Estate Agency Commission: When Is It Lawful to Receive Payment Before the Notarial Deed?

Imagine: you are selling your house in Anglet. You sign a preliminary sale agreement with a buyer, the estate agent demands his commission. But a few days later, the buyer withdraws. Can the agent keep the commission? This question arises for hundreds of owners and agents each year. The answer lies in a judgment of the Court of Cassation dated 25 February 1969, which sets out the rules of the game.

The Law of 21 June 1945 prohibited an intermediary from receiving a commission before the sale had been effectively concluded. But what is a concluded sale? Is it the preliminary agreement (synallagmatic promise to sell) or the notarial deed before the notary? The Court of Cassation ruled: as soon as the agreement of the seller and the buyer is recorded in a written instrument, the commission is due. It does not matter that the notarial deed has not yet been signed.

This decision, handed down over 50 years ago, remains an absolute reference. It secures estate agents in their mission and also protects the parties, provided the preliminary agreement is clear. But caution: if the sale fails due to the agent's fault, he may lose his right to commission. Let us analyse this case.

The Facts: A Story Like Many Others

Mr X, owner of a property in Hendaye, entrusts the sale to an estate agent. A preliminary agreement is signed with a buyer. The agent receives his commission on the day the preliminary agreement is signed. But a few weeks later, the parties mutually agree to cancel the preliminary agreement. The agent refuses to return the commission. The seller sues him.

The criminal court convicts the agent for unlawfully receiving commission before the sale was concluded, on the grounds that the notarial deed had not been signed. The agent appeals. The Court of Appeal reverses the judgment: it considers that the preliminary agreement records the parties' agreement, so the sale is concluded. The case reaches the Court of Cassation.

The lower courts had held that the subsequent cancellation of the preliminary agreement retroactively extinguished the right to commission. But the Court of Cassation quashes the judgment: the agent had performed his mission by bringing the parties together and having them sign the preliminary agreement. The cancellation by mutual agreement does not affect the lawfulness of the receipt of commission at the time it occurred.

The Reasoning of the Court — Explained

The Court of Cassation relies on Article 3 of the Law of 21 June 1945, which provides: "Any intermediary who, directly or indirectly, receives a commission before the sale has been effectively concluded, as evidenced by a written instrument, shall be punished by the penalties provided for in Article 1." The question was: at what point is the sale "effectively concluded"?

The judges give a broad interpretation: the sale is concluded as soon as the parties have agreed on the thing and the price, and that agreement is recorded in writing. It does not matter that the transfer of ownership (which only occurs at the notarial deed) has not yet taken place. In other words, the preliminary sale agreement suffices.

This reasoning is logical: the agent has performed his mission of bringing the parties together. The signing of the preliminary agreement embodies the agreement. The subsequent cancellation, even by mutual agreement, does not change the lawfulness of the receipt at the time it occurred. The Court clarifies that the parties cannot, by deciding to cancel the preliminary agreement, retroactively cause the agent to commit an offence.

In short, this decision protects the agent against last-minute changes of heart. But it is not a carte blanche: if the agent has not fulfilled his obligations (for example, if he has not loyally informed the parties), he may be required to refund.

What This Means for You — In Practice

For the seller: if you sign a preliminary agreement, the agent may legitimately demand his commission, even if the sale does not go through. To avoid unpleasant surprises, include in the preliminary agreement that the commission is only due upon completion by notarial deed. This is a common clause. Example: a property sold for €300,000 in Anglet, commission of 5% = €15,000. If the buyer withdraws, you could owe this sum to the agent if the preliminary agreement does not provide for a suspensive condition.

For the estate agent: you may receive your commission as soon as the preliminary agreement is signed, but be cautious. If the sale fails due to your fault (for example, failure to disclose a latent defect), you must refund the commission. undefined, I have seen cases where agents had to refund because the preliminary agreement contained suspensive conditions that were not fulfilled.

For the buyer: if you sign a preliminary agreement and then withdraw, you may be liable for the estate agency commission if the contract so provides. Read the clauses carefully before signing. An example in Hendaye: a buyer withdrew after finding cheaper financing elsewhere, and the agent kept the €8,000 commission.

Four Tips to Avoid This Type of Dispute

• Have a clear preliminary agreement drawn up: specify the time of payment of the commission (on signing the preliminary agreement or at the notarial deed). Include suspensive conditions (obtaining a loan, etc.) to protect each party.
• Negotiate withdrawal conditions: if you are a seller, provide that the commission remains earned even if the buyer withdraws. If you are a buyer, have it stated that the commission is only due upon completion of the sale.
• Keep all written documents: preliminary agreement, mandates, addenda. In the event of a dispute, written evidence is essential. The Court of Cassation requires a written instrument recording the agreement.
• Consult a lawyer before signing: a professional can help you understand the clauses and negotiate. A 30-minute consultation can save you thousands of euros in losses.

Further Reading: Related Case Law and Developments

The 1969 decision has been confirmed on several occasions. For example, in a judgment of 10 February 1999 (No. 96-22.015), the Court of Cassation held that the commission is due upon signing the preliminary agreement, even if the sale is not completed. More recently, in a judgment of 13 September 2023 (No. 22-10.864), the Court recalled that the agent must have performed his mission of finding the buyer to be entitled to the commission.

The trend is therefore consistent: the courts protect the agent's right to commission when he has fulfilled his role. However, the courts are increasingly attentive to pre-contractual information. An agent who omits to mention a major defect in the property may lose his commission.

For the future, with the digitalisation of transactions, the question arises whether an exchange of emails or a click on a website can constitute a "written instrument". Case law tends to accept this, provided the agreement is clear and unambiguous.

In Practice: What to Do

FAQ:

1. Can I refuse to pay the commission if the sale falls through after the preliminary agreement? It depends on the clauses of the preliminary agreement. If you signed a clause providing for payment upon the preliminary agreement, you must pay. Otherwise, you can contest.
2. Can the agent demand his commission if I withdraw within the 10-day cooling-off period? No, because the cooling-off period applies to the preliminary agreement itself. If you withdraw within this period, the preliminary agreement is cancelled and no commission is due.
3. What if the agent receives the commission before the preliminary agreement? This is illegal. You can file a complaint for unlawful receipt. The agent risks a fine and an obligation to refund.
4. Is the preliminary sale agreement a sufficient written instrument? Yes, according to the Court of Cassation. It must be signed by both parties and contain the essential elements (thing, price).

Are you in a similar situation? A first 30-minute consultation with Maître Zakine (€45) can save you months of proceedings — and often much more. Book an appointment →