Estate agents are strictly regulated in France and need to have a 'carte professionnelle' in order to undertake estate agency business. They are also obliged to ensure that sellers sign a mandate giving them the power to enter into a contract with a buyer according to the price and other terms stipulated by the seller. Estate agents are normally keen for sellers to sign mandates stipulating the price and giving the estate agents power to conclude the contract. This, of course, does not happen in England where a contract is drawn up by the solicitor after the buyer's offer has been accepted. The estate agent in England is in a more precarious position because he relies on the letter of instruction from the seller and does not have power to conclude the deal.
It is increasingly the case, especially with higher value properties in a rising market, that sellers are reticent about signing mandates, and require the estate agent to find prospective buyers with whom they can enter into negotiations on the price before signing a mandate to the estate agent. Estate agents do not like this because it makes payment of their commission more precarious and gives the seller the upper hand in negotiations. A mandate has to be signed to ensure the agent can enforce payment of his commission. This may, for instance, result in a seller introduced to a keen buyer at a price including the agent's commission, subsequently insisting that the buyer pay an additional amount equivalent to the estate agent's fees. It also means that the seller is free to sell the property privately or use any number of agents. It is also possible for the mandate to be drafted in a way which allows the seller various get-outs, as there is no set wording for the mandate, which only needs to comply with the general French law provisions relating to all mandates.
In a recent case, decided on 31 January 2008 by the French Cour de cassation (French House of Lords), the court had to consider the following. Mrs X owned a flat in Paris and signed an exclusive mandate with an estate agent C. Shortly after signing the mandate, C signed a contract of sale with Y as agent for Mrs X. Mrs X then refused to sign the transfer document and was sued by the prospective buyer who also sued the estate agent, C. The mandate contained an express provision that any sale had to be authorised by Mrs X. Mrs X claimed that Mr Y should have checked the powers in the mandate of the estate agent, C, before he signed the contract and that accordingly she was not bound to sell the property to Mr Y.
The Cour de cassation decided that Mrs X was not obliged to sell the property to Mr Y. The court took a strict view of the position and said that estate agents had to ensure that all the formalities were complied with; in particular that the mandate the estate agent had did not contain any provisions which could prevent the estate agent engaging the seller in a transaction which was not permitted. The court held that it was essential that the mandate was drafted correctly and was for a set period of time, and was precise as to the powers the estate agent had.
This decision is at odds with other French court decisions in which third party buyers who have signed contracts with estate agents have been successful in acquiring the properties on the basis of a 'mandat apparent', which means that a third party buyer acting bona fides is able to legitimately believe in the power of the estate agent which is legally regulated. There must be some sympathy for this view, as a buyer should be able to have confidence in a tightly regulated estate agency profession, especially if all the documentation on the face of it appears to be in order.
However, the position, which has been clearly stated by the Cour de cassation is that the buyer must, if he is in any doubt, check that the estate agent is fully authorised, and should ask to see a copy of the mandate to be sure that there is no possibility that the seller could avoid the sale. This is likely to be a continuing area of litigation especially in connection with higher value properties in areas where prices are rising sharply, such as the Côte d'Azur and the Alps.
When signing a mandate the seller should be read the contract carefully and if they want any changes made, should insist on them - they are perfectly entitled to do so. Standard form, printed mandates should not be automatically signed and any manuscript alterations you make should be initialled by you and the estate agents. It is fine to include conditions such as approval of the purchaser or price. If you don't do this then you run the risk of being bound by a contract signed by the agent.
May 2008