In the entire process of buying, selling or renting immovable property the broker/agent is the first to come and the last to go in the process. He is the one who puts in the maximum efforts but is often deprived and cheated of his brokerage not only by clients but also sometimes by his fellow brokers.
So we need to discuss two aspects of brokerage i.e. safeguarding and recovering your brokerage. As the saying goes it is better to be on the side of caution than to be sorry later. It is imperative for all brokers to be vigilant and exercise caution in their dealings otherwise there could be a situation when a broker stands to lose a large sum of money foolishly.
SAFEGUARDING: We shall deal with the brokerage payable by clients and brokerage sharing with fellow brokers as follows:-
CLIENTS:- a. Representing the owner for the sale or leave and license of his premises. Where you represent the owner for the sale or leave and license of his property either as an exclusive mandatee or as one of several brokers entrusted with the job, it in your own interest to execute a simple but well-drafted agreement wherein your scope of work and the brokerage payable to you are clearly spelt out. Every inspection must be followed by a written/email confirmation. Such confirmation must contain the date and time of inspection, counter broker (if any) and the name of the client who has taken inspection of the property.
In case of later possible default by the owner, the communication can be used as a vital piece of evidence in court to support your case. Even where the potential buyer bypasses the counter broker and you or where both the owner and potential buyer bypass the brokers, the communication whether written or email will be a very important piece of evidence to nail such unscrupulous people.
Brokers need to be particularly vigilant with developers as in the current market practice it is the developers who pay brokerage for the sale of their properties. I have come across numerous cases wherein developers having enormous clout and muscle power are bullying brokers for their brokerage.
Insist on filing a channel partner form before taking any client for a presentation. Ensure that you keep a copy of the form signed by the developer as an acknowledgement. If you feel that the developer may not give you a copy, scan the same and send an email stating that the hard copy is being sent by courier or registered post a/d. Before taking a potential client for a site visit, email the developer giving the name of your client requesting for an appointment.
In case you communicate with the developer’s sales team via SMS or WhattsApp, save the messages till you actually receive your brokerage. The Supreme Court has in a recent judgment relied on the text messages as a vital piece of evidence. In the unfortunate situation that you need to go to court to recover your legitimate dues, emails and text messages can be used to buttress you claim. Take a situation in both the above cases, where for any reason you do not have a brokerage agreement, then prior to the transaction exchange an email letter confirming the same. The communication must state precisely all the relevant information pertaining to the transaction. Your email clarifying your brokerage terms must be followed by a written or return email confirming your professional fees.
b. Representing a potential buyer or licensee. Where you represent a potential buyer/licensee of immovable property either as exclusive mandatee or as one of several brokers entrusted with the job, it in your own interest to execute a simple but well drafted agreement wherein your scope of work and the brokerage payable to you are clearly spelt out. Every inspection must be followed by a written/email confirmation. Such confirmation must contain the date and time of inspection, the premises (in detail) inspected, counter broker (if any).
In case of later possible default by your client, the communication can be used as a vital piece of evidence in court to support your case. In case your client bypasses you and/or the counter broker, the communication detailing the inspection and the brokerage agreement can be used in court in support of your claim. It often happens in large companies who take flats on leave and license basis that an administration representative will first inspect the properties and then the actual occupant will start his inspections post the initial round.
I have come across cases wherein the occupants do not go thru the company empaneled brokers but go thru their own brokers for reasons best known to them. In such situations the broker who has done the initial spadework stands to lose out. You must be more careful and your brokerage contracts must be worded carefully to protect your interests.
BROKERAGE SHARING:- Brokers very often do deals where 3 or more brokers are involved in a single transaction. In broking this practice is rampant and is popularly known as +1/+2 offers. This results in brokerage sharing, which is effect means that the broker on receiving his brokerage will have to pass on a certain percentage to the other broker/s involved.
I have often come across many disputes between fellow brokers post the transaction which leaves a bitter trail in future dealings and the aggrieved broker often spitting venom against the other broker. The best way to avoid such unpleasant situations is to agree on the percentage before giving inspections. This must be followed by an email confirmation containing the details as discussed above. Once you have this in place, no broker can deny your share of the kitty. To repeat as aforesaid, communication is important and can be used in a court of law.
Despite all precautions you may yet get into a situation where a client or broker may, post the transaction outright refuse your brokerage or may dilly dally or may even put some up some flimsy or nonsensical excuse to evade paying brokerage. Brokering services do come under the purview of the Consumer Protection Act, 1996 and therefore it is in your own interest to offer the best services to your client.
A client prone to litigation can drag you to the state consumer forum. He could show that your broking services were deficient and thereby pray to the court for a reduction in brokerage payable. In case of any dispute with regards to the brokerage payable, each broker must try and resolve such situations amicably with their respective client’s. With respect to brokerage disputes with developers, the help of housing industry associations can also be availed off.
Some associations have a dispute resolution mechanism and I must point out that the decision of the concerned committee is binding on its members. In the inevitable situation where such a resolution is not possible, the only recourse is to a court of law. Such disputes are purely of a civil nature and would entail filing a suit in a regular civil court having the pecuniary jurisdiction to try such cases.
As per an amendment in 2012 all money matters below INR 1 crore must be filed either in the Bombay City Civil Court or City Civil Court at Dindoshi, Goregaon as the case may be. Court fees as applicable must be paid to file any civil suit. If the suit goes in your favour, the Court will award you the brokerage, certain costs and interest at the regular rate. Post the suit a certain fixed amount paid as court fees are refunded to the plaintiff. Approximate time for such a suit would be 3.5 to 5 years.
It is worthwhile mentioning here that if your client is dilly dallying in paying your brokerage, then you must try and get him to sign a promissory note with respect to the amount payable. A promissory note must be signed in usual format and must bear a revenue stamp. In case you need to go to court, the promissory note being a negotiable instrument, a summary suit can be filed in the regular civil court. In a summary suit the defendant does not get an automatic right to defend himself.
He must satisfy the court that he has a valid defense and obtain leave of the court to defend the case and claim against him. In simple terms such suits are settled faster; approximately 2 to 2.5 years. However, if the broker is able to prove by way of evidence that the case involves a criminal angle then recourse can also be had to filing a criminal complaint in the magistrate’s court.
People are always wary of a criminal complaint against them as such offences would entail a jail term and or fine. Besides it pertinent to note that both complainant and accused are required to be present in every hearing in criminal cases. Again it would be at least 3 to 5 years till such time the complaint is disposed off. Every criminal complaint would require a trial which itself is a highly time-consuming and tedious process.
In case your client gives a cheque which is dishonoured you have the option to either file a cheque bouncing complaint u/s 138 of the Negotiable Instruments Act or a summary suit as aforesaid. Vide an amendment cheque bouncing cases attract a court fee of 2%. A certain percentage is refunded to the complainant post the disposal of the compliant.
Advocate Rajesh Narang is our legal expert at Pro Realtors. If you have a legal query, you can ask him your question here. He answers 1 query every week and Pro Realtors members, will be given a preference.