A family member who is not the owner of the property signed a brokerage agreement (for example, a spouse, brother, or sister who has no rights in the property). Will the property owner be required to pay brokerage fees to the broker who worked to sell their property?
In a recent case (2023, the Shalom court in Tel Aviv), a real estate broker sued a pair of brothers who had signed a brokerage agreement with him. The broker argued that he was entitled to brokerage fees, even though the agreement had been signed by only one of the brothers, who was not the owner of the property.
Section 9(a) of the Israeli Real Estate Brokers Law states that a real estate broker must have a written brokerage agreement signed by the “client” to be entitled to receive brokerage fees. The “client” is typically the owner of the property being sold, but the Knesset (the Israeli legislature) did not limit the definition of “client” to the owner of the property.
The term “client” is defined in the law as “a party to an agreement with a real estate broker to receive his services, whether he pays brokerage fees or not.” This broad definition of “client” means that even someone who does not own the property but has an interest in its sale can enter into a binding brokerage agreement.
The sale of the property to the tenant: the effective factor
The court ruled that the fact that the property was sold to the tenant who leases the property does not affect the broker’s right to receive brokerage fees. The brokerage agreement included a blanket agreement to pay brokerage fees “in any case that the property is sold during the exclusivity period,” and the agreement did not specifically exclude the possibility of a sale to the tenant.
The court found that there is no room to interfere in the contractual relations between the parties and to determine retrospectively new conditions and obligations that were not included in the agreement at all. If the parties wanted to exclude the tenant from the agreement, they should have stated this explicitly. Since they did not do so, the brothers are required to pay the agreed compensation to the broker.
