Real Estate Law: The Various Types of Brokerage

Real estate brokerage in Switzerland: what the law provides

Those selling or purchasing property in Ticino often rely on an intermediary. The real estate broker has a clearly defined task: to bring seller and buyer together so that they may conclude a transaction. Yet not all brokers operate in the same manner, and the law draws clear distinctions between different figures.

The brokerage contract is governed by the Swiss Code of Obligations (Art. 412–418 CO). Knowledge of these provisions is of considerable importance both for those who practise brokerage and for those who engage a broker to sell or buy a property.

The three types of broker recognised by law

Swiss law identifies three subcategories of broker, each carrying different obligations and rights with regard to commission.

Introducing broker. His task is limited to identifying a potential buyer or seller to the client. Nothing more is required: the mere introduction suffices. If the purchase contract is subsequently concluded with the person so identified, the broker is entitled to his fee.

Negotiating broker. This figure goes beyond a simple introduction. The negotiating broker takes an active part in the negotiations between the parties. The right to commission arises only if the contract is concluded as a result of his concrete negotiating activity. If seller and buyer close the deal without his direct involvement in the negotiations, the entitlement to the fee lapses.

Procuring broker. This is a less common figure. His role consists in procuring persons interested in purchasing for the seller. In practice, this subcategory is encountered rarely.

When is the commission owed?

The question of commission frequently gives rise to disputes. The distinction between the introducing broker and the negotiating broker is determinative.

For the introducing broker, the right to the fee arises at the moment the purchase contract is concluded with the person whom he identified. No further proof is required. For the negotiating broker, by contrast, it must be demonstrated that the contract was concluded precisely as a result of his negotiating activity. A subtle distinction, but one with very tangible consequences.

A point on which considerable confusion circulates should be clarified: there is no legal presumption that every brokerage contract is to be regarded as an introduction brokerage, absent agreement to the contrary. Part of the legal literature maintains this view, but the Federal Supreme Court has not to date recognised such a presumption.

Practical advice for the real estate broker

Hugo Haab, Attorney-at-Law, and Roberto Haab, Attorney-at-Law, of Studio Legale e Notarile Haab in Lugano, regularly advise real estate brokers and clients involved in brokerage disputes. Drawing on over forty years of professional experience, the following points prove particularly useful.

Define your contractual role with precision. The intermediary should favour the role of introducing broker, given that entitlement to the commission requires in that case only the identification of the potential contracting party. The qualification must, however, be formalised in writing in the brokerage contract, leaving no room for ambiguity.

Avoid unplanned negotiating activity. If the introducing broker begins to negotiate actively between the parties, he risks being reclassified as a negotiating broker, even through implied conduct alone. At that point, the commission will be owed only if the conclusion of the contract depends on his negotiation. Proving this in court is not always straightforward.

Do not act for both parties. So-called dual brokerage, that is, acting simultaneously for seller and buyer, is permissible only if both parties are aware of the arrangement and have expressly consented to it, or if it is a negotiation brokerage. In all other cases, a conflict of interest exists. The consequence is severe: the brokerage contract is deemed invalid. The broker forfeits any right to a fee and must return any sums already received.

Legal assistance in real estate brokerage matters

Questions relating to real estate brokerage concern sensitive contractual aspects that require assessment on a case-by-case basis. Whether you are an intermediary seeking to protect your right to commission, or a client contesting a fee claimed against you, Haab Legal has the experience necessary to assist you.

For a personal consultation: info@haablegal.ch | +41 91 913 30 70. Studio Legale e Notarile Haab is located at Via Ludovico Ariosto 5, 6900 Lugano.