Haifa court case sets precedent for broker commission payment
Posted on 16. Mar, 2010 by Buy-It In Israel Staff in Israel Real Estate, Legal Matters
©iStockphoto.com/Sean Locke
Those who are interested in purchasing or renting a home in Israel using the services of more than one real estate agent should be aware of the legal trap and fees they could fall into under what is termed the “efficient cause” leading to sales transactions of property in Israel.
A recent court ruling at the Haifa Magistrate’s Court set a precedent determining that an Israel real estate agent was eligible for brokerage commission under the condition that it can be shown that he or she was part of the efficient cause leading to the sale transaction of the property. In the specific case a real estate agent showed a property in Haifa to a couple interested in buying a new home. For various reasons, the couple decided to postpone the decision over the purchase of the apartment. A couple of months later, the couple bought the same apartment using a different broker whom they paid the commission he or she was entitled to.
The first agent discovered that the property was sold through another real estate broker and sued the couple for the amount of NIS 16,000, which is the sum of the commission on the sold apartment. Judge Maayan Zur at the Haifa Magistrate Court ruled that the couple will have to pay the original real estate agent a comission of NIS 8,700 or about 1 percent of the general fee charged by a broker on the price of a sold property in addition to the court fees of NIS 1,000.
Under the interpretation of the efficient cause concept, an agent in order to get a commission, must show that he or she is the efficient cause of a sale. In the case of Haifa lawsuit, the first real estate broker was the original source leading to the sale of the apartment. The original broker was a victim of intrusion, which is created when a second agent gets involved and potential buyers will not mention that they have seen the property with another broker.
In Israel, the law requires real estate brokers to obtain a signed document from their clients setting forth the amount of the agreed brokerage commission. For this reason Israel real estate agents always require, as an accepted procedure, all potential buyers to sign such a document at their first meeting or viewing even before a decision over the purchase of the property is made.
In the Haifa court case, the couple had signed such a document with the first real estate broker for the commitment of a 2 percent commission fee should the sale come through. The commission of a real estate agent in Israel is usually between 1.5-2 percent of the sale price of the property. Value Added Tax (VAT) of 16 percent of the commission will be added to the agent’s charge. The commission is due as long as the agent was part of the transaction and needs to be paid out on signing of a sales contract.
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