Commissions, payments from real estate brokers

Commissions, payments from real estate brokers

In our last article, we discussed the new law regulating the real estate brokerage industry. In today’s article, we’ll go into more detail about commissions and payout terms.

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

With regard to the disputes of the parties on the guarantee, any dispute which may arise between the lessor and the lessee concerning the guarantee and the assessment of the damages it entails: It will first be dissolved by specialized experts — determined by authority — with the consent of both parties, and both parties will bear their fees equally. If the two parties do not agree to accept the experts’ solution, they have the right to appeal to the competent court.

Regarding the amount of the deposit of the real estate transaction carried out through the real estate broker, it is determined on the basis of the agreement between its parties, provided that it does not exceed 5% of its value, and in the event that this percentage is exceeded, the amount will be considered as an advance on the price of the transaction.

In addition, the sum paid by the buyer or the tenant is considered as a deposit only if it is stipulated in writing, failing which it will be considered as an advance of price not due to the seller or the lessor in the event of termination of the contract.

The seller or the lessor, upon receipt of the deposit, must conclude the transaction, and if the realization of the latter fails for a reason of the buyer or the tenant without defect of the property, the deposit will not be returned, and if the cause of the default is not due to any of them, the deposit must be returned to the person who paid it.

It is also important to note that the real estate broker is not permitted to keep the deposit as security for his right.

The real estate brokerage commission is determined at 2.5% of the value of the transaction 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.

In addition, the commission is paid by the contracting party with the real estate broker in the brokerage contract and in the event that the real estate broker enters into a brokerage contract with more than one of the parties to the same real estate transaction; the total commission he receives cannot exceed the percentage of 2.5 indicated above.

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

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

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

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Kristan F. Talley