Although Israeli law generally requires a signed brokerage agreement in order to collect brokerage fees, the Supreme Court confirmed that, in certain circumstances, liability can still apply even to someone who did not sign the agreement. In this case, an attorney who ultimately purchased a property through a company he owned was required to pay brokerage fees after the Court determined that he had acted as a partner at the initial stage of the transaction and had benefited from the brokers’ work. The ruling highlights that doctrines such as partnership, agency, and unjust enrichment may justify brokerage liability even without a signed brokerage services agreement.
At first glance, the answer to this question seems straightforward. Israeli law generally requires a written brokerage services agreement as a condition for collecting brokerage fees. However, a recent case that reached the Supreme Court demonstrates that under certain legal circumstances, even a party who did not sign such an agreement may still be required to pay.
Broker Yaakobi, together with another broker, Gil, presented the property known as Cinema David in Herzliya to the client, Kopler. Kopler was assisted throughout the process by attorney Kastenbaum, who conducted communications with the brokers on his behalf. Kopler signed a brokerage services agreement, and negotiations continued between attorney Kastenbaum and the seller’s counsel. In February 2017, an agreement was ultimately signed under which a company owned by attorney Kastenbaum purchased the property. When broker Yaakobi learned that the transaction had been completed, he demanded payment of brokerage fees from Kopler. Kopler refused, arguing that he himself had not purchased the property and that he had not even been aware that attorney Kastenbaum had ultimately acquired it.
Broker Yaakobi filed a claim in the Tel Aviv Magistrate’s Court against Kopler, Kastenbaum, and the company owned by him. The court ruled that Kopler was not liable for brokerage fees because he had not purchased the property, whether directly or through an agent. However, the court determined that Kastenbaum had exceeded his authority as Kopler’s representative and could therefore be charged brokerage fees under the law of agency, despite not having signed the brokerage services agreement. The court further noted that the same result could also be justified under the doctrine of unjust enrichment, since attorney Kastenbaum had received a benefit without paying for it.
The District Court reached an additional conclusion. It held that Kastenbaum could be charged brokerage fees based on his status as Kopler’s partner at the time the brokerage agreement was formed, even though he was not formally acting as a partner at the time the property was ultimately purchased. Kastenbaum’s appeal to the District Court was dismissed. He then filed an application for leave to appeal to the Supreme Court, which decided to hear the application but ultimately rejected the appeal.
What did the Supreme Court rule?
The Supreme Court clarified that the central legal question was whether liability for brokerage fees under a written brokerage agreement could extend to a person who was not formally a party to that agreement.
Relying on the Partnerships Ordinance (New Version), which provides that actions taken by one partner bind the other partners, the Supreme Court upheld the District Court’s determination that Kopler and Kastenbaum had acted as partners at the initial stage of their intention to purchase the property. Because Kopler signed the brokerage services agreement as an agent of that partnership, the agreement also bound Kastenbaum once the property was later acquired by a company under his ownership.
The Court added that even if a partnership relationship had not existed, and the relationship between the parties had been limited to that of attorney and client, the outcome could still have been the same. Where an agent exceeds the scope of his authority, the third party—in this case, broker Yaakobi—may treat the agent as personally bound by the obligation.
Conclusions
This ruling illustrates that although such cases are relatively rare, brokerage fees may still be imposed on a party who did not sign a brokerage services agreement, based on legal doctrines such as unjust enrichment, agency law, or partnership principles.
It also highlights the importance of carefully drafting brokerage services agreements so that they explicitly address situations in which the party ordering brokerage services does not ultimately complete the purchase personally, but instead the transaction is carried out by an agent, a partner, or another third party who received the information about the property and later completed the acquisition.
Adv. Dr. Arik Ariel is a leading real estate attorney in Israel, specializing in brokerage law, with over 30 years of experience in the field. He regularly lectures on behalf of the Ministry of Justice, the Registrar of Realtors, the National Chamber of Realtors, and major real estate chains. Adv. Dr. Ariel was appointed by the Ministry of Justice to lead the drafting of new ethical regulations for real estate brokers. His book, Real Estate Brokerage Law, offers an in-depth exploration of ethical standards in Israel and abroad, providing valuable insight into the evolving landscape of the profession. He can be reached at [email protected].
