REAL ESTATE MANDATES
A mandate is a contract where the owner grants an agent power over their real estate assets.
In real estate, there are 4 types of mandate:
- The Sales Mandate or the Right To Sell Agreement - for when the owner wishes to sell their property
- The Search Mandate - corresponding to someone looking for a property to rent or purchase
- The Rental Mandate - signed by the owner who wishes to rent their pied-à-terre
- The Management Mandate - allows the real estate agent to manage the owner's property throughout the lease.
Governed by the Hoguet Law of 1970 and ALUR Law of 2014, this type of mandate is very close to the sales mandate even if the two are the opposite of each other. These two mandates can be distinguished by the two different objectives of the agreement; the search mandate having for the purpose of acquiring real estate while the sales mandate represents a delegation of power concerning the transfer of real estate assets.
It must be specified in the mandate that the power conferred on the agent, the conditions of the service provided, the means mobilized (as well as the remuneration), and defined all taxes included (TTC).
Two specificities frame the search mandate in order to protect the client:
- It is only in case of success (when the notarial deed is signed) that the professional's fees are to be paid, moreover, the administrative fees are prohibited.
- It is mandatory to hold a professional card bearing the mentioned transaction for the mandated agency, guaranteeing a certain level of professionalism.
2. The rental mandate
Governed by the Civil Code by Article 1984, this mandate corresponds to a power of attorney by which the landlord empowers the real estate agent to act on their behalf.
The rental mandate should lay out:
- The rental management mandate allows the agent to take care of all the steps related to rental management, including:
- Search for the new tenant
- Drafting and signing of the lease
- Realization of the inventory of fixtures
- Other steps related to the rental property (i.e. recovery of rents, drafting of receipts, taking charge and management of the work of the property and common areas if the case arises, etc.)
- The rental mandate also concerns the search for tenants and the rental of the property
The rental mandate should include:
- The complete identities of both parties
- The designation and description of the property
- The various missions entrusted (price of the rent, assumption, and termination of the diagnostics, dissemination of the advertisement, management, and planning of visits, study of rental files, drafting of the lease & deed of guarantee, realization of inventory and exit, etc.)
- Fees and general conditions of the contract
- The register number of the mandate and that of the professional card of the agent
- The E&O insurance policy number and the agent's financial guarantee
The representative may be:
- A property manager
- A trustee
- A real estate agency
- A notary (even if it is not his core business)
The management mandate must absolutely follow certain rules and steps, including:
- Dawn up in duplicates, one for each signatory
- Submit to the directives of Article 1984 of the Civil Code, the Hoguet Law (No. 70-9 of 02/1/1970), and implementing Decree (No. 72-678 of 20/07/1972)
- Be registered in the Register of Mandates of the professional who deals with it
A rental management mandate is concluded for a fixed period because the Hoguet Law prohibits management mandates for an indefinite period. The general duration is one year and is automatically renewed within the limit of 10 years.
The remuneration of the agent is negotiated between the signatories and they're free to set it. Though it commonly varies between 5% to 8% TTC of the sums collected.
The management mandate includes:
- The complete identities of both parties
- The designation and description of the property
- The various missions entrusted (price of the rent, assumption, and termination of the diagnostics, dissemination of the advertisement, management, and planning of visits, study of rental files, drafting of the lease & deed of guarantee, realization of inventory and exit, etc.)
- Fees and general conditions of the contract
- The register number of the mandate and that of the professional card of the agent
- The E&O insurance policy number and the agent's financial guarantee
The signing of the mandate is a mandatory step to put the property on the market. Consequently, the agency will not be able to market the property without a sales mandate.
This mandate obliges the seller (or the buyer) to pay a fee called “agency commission” or “negotiation fee” only in the event of a sale of the property. Otherwise, the agent does not collect anything.
When setting up the mandate, it is necessary to indicate the price of the fees and at whose expense they are stipulated (seller or buyer).
The fees are generally estimated between 5% to 20% of the price of the property.
The Non-Exclusive Right to Sell Agreement
And similarly to the exclusive sales mandate, any contract signed with one or more agencies will last for three months. These mandates will also be renewed automatically after the terms end if you do not send a notice for termination.
Other kinds of Sales Mandates:
- The Co-Exclusive Mandate
- Semi-Exclusive mandate
BENEFITS
The main advantage is that by opting for a simple mandate you can technically reach a larger number of potential buyers. It is indeed all the agencies entrusted with the simple mandate that will be responsible for finding the buyers. Among these proposed buyers you will have a freedom of size, since not committed exclusively to an agency, you will retain the possibility of selling to the buyer of your choice.
DISADVANTAGES
Because the property is visible in multiple windows of real estate agencies, this represents a risk that can be penalizing by sending a negative image to potential buyers. They might understand that your property is struggling to sell. Being likely to find a buyer on your own can possibly also dissuade the real estate agent from fully investing in the sale of your property. In contrast to the point of view of the professional, the individual, during his research, finds your property and realizes that the selling price associated with your property differs depending on the agency or site visited.
The Exclusive Right to Sell Agreement
Just as its name says, the exclusive sales mandate gives total exclusivity to just one real estate agency. As such, the seller is not allowed to hire or collaborate with other agencies and/or third-party professionals throughout the duration of the contract.
Usually, the exclusive sales mandate spans around three months. If the seller decides to terminate the contract by the end of this term, they’ll be required to send a letter to the agency with a 15-day notice prior to the end of the mandate. If not, the contract will be renewed automatically.
BENEFITS
The real advantage of the exclusive mandate lies in a high and assured involvement on the part of the real estate agent. The latter doing his utmost to complete the transaction as quickly as possible and at the most attractive price, allowing him to receive, in passing, his commission. The second advantage, remaining not negligible, consists in the valuation of your property by its rarity on the market.
DISADVANTAGES
The signature of the exclusive mandate to a single agency gives an impression of loss of control and total freedom over the sale of the property. Agencies can be criticized for relying on their achievements once the exclusive mandate is signed, instead of rushing to find a buyer. This makes it possible to realize the mistake of having bet on the wrong structure, the real estate agency being less efficient than expected ... As the minimum duration of the exclusive mandate is three months, it would be impossible for you to use another agency or sell to a buyer on your own.
The co-exclusive sales mandate, which is not widely used, allows the owner to use a certain number of agencies determined in advance.
• Semi-exclusive mandate
Only one real estate agency has the property but the owner reserves the right to sell his property directly (which excludes the payment of fees unless otherwise stipulated).
How to terminate a mandate ?
As soon as the termination takes place outside the premises where the professional practices (Hamon Law of March 17, 2014), the conclusion of the mandate is subject to a right of withdrawal.
The law authorizes a retraction period of 14 days upon signing the mandate. But it does not work if the mandate has been signed at the agency.
What content must be included in a mandate?
- The type of mandate
- The identity of both parties
- The objectives of the mandate
- The selling price and fees
- The duration of the mandate: The duration of a mandate is necessarily limited in time (whether it is a simple or exclusive mandate) in case it has the function of being perpetual. Whatever it is, simple or exclusive, any mandate must therefore, under penalty of nullity, clearly and precisely indicate its period of validity.
- Termination conditions
Important Note: To protect their clients as much as possible, the real estate agent or negotiator must prepare some documents as soon as the mandate of the property subject to a co-ownership is taken. They include:
- Title deed
- The last three (3) minutes of the General Assembly
- The surface certificate Loi Carrez