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Brokerage contract
A common concern for property owners is commissioning a broker to find a buyer or a tenant for their property. They take on the marketing and a role as an intermediary – and ideally guide your sale to a rapid and pain-free conclusion. In our guide, we’ll show you which types of brokerage assignment there are and what you need to be aware of.
What is a brokerage instruction and what types are there?
A brokerage instruction is you instructing a broker to market your property according to your specifications. The goal of this is to successfully and swiftly find a tenant or a buyer for your property. Once the brokerage has been completed, payment in the form of the agent’s commission is due.
In Switzerland, Art. 412 ff. of the Swiss Code of Obligations (CO) governs the brokerage instruction. Brokerage law, regulations for brokering contracts and more are described in more detail here.
What’s important to consider on this subject is that there is a difference between the types of broker in Switzerland – one who only puts sellers and buyers in contact, with a view to them concluding a sale, and one who does this plus seeing the sale through to completion. It is essential that the details are specified in the brokerage contract.
The brokerage contract – what it includes
The brokerage contract regulates the exact brokerage instruction. The contract describes your instruction to them to find a buyer or a tenant for your property. In theory, it is also possible to make a verbal agreement, but a written contract is always advisable.
For brokerage to be successful, it is also important that the brokerage contract specifies the broker’s tasks – and that you as the property seller are familiar with them. This will avoid any misunderstandings regarding responsibility and services to be provided and subsequent payment of associated fees.
As the property owner, there are various forms your collaboration with a broker can take:
In this form of collaboration, which is a more simplified brokerage instruction, the broker only takes on the task of proposing verified prospective buyers. All steps after that, such as negotiations and concluding the contract, are down to you. With this option, you can enlist the services of several brokers or brokerage firms, with commission being due when a suitable potential buyer is put forward.
With this type of instruction, the broker takes on all tasks on your behalf, from marketing through to completion of the sale. All you need to do then is make the final decision. You can choose for the services to be rendered by the broker under a sole broker exclusive contract (which stops you from using other brokers) or an exclusive mandate (which stops you from finding a suitable buyer yourself). In this case, commission is due upon completion of the sale.
Information on broker commission in Switzerland
Broker commission is usually due when the broker’s instruction has been successfully completed and is generally paid by the seller. The point at which this “success” occurs can be defined differently as required (recorded in the brokerage contract) – either with the referral of a potential buyer or when the sales contract has been concluded. This also points in favour of having a written contract.
The amount of commission is also stipulated in a brokerage contract in Switzerland for transparency. The typical amount for the sale of real estate is currently 2 to 3% of the achieved purchase price. You can of course individually negotiate the exact amount of commission for your specific situation. You can also divide the commission between you and the buyer if necessary, if they agree to the arrangement.
Obligations of the broker and the client
While the brokerage contract can be individually drafted, brokers always have the following obligations as part of their broker mandate:
The broker must be involved in an exclusive instruction.
The broker must (depending on the type of instruction) refer or be the intermediary for prospective buyers.
The broker has a duty of care and allegiance to the client, and must
therefore protect their interests and act diligently.
The broker must also maintain confidentiality in relation to all
information identified as confidential.
The notification obligation states that problematic potential buyers
should be signalled as such to the client (a credit check can be stipulated
in the contract).
Clients also have certain obligations.
As part of their duty of allegiance, they must inform their contracted broker of all relevant details and any possible changes. In the event of success, they must compensate the contracted broker in accordance with their agreement, and, in the case of a sole broker or exclusive mandate, uphold the respective contractual limitations.
FAQ
Maklervertrag & Maklermandat
In principle, you are allowed to look for prospective buyers yourself. If you are successful in doing so and the broker had no intermediary role with the buyer/tenant, no commission is to be paid. But be aware that an exclusive mandate contractually prohibits you from undertaking the search yourself.
Dual agency occurs when a broker collects commission from the buyer and the seller at the same time. This is only permitted to a limited extent and only in the case of the broker only being responsible for introducing a potential buyer, as long as the broker informs their client about the presence of a dual mandate. Legally, it is better to protect yourself against this by concluding a written brokerage contract.
Brokerage also involves fees for listings and travel expenses. These costs are due even if no sale is completed. The amount to be reimbursed is governed by the written brokerage contract. It is advisable to set a fixed price or an upper limit instead of a percentage like for the commission.
Don’t worry, only you as the client have the final say in which potential buyer/tenant you sell/rent your property to. Your broker can do nothing to force you.
If the broker is only responsible for finding a buyer/tenant, you still owe the broker their commission provided they have carried out their task of finding you a potential buyer.
When concluding a brokerage contract, it is usually unlimited in terms of time. Both parties are able to terminate this kind of contract at any time and without reason. If you sign a contract with a specific time period and want to terminate it immediately before this period has passed, you must provide a compelling reason, for example well-documented breach of contract. Statutory termination with a (typically) two-week cancellation period is also possible.
A brokerage contract automatically expires when the contract has been performed (sale, intermediary services).
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Contact
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Engel & Völkers Switzerland
Poststrasse 26
6300 Zug | Switzerland
Tel: +41 41 500 06 06