Real Estate Brokerage Agreement and the Legal Liability of the Real Estate Agent
LAW OF OBLIGATIONS
Att. Berke KOCAAĞAOĞLU
3/13/20268 min read
Who is a Real Estate Agent, and What Are Their Rights and Authorities?
Real estate agents are professionals who act as intermediaries to facilitate the sale or lease of real estate in accordance with the desires and demands of individuals.
Since the sale, valuation, marketing, leasing, and showing of a property constitute a comprehensive process, the necessity often arises in daily life to work with a professional who is well-versed in the real estate market and sales/leasing procedures. This emerging need is met as a professional service provided by real estate agents.
The procedures and principles regarding the activities of real estate agents are regulated by the Regulation on Real Estate Trade, the Turkish Code of Obligations (TCO) No. 6098, and the Turkish Commercial Code (TCC) No. 6102. The activity carried out by a real estate agent is a brokerage (simsarlık / tellaliye) activity within the scope of the Turkish Code of Obligations.
Requirements for Real Estate Agents to Operate and Determination of Their Fees
As mentioned, real estate agents become entitled to a commission fee—the upper limit of which is determined by the Regulation on Real Estate Trade—by providing the necessary services to individuals during the process of selling, valuing, marketing, leasing, and physically showing a property to potential buyers. According to this regulation, the commission fee to be received by the broker cannot exceed 4% of the sales price specified in the contract. In practice, the buyer and the seller share the payment of this fee equally (2% each).
The primary condition for a real estate agent to carry out brokerage activities is an Authorization Certificate. This certificate is issued by the relevant administration and recorded in the central registration system. Similarly, a Professional Competence Certificate (MYK) is mandatory for individuals who will practice the profession. According to Article 10 of the relevant regulation, responsible real estate agents must possess a Level 5 certificate, while standard real estate agents must hold a Level 4 professional competence certificate.
When Does a Real Estate Agent Become Entitled to a Fee?
When a real estate agent becomes entitled to a fee is determined by explicit legal provisions and supreme court jurisprudence. Accordingly, the real estate agent will be entitled to a fee if a contract is established as a result of their brokerage activity. Although this provision is sometimes interpreted as requiring the completion of the sale, the supreme courts have ruled that the signing of a contract between the parties is sufficient.
Indeed, in practice, brokerage activities do not always conclude positively, and sometimes all the effort and endeavor put forth by the broker may be wasted if the buyer and seller withdraw their intent for invalid reasons. The legal system does not protect such actions.
However, under all circumstances, the fundamental condition for the broker to be entitled to a fee in return for their effort and endeavor is the existence of an executed contract. Otherwise, the broker will not be entitled to a fee under any circumstances.
What is a Brokerage Contract?
A brokerage contract is an agreement that documents the mutual intent of the buyer and seller (or lessor and lessee) established through the broker and regulates the fee the broker is entitled to. The brokerage contract is governed by Article 520 of the Turkish Code of Obligations No. 6098. Accordingly, a brokerage contract is one in which the broker undertakes the preparation of an opportunity for the establishment of a contract between the parties or acts as an intermediary for its establishment, and becomes entitled to a fee upon the establishment of this contract.
It is clearly seen here that the broker becomes entitled to the fee upon the establishment of the contract, not its performance (i.e., the actual transfer/sale). Likewise, Article 521 of the aforementioned law states: "The broker is entitled to a fee only if the contract is established as a result of their activity." As a matter of fact, this issue is also accepted by the supreme courts, and some precedent-setting decisions are provided below:
Istanbul Regional Court of Justice, 12th Civil Chamber, Merit No. 2020/1284, Decision No. 2020/1142: "In Article 520/1 of the TCO, a brokerage contract is defined as a contract in which the broker undertakes to prepare the opportunity for the establishment of a contract between the parties or to act as an intermediary for its establishment, and becomes entitled to a fee if this contract is established. The broker will receive a fee in return for the activity they perform for the employer. In accordance with Article 521 of the TCO, 'the broker is entitled to a fee only if the contract is established as a result of their activity.' For the plaintiff broker to be entitled to the fee, the main contract does not need to be performed; the establishment of the main contract is sufficient."
Antalya Regional Court of Justice, 11th Civil Chamber, Merit No. 2021/401, Decision No. 2023/150: "By the court... the plaintiff party has become entitled to the fee with the signing of the contract between the parties, and it is irrelevant whether the immovable property subject to the contract has been transferred by the buyer. Because there is no provision regarding the non-payment of the broker's fee in Article 5 and subsequent articles of the contract in question, which regulate the cases of the buyer's withdrawal."
The relevant article of the law also stipulates that the brokerage contract must be in an ordinary written form. Accordingly, a contract signed between the parties will be binding on them even if it is not approved by an official authority.
In cases where the fee is not determined in the brokerage contract, the contract will not be invalid; pursuant to Article 522 of the Turkish Code of Obligations, the fee will be paid according to the tariff, or if there is no tariff, according to custom. Since the tariff in real estate brokerage is stipulated by the Regulation on Real Estate Trade, the broker may be entitled to the fee specified herein.
