• Brokerage Agreements
  • January 5, 2016
  • Law Firm: Erdem Erdem Law Office - Istanbul Office
  • Introduction

    Brokerage agreements are governed by Articles 520-525 of the Turkish Code of Obligations (“Code”). Brokerage agreements are the agreements where a broker prepares an environment to enable the parties to reach an agreement, and undertakes to be the intermediary for the execution of an agreement, and qualifies for a fee after the execution of such agreement. Real estate brokers, employment offices, exchange brokers, financial brokers (eg: persons connecting the seller of a company and buyers) are what constitutes brokers.

    Brokerage

    Persons who are considered as brokers provide an opportunity to parties to reach an agreement and acts as intermediates between those persons who are to execute an agreement, and/or directs and leads the negotiations of this agreement.

    Brokers,

    (i) may be the lead in identifying persons who seek to reach an agreement in accordance with the request, needs, terms and conditions of the principal under the brokerage agreement, and suggesting those people to the principle contact, and may gather the parties together, and assist them in connecting with each other.

    (ii) may be actively involved in the negotiation process of the parties, prepare or comment on the main agreement, and thus, may play an active role in the execution and signing of such agreement.

    The principal may appoint more brokers. Those brokers may have differing duties under the main brokerage agreement, or may be appointed to act in concert with the existing broker(s).

    There is no precedent form with respect to brokerage agreements except for real estate brokerage agreements. However, having a written form of brokerage agreements is important for the purposes of evidence and future disputes. Real estate brokerage agreements, wherein the broker connects the buyer/tenant and the lessor/seller of a certain real estate, must be in writing. Provisions under the Code with regard to representation shall apply to brokerage agreements.

    Rights and Obligations of the Broker

    In principal, brokers are entitled to a fee when the parties reach an agreement, and upon the execution of the final and main agreement. However, the principal and the broker may agree on the payment of a fee (a portion or full payment thereof) even if the agreement is not executed. If there is no agreement, the brokerage fee may be determined according to the tariff, or upon private agreement, if there is no tariff according to the practice. (Code Art. 522).

    If the parties agree on the payment of the broker’s expenses as set forth in the brokerage agreement, then the expenses of the broker shall be paid, even if the main agreement is not executed and signed. In practice, brokerage agreements determine the payment of the documented expenses of the brokers within a limited capped amount, and for any overage expenses, the broker shall obtain the prior consent of the principal.

    The broker, in principal, shall fulfill his duties in person; however, as per Article 507 of the Code, he may delegate his duties to a third person; in such case, he shall be responsible for the acts of such third person.

    The broker shall report to the principal with regard to his actions, and act in accordance with the instructions given by the principal. The broker shall be loyal, and shall fulfill the duty of care. In the case of a breach of his duty of care, he may forfeit his right to claim the payment of the fee. As per Article 23 of the Code, if the broker acts in favor of the counterparty and not the principal, in breach of his duty, or acts contrary to good faith and agrees on a payment of a fee from the counterparty, then he forfeits his right to claim the payment of the fee and the expenses.

    Obligations of the Principal

    The main obligation of the principal is the payment of the fee of the broker, if and when the parties reach a final agreement, and upon execution of the agreement. If the payment of the expenses is agreed to between the broker and the principal, then the principal shall pay all agreed expenses even though the main agreement is not executed and signed. The broker may request ordinary expenses, and expenses which are reasonably considered mandatory in the due fulfillment of his duties.

    The principal may not appoint another broker if there exclusivity exists between the broker and the principal. The broker may claim indemnity in the event of a breach of an exclusivity provision.

    Conclusion

    Brokerage appears as the legal basis for real estate brokers, employment offices, exchange brokers, and financial brokers under the Turkish Obligations Law. Brokers bring together parties and provide an opportunity to parties to reach an agreement, and then acts as intermediary between those persons who are to execute an agreement, and/or direct and lead the negotiations of agreement. Therefore, brokers play a significant role in ordinary and financial life.