In Turkey, real estate agents are bound by a unique type of contract known as a “brokerage agreement,” as defined under Article 520 of the Turkish Code of Obligations. While many in practice refer to these as “commission contracts,” they are, by law, brokerage agreements, where the broker earns a commission for facilitating the contract’s formation. Let’s delve into the essential elements and legal intricacies surrounding these agreements—and discuss one particular rule that often raises eyebrows in the real estate sector.
What is a Brokerage Agreement?
A brokerage agreement is a legally binding document between a broker (real estate agent) and a property owner. According to Article 520 of the Turkish Code, this contract obliges the broker to either arrange an opportunity for a deal or directly assist in finalizing the deal. Only when the contract is completed does the broker earn the right to their fee, which is why this agreement stands out compared to other types of service contracts.
Interestingly, brokers can sign separate brokerage contracts with both the buyer and seller, effectively creating two independent agreements. In such cases, the broker can collect two separate commissions, each based on a distinct contractual obligation. But here lies the twist: Turkish law sets a cap on real estate commissions, which can’t exceed 4% of the property’s sale value. However, where there’s a will, there may be a way to work around this restriction.
The 4% Commission Cap: A Legal Limit With Creative Flexibility?
Under Turkey’s Real Estate Trade Regulation, real estate commissions cannot surpass 4% of the property’s sale value, and for rentals, the fee is capped at one month’s rent. This rule ensures fair dealings and prevents exploitative fees. Yet, as with many legal boundaries, innovative brokers and clients have found ways to adjust this limit.
One approach is to enter into auxiliary service agreements—separate from the main brokerage contract. Such agreements can cover additional services like consultancy, valuation assistance, or even specialized market research. By structuring these services separately, brokers may effectively exceed the 4% threshold in indirect ways, often to the benefit of both parties involved.
Binding Terms and Formalities
For real estate transactions, brokerage agreements must be documented in writing. While Turkish law doesn’t impose strict formatting requirements, including the signatures of both broker and client is crucial for legitimacy. Omitting a date on the contract won’t invalidate it, but the broker must demonstrate that a written agreement existed to protect their claim to commission.
Earned or Unpaid: When Brokers Can Claim Commission Without a Sale
A broker’s right to commission typically arises once a deal is concluded. However, an intriguing exception exists: if the sale falls through due to an unfounded refusal by either party, the broker may still claim their fee. Turkish courts, including the Supreme Court, have upheld brokers’ rights to commission in instances where a sale was only blocked due to a party’s unjustified withdrawal.
The “Kapora” (Earnest Money) Dilemma: Binding or Refundable?
It’s customary for buyers to provide a “kaparo” or earnest money when initiating a transaction. If treated as a commitment fee, this amount solidifies the contract and serves as proof of intent. However, if it’s a withdrawal fee, the party paying it forfeits the amount should they back out. The Turkish Code of Obligations distinguishes between these two scenarios in Articles 177 and 178, often leading to legal disputes if not clarified in writing.
Ultimately, whether you’re a buyer, seller, or broker, understanding these nuances can make all the difference. From the 4% commission cap to the hidden flexibility within brokerage agreements, navigating Turkey’s real estate market with an informed legal approach opens up a world of opportunities—within the bounds of the law, of course.
At Bayraktar Attorneys, we specialize in real estate law and real estate title deed transfers. Reach out to our lawyers if you need assistance for a real estate investment or title deed transfer.