Another point worth mentioning regarding the validity condition of the contract is that, in practice, parties often conclude a brokerage contract by executing a preliminary real estate sales contract (promise to sell) among themselves. However, preliminary real estate sales contracts are subject to a formal written form requirement (executed before a Notary Public) as a rule. Therefore, preliminary real estate sales contracts that the parties do not execute before a notary or an external official authority will be null and void, and the return of the deposit amounts paid based on these contracts can be requested as they constitute unjust enrichment.
However, it should be noted that if the preliminary real estate sales contract contains provisions regarding the brokerage contract, the contract will be considered partially, not completely, invalid, and the sections pertaining to the brokerage contract will remain valid. Furthermore, contracts that are invalid in terms of the provisions regarding the promise to sell real estate will also fulfill the condition of proof that the broker has carried out their duties and provided the necessary service for the establishment of the contract.
What is the Legal Liability of the Broker (Real Estate Agent)?
We have stated that the work undertaken by the real estate agent is a brokerage relationship within the scope of the Turkish Code of Obligations.
Article 520 of the TCO No. 6098 also explicitly states that the provisions applicable to mandate agreements (proxy) shall apply to the brokerage contract. Accordingly, the broker is under the responsibility of loyalty, care, and prudence like a proxy in the business and transactions they carry out. The proxy is obliged to carry out the work personally and in accordance with the interests of the person they represent.
As accepted by the practice of the Court of Cassation, the responsibility expected from the proxy by the law is equivalent to that of a prudent proxy engaged in similar activities. Likewise, the abuse of the mandate duty constitutes a crime under the Turkish Penal Code, and the proxy will be personally liable for all material and moral damages arising from this situation.
In conclusion, it would be accurate to say that the broker must prudently protect the rights and interests of the parties they represent in the business and transactions they carry out, act faithfully and in accordance with their will, and avoid actions that would cause damage.
Can a Broker Claim a Fee Based on a Property Showing Form?
First of all, it should be noted that it is prohibited in other legislation, particularly the Regulation on Real Estate Trade, for a real estate agent to demand a fee solely in exchange for showing a property.
However, as accepted by supreme court jurisprudence, if the documents referred to as immovable showing certificates or property showing forms in practice are issued and signed between the parties under the conditions specified in Article 19 of the Regulation on Real Estate Trade, they will have the status of a brokerage contract, and the real estate agent will be entitled to a fee due to the activities they have carried out. A Court of Cassation decision regarding this is as follows:
"The lawsuit relates to a claim for receivables arising from the brokerage contract defined in Article 520 of the Turkish Code of Obligations No. 6098. Although the court decided to dismiss the lawsuit on the grounds that the plaintiff did not have the authority to act as a real estate agent on the date they mediated the sales transaction and therefore could not be entitled to a fee; it is obvious that the plaintiff provided service with the property showing form dated 19/10/2011, the signature of which was not denied by the defendant party. The service fee must be paid in accordance with the contract. As such, while the court should have evaluated the Contract and established a judgment according to its result, giving a decision in writing is against the procedure and the law and requires reversal." (Court of Cassation, 13th Civil Chamber, Merit No: 2015/24945, Decision No: 2017/12617, Decision Date: 18.12.2017)
Are Penalty Clauses in Contracts Valid?
The penalty clause or penal condition is stipulated in Article 179 of the Turkish Code of Obligations. The basis of the penal condition relies on the responsibility of "Culpa in Contrahendo", which was envisaged by Roman law and is also accepted in modern legal systems. The purpose of stipulating a penal condition in contracts can be to compensate for the damages that will occur due to the party refraining from performing their contractual obligation, or it can be to create a means of pressure to prevent them from avoiding the performance of their contractual obligation. Accordingly, the parties may include a penalty clause in the contracts they execute within the scope of freedom of contract.
However, it is important to note that, unlike the compensation institution, the penal condition is not a phenomenon dependent on damage. In other words, the parties have the right to claim the penalty clause even if they have not suffered any damage.
Article 182/3 of the Turkish Code of Obligations grants the judge the authority to reduce this amount in cases where the penalty clause is exorbitant. In practice, a reduction rate determined at the discretion of the judge can often be applied to the penalty clause amount, depending on whether the parties are prudent merchants or consumers.
In brokerage contracts, a penalty clause is often determined to the effect that the party withdrawing from the contract will pay the commission fee belonging to the other party. According to the decisions of the Court of Cassation, this penalty clause determined in brokerage contracts is in the nature of a penalty clause added to performance and is valid (Court of Cassation 13th Civil Chamber, Merit 2004/15671, Decision 2004/16821). However, the judge will be able to apply a discount over this amount in cases they find exorbitant.
Competent Court and Jurisdiction in Real Estate Brokerage Disputes
The courts in charge of disputes arising from real estate brokerage are Consumer Courts if one of the parties is a consumer, and Commercial Courts of First Instance if the work done is commercial and the parties are merchants. Unless there is a valid contract to the contrary in these cases, the general jurisdiction rule stipulated by the Code of Civil Procedure (HMK) No. 6100 applies.
In this article, detailed explanations regarding the rights and authorities of the parties in case of working with a real estate agent in real estate sales processes are provided. Since unconsciously executed transactions and signed contracts can create a heavy compensation obligation against the parties, we strongly recommend obtaining legal support from an attorney during these processes.
Att. Berke KOCAAĞAOĞLU
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