Real estate brokers’ commissions, payments

Real estate brokers’ commissions, payments

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In our last article, we touched on the new law regulating real estate brokerage industry. In today’s article, we will elaborate more on the commissions and payment terms.

The real estate broker receives the amount of the guarantee, if any, and delivers it to the authority or whomever it authorizes, and it is kept with it until the real estate is redelivered without damage, and the guarantee — or what remains of it after deducting the value of the damages — is returned to the lessee.

With regard to the disputes of the parties over the guarantee, any dispute that arises between the lessor and the lessee regarding the guarantee and the assessment of the damages it includes: It shall initially be dissolved by specialized experts — determined by the authority — with the consent of both parties, and the two parties shall bear their fees equally.  If the two parties do not agree to accept the experts’ solution, they have the right to resort to the competent court.

With regard to the amount of the deposit of the real estate transaction that is carried out through the real estate broker, it is determined based on the agreement between its parties, provided that it does not exceed 5 percent of its value, and in case this percentage is exceeded, the amount shall be considered as a price advance for the transaction.

In addition, the amount paid by the buyer or the lessee is not considered a deposit unless it is stipulated in writing, otherwise it will be considered as a price advance that is not owed to the seller or the lessor if the contract got terminated.

The seller or the lessor, upon receipt of the deposit, must complete the transaction, and if the completion of it fails due to a reason from the buyer or the tenant without a defect in the property, the deposit shall not be returned, and if the cause of the default is not due to either of them, the deposit must be returned to the one who paid it.

It is also important to note that it is not permissible for the real estate broker to keep the deposit as a guarantee of his right.

The real estate brokerage commission is determined at 2.5 percent of the transaction value if it is a sale, and only the first year’s rent if it is a rental, unless the parties to the brokerage contract agree otherwise in writing.

Moreover, the commission shall be paid by the contracting party with the real estate broker in the brokerage contract and in the event that the real estate broker concludes a brokerage contract with more than one of the parties to the same real estate transaction;  the total commission that he receives may not exceed the 2.5 percentage stated above.

The real estate broker is entitled to commission in the following cases: Completing the real estate transaction that he handled , in accordance with the brokerage contract, during its validity period, or within a period not exceeding (two months) from the end of the contract, provided that his mediation is proven in this case.

The commission will also be entitled if the real estate transaction has not been completed, and the seller or the lessor is entitled to the deposit.

Dimah Talal Alsharif is a Saudi legal consultant, head of the health law department at the law firm of Majed Garoub and a member of the International Association of Lawyers. Twitter: @dimah_alsharif


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