Antonio Flores’ Blog

Real Estate Agents (REA) in Spain have long thought that if they register a client with a property owner or developer (irrespective of whether they show them the property), they have an automatic right to receive a commission when the property sells; although it may come as a shock to many, this is not the case, according to specific case law on the matter. The following rulings explain this:

Appeal Court in Oviedo (22/2/1996):

Only the broker that has effectively concluded the contract between buyer and seller is entitled to retribution, rejecting “equitable remedies” to the broker who, having intervened in some capacity in the contract has nonetheless failed to close an agreement. 

Appeal Court in Oviedo (27/2/1998):

The elucidation of who is entitled to the commission where several REAs intervene is not an easy one for, although several REAs may have ostensibly taken part in the negotiations, it is only the REA whose actions were decisive to perform the instruction who will be entitled to a commission payment.

In a transaction where the principal has hired several REAs, it is not always easy to establish which are those specific actions, as carried out by each REA independently, which produce the desired result of successfully closing the deal. The Court is of the opinion that where this situation occurs, it is a question of fact whether a specific REA action was decisive in securing the closing of the deal, in other words, the causation of the exchange of contracts between buyer and seller even if, in practice, coexisting actions or other particular factors of other REAs could have helped achieve the result.

Supreme Court (23/2/1965):

Where several independent brokers concur with each other in a transaction, remuneration will have to be paid to the one whose action(s) was a cause, even if not exclusive, of the success of the intermediation, i.e. the exchange of contracts. Not upholding this view risks transmuting the very nature of a brokerage into a type of services contract where remuneration would be paid irrespective of the result of the conclusion of a sale, thus depriving brokerage agreements from the risk-of-failure element that is inherent to any aleatory contract.

This conclusion is even shared by international case law (Webranchek v LK Jacobs & co Ltd.):

Where a property is listed with several agents and they compete in trying to conclude a sale by the principal to a particular third party, it is not necessarily the agent who first introduces the purchaser who is entitled to remuneration but the agent who is the effective cause of the transaction being completed.

The most immediate consequence of the application of this case law is that the commonly known action of “registering a client”, on its own, does not entitle the agency to receive a commission. On the contrary, a REA needs to prove that its endeavours have materialized, specifically, in the exchange of a purchase sale agreement (of whichever description).

Antonio Flores Legal Practise buying property in Spain, Property Spain, real estate agency commission, real estate agent costa del sol, real estate agents spain

Last week I was approached by a professional real estate agent with a requirement for legal representation for property purchasers, on newly built “residential” for commercial (rental) purposes property, in the Marbella region. Among the queries he had the choice of investment vehicle, that is, personal vs. corporate, was of the utmost importance for his clients, and so I decided to put some ideas on paper in respect of the pros and cons of one or the other, as I saw them. The article is titled Buying Property in Spain: In my Own Name or Using a Company?

It is worth noting that I have not included offshore companies in this article, for they are less in demand, and also I have never been too keen on them anyway.

Antonio Flores Repost buying property in Spain, offshore companies