Real Estate Brokerage Agreement: What do I need to know to be legally covered?

Δημοσίευση: March 11, 2024

Real Estate Brokerage Agreement: What do I need to know to be legally covered?

1.What is needed to become a real estate agent?

In order for someone to practice the profession of a real estate agent, the legal requirements are as follows:

They must be a Greek citizen or a citizen of a European Union member state, while if they originate from a third country (outside the EU), they must have a residence permit for the exercise of economic activity according to the relevant provisions.
They must not have criminal convictions for property-related crimes or document-related offenses.
They must hold a high school diploma (or equivalent qualification if it is from a foreign school).
They must not have been placed under judicial assistance.

(If it is a real estate agent from another country who wants to establish themselves in Greece), they also require a license from the Registry (the equivalent of GEMI in other words) of the country from which they originate.

2.And if I want to establish a real estate company?

In this case, two additional conditions are required:

Real estate services must be stated as the main purpose in the company’s articles of association.
ALL the qualifications mentioned in the previous question must be met by at least one of the individuals representing the company.

Depending on the type of company to be established (e.g., SA, Ltd, IKE, GP, etc.), the corresponding documents and registration with the competent GEMI service will be required. We will discuss this issue in a separate analysis.

3.Do I need any supporting documents?

In order for the interested party to obtain the professional license, they must prove what they claim by providing the following documents (see also the list of qualifications in question 1):

Identity card or passport, if they are a Greek citizen or a citizen of a European Union member state, and if they are a citizen of a third country, a residence and work permit for Greece is required.
They will also need to submit a sworn statement that they have not been convicted of property-related crimes or document-related offenses.
They must provide a certificate certifying that they have not been placed under judicial assistance.
Finally, a high school diploma (or equivalent qualification if obtained abroad) is required.
These documents must be submitted by the interested party to GEMI (it is understood that they have not been imposed a penalty depriving them of the exercise of the profession or termination).

4.The brokerage contract: How is it drafted?

Generally, the brokerage contract is informal (so it can be drafted orally without a document). However, specifically for real estate, the law stipulates that drafting a brokerage contract requires a written document (= private/notarial document) containing some elements:

The personal details of the contracting parties (e.g., tax identification numbers of both, registration number in GEMI for the real estate agent).
The type of contract to be concluded (purchase or rental of property?) as well as the brokerage fee, which is freely negotiable, while if there are predefined General Terms and Conditions of Service (GTCs), they will be checked for abusive clauses.
The duration of the contract, which will be discussed further below.

5.How long does it last?

First of all, it should be noted that the brokerage contract lasts for the duration determined by the contracting parties themselves (without limitations). However, if they do not specify anything regarding the duration, then by law, the contract is valid for 12 months (and therefore, if it expires, a new one must be concluded). By law, the principal can extend it for another 6 months with a declaration to the broker. Finally, it is worth noting that there is a right to terminate this contract, and if the contract has a duration of more than 12 months, then either party can terminate it without compensation after the first 12 months, with the termination taking effect 3 months after it is made (so here, the contract will last at least 15 months if we add up all the aforementioned time periods).

6.What happens when it comes to the fee of the broker;

The rule is that the broker is entitled to a fee for the services provided when the contract that the client sought is concluded (e.g., if the client buys the property themselves) and even if a different contract is concluded, but it is based on the same opportunity indicated by the broker (the client, instead of buying the property that the broker indicated, eventually rents it).

However, let’s also see when the broker is not entitled to claim their fee:

When the client has not authorized them to conclude a contract with the seller/landlord, and the broker does it anyway (i.e., they draw up a contract between the two parties without having the authority to do so).
When the contract is concluded without the assistance of the broker (e.g., the client goes directly and ‘discovers’ the property themselves).
When the broker engages in collusion and fraudulent actions with the other party to harm the client’s interests (e.g., demanding a commission from the seller to present a higher price than the actual value of the property to their client).

It is important to note that the broker is entitled to claim expenses incurred for the contract (e.g., travel expenses, operational costs) from their client only if they have agreed to such a provision and have included it as a term in the brokerage contract they ultimately signed.

7.What are my obligations as a broker?

The main obligations of the person acting as a broker are as follows:

To present an opportunity (a property) to their client so that the latter can decide.
To mediate between the two parties (if agreed) with the aim of concluding the contract.
To inform their client and the other party, before the conclusion of the contract, about the characteristics of the property as well as its defects (if any) in order to avoid misunderstandings during the conclusion of the contract.
If there is any interest from the other party or even personal interest of the broker, to disclose this fact to their client, in order to avoid collusion where only the client will incur costs in the end.
To protect the interests and privacy of their client by not disclosing sensitive personal data to third parties.

8.What if we don’t agree on a fee with the agent?

Here, the law itself provides a solution, stating that if the fee of the agent was not explicitly agreed upon, then there is an implied agreement for a fee if such agreements are customary or if the agent is a professional (meaning that he possesses the qualifications required by the profession).

If neither the amount of the fee was determined (which usually happens):

The agent is entitled to the fee resulting from the valuation (i.e., from an administrative authority such as the local municipality where there may be limits on the fees of agents).
The agent is entitled to the fee that is customary in the area (fees of agents in Santorini are different from those in Evros, for example).
If none of these solutions are helpful, the fee will be determined by the agent himself, and in case of disagreement, the court will decide whether it is reasonable or not, and adjust it to normal levels if necessary.

9.What happens if I violate my obligations as a real estate agent?

In this scenario where the agent breaches any of the obligations mentioned above, there are consequences for them. Firstly, the agent will not be entitled to their fee, as the breaches we mentioned also serve as grounds for the client’s exemption from paying the brokerage fee. Additionally, the agent may be liable to compensate the client for any damages suffered due to the trust placed in the expectation of a valid contract (which was nullified, for example, due to collusion of the agent with the other party). These expenses may include fees for engineers for drafting a study regarding the property under negotiation, lawyer fees for title checks, and generally anything that the client would not have spent if they had known from the beginning that a valid contract would not be concluded.

10.Variations of the brokerage contract

In practice, the so-called ‘exclusive brokerage contract’ is highly popular, in which the parties conclude a regular brokerage contract with the difference that the client cannot assign to another person to present opportunities or to mediate for the conclusion of a contract for the duration of this contract. According to the law:

This contract has a minimum duration of 8 months (if not specified), with the possibility of extension for another 4 months upon declaration by one party to the other.
Other individuals may be mentioned in the contract who will be entitled to present opportunities to the client, and the client may conclude the contract with them.
If the client ultimately concludes the contract with another person, other than the broker, in violation of the agreement, then the broker will be entitled to the agreed fee as well as reasonable compensation, which cannot exceed 1/3 of the fee itself.

Next to the client and his needs.

Athina Kondogianni

The above does not constitute legal advice and no responsibility is assumed for it. For more information, please contact us.