A real estate brokerage sued a client, himself a lawyer, who refused to pay its commission. The court ruled he was bound by the brokerage agreements he signed, but found that the agent never explained what the 2% fee meant and never gave him a copy of the agreements. As a result, the court cut the fee in half, to 1%. The ruling also shows Israeli courts drawing on the new 2024 broker ethics regulations to interpret deals made before those rules took effect.
Topic
A real estate broker has a duty to explain to a client, in simple and clear language, what the brokerage deal involves, before the client signs a written order form.
Background
A real estate brokerage firm sued a client who refused to pay its brokerage fee. The court ruled that because the client had signed brokerage agreements, he was obligated to pay. The client, a lawyer by profession, argued that a later verbal agreement had established that he would not pay a brokerage fee. The court rejected that argument, as well as his claim that he had been tricked into signing documents that were never explained to him. The court then went on to consider a further question: what happens when a broker does not explain to a client what the financial terms in the brokerage services order actually mean?
What Did the Court Rule?
The Rehovot Magistrate’s Court, in a decision by Senior Registrar Naama Peres, held that a broker has a duty to explain to a client the content of the documents the broker asks them to sign[1]. This duty comes both from the broker’s professional position and from the consumer-protection purpose of the Real Estate Brokers Law. The agreements were presented to the client during a meeting about the purchase of his new home, not in a setting that allowed him to read them carefully and with focus. The court added that the client was given no explanation of how much he was committing to pay in brokerage fees, and he was not given a copy of the agreements.
The court referred to the Real Estate Brokers (Ethics and Professional Duties) Regulations, 5784–2024. These regulations do not apply to this case, because they came into force later, but they can help shed light on how its circumstances should be interpreted. The regulations require a broker, before the client signs the written order form, to explain in simple and clear language the nature of the brokerage deal and the details that appear in the form. This duty also covers the terms of the deal and what they mean. The court added that in this case, no evidence at all was presented that the broker had explained to the defendant, even after the brokerage agreements were signed and before any marketing began, what the financial term meant: a brokerage fee of 2% of the transaction price. As a result, the court ruled that the fee would be reduced, and instead of 2%, the client would pay a brokerage fee of only 1%.
Insights and Conclusions
As we have written before, courts have begun using the new ethics regulations as a tool for interpretation, including in cases that took place before the regulations came into force![2]
With all due respect, we believe the court made a mistake in this case when it held that the lack of a verbal explanation, in circumstances where the client is a lawyer, justified cutting the brokerage fee in half!! In fact, the failure to give the client a copy of the brokerage agreements, which is also required under the Consumer Protection Law, was arguably even more significant.
It is worth remembering that when a lawyer signs brokerage agreements (as in this case), it is hard to accept the conclusion that he did not receive an adequate verbal explanation.
[1] Civil Claim, Expedited Procedure (Rehovot) 8712-09-22, Keren Teshuva My House Properties v. Avshalom Sariel (issued August 25, 2026, published in Nevo).
[2]Civil Claim (Petah Tikva) 38088-01-23, Sivan Geller v. Stefan and Yamit Tabakaru (issued August 25, 2026, published in Nevo).
In that ruling, the court referred to the new ethics regulations. Although they did not apply to the agreement between the broker and the defendants, the court examined whether the duties they place on brokers (Regulations 4 and 15 of the Brokers Ethics Regulations, which prohibit misleading clients and prohibit preventing direct contact between the client and the other side) could support the defendants’ claims against the broker. They could not, because no misleading conduct or blocking of contact was proven.
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].
