investigation regarding the state of the physical building, he must inform the buyer/seller of the various legal and physical characteristics of the property (e.g. zoning, limitations, repairs, mortgages and impediments, ownership and title availability etc etc).
- Expenses – If there is no agreement as to who pays the expenses for promoting the property, then the seller is liable to pay such costs, but which must relate to the efforts and time. The expenses are payable even if no deal is concluded, but any “reasonable” expenses may be claimed. The agent must, however, inform the client, of his intentions and actions and the estimated expenses.
- Cancellation – Even if there is a cancellation of the contract at the buyer’s fault, the seller must pay the analogous commission, provided he has received a reasonable amount of money e.g. 25%-35% of the total price. If the breach is caused by the seller, then the whole commission is payable.
- Instructions – Independently from whom the agent received instructions for, it is always the seller who pays the commission (unless there is an otherwise agreement).
- Exclusivity – Care is needed if an agent is instructed as an exclusive agent since whoever sells the property within the time described in the exclusivity agreement, the seller may be called upon to pay the agent, (even in case the owner himself sells the property or if another agent is involved).
- Duty of Care – Not clear to whom the agent owns a primary duty of care i.e. to the seller (from who he gets a commission) or the buyer, who trusts the agent to find him the right property.
- Clear Instructions – It is a must and it should include:
- The period of sale
- The commission rate
- When the commission is paid
- What will happen if another agent is involved
- The sales price and the terms of payments required
- Lower sales price – If an agent concludes a deal at a lower price than instructed originally, but for which approval has been obtained (or a deal is concluded), the commission is payable.
- An agent can act on behalf of both the buyer and agent.
- An agent is liable if he has not carried out his duties, provided it has the ability to execute them (e.g. if he cannot ascertain any mortgages because the Lands Office refuses to let him have the information). The duty of care is increased if the agent has an exclusive right to sell.
- If an agent is also the buyer, he is not allowed to get a commission.
- Even if an estate agent is not directly involved in a sale, but he has given all the details of the property to a potential buyer who concludes the deal directly, then the commission is payable.
- If an agent acts contrary to instructions, but in any case a deal is concluded, he may not be entitled for a commission.
- If an agent acts in an doubtful or improper manner, he may not be entitled for a commission.
- There is a great confusion whether an agent is entitled for the payment of his commission or his expenses, in case the seller changes his mind or acts in such way so as not to allow the deal to go through. There are contradictory court cases both in the British & Cypriot common law.
- The only fact that the agent must prove in order to be entitled for a commission is that, it is out of his own acts that the sale was concluded.
We hope that this helps, to an extent, all the people who are involved in a property transaction, since we do appreciate that the circumstances are not cleared. Most of the law cases quoted above refer to U.K. cases, for which there is no law regulating the agents’ activities. In Cyprus with the agents’ act, the situation is more clear, be it still confusing.
Copyright © 2006 Antonis Loizou & Associates Ltd. All rights reserved