Brokerage Agreement (Real Estate Mediation Contract): Simple on the surface, risky underneath

SHORT ANSWER TO THE MAIN QUESTION

Under a real estate brokerage agreement, a real estate broker undertakes to facilitate the conclusion of a real estate contract for the client – typically, for example, a purchase agreement or lease concerning real property.

Unlike ordinary brokerage, real estate brokerage in the Czech Republic is also governed by specific legislation, particularly Act No. 39/2020 Coll., on Real Estate Brokerage. The agreement must be in writing, and Czech law sets out certain mandatory requirements and specific protections, particularly for consumers.

Key issues include which property and transaction are covered, the amount of the commission, when the obligation to pay it arises, and whether the brokerage arrangement is exclusive.

By signing the agreement, you may therefore be doing more than simply ordering advertising services. You may also significantly restrict your ability to sell or rent the property through another route.

YOU MAY BE THINKING…

“If the agency does not find a buyer, surely I do not have to pay the commission?”

“What exactly does exclusive brokerage mean?”

“Can I continue advertising the property myself?”

“What if the buyer comes back after the brokerage agreement has ended?”

“Do I have to sign the purchase agreement if the agent finds a buyer?”

“What exactly must the real estate agency do for its commission?”

These are questions that should be answered before signing, not when a buyer appears or a dispute over commission has already arisen.

THE REAL PROBLEM IN PRACTICE: THEORY VS REALITY

At first glance, the commercial model seems simple.

I want to sell an apartment.

The real estate agency finds a buyer.

The transaction is completed.

The agency receives its commission.

But the actual relationship may be considerably more complex.

The real estate agent may provide services such as:

• recommending an asking price,
• preparing the property for presentation,
• arranging photographs or video,
• advertising,
• communicating with potential buyers or tenants,
• organising viewings,
• screening interested parties,
• negotiating transaction terms,
• coordinating legal and other related services.

Czech law requires a written brokerage agreement and specifies certain mandatory information, including identification of the property concerned, the purchase price, rent or other consideration – or the method for determining it – and the amount of the broker’s commission or the method for calculating it.

But compliance with the statutory minimum still does not tell you how the particular cooperation will actually work in practice.

You need to know:

• which services are included in the commission,
• who decides on the asking price,
• where and how the property will be marketed,
• whether the owner may deal with potential buyers independently,
• when the agency has fulfilled its task,
• when the right to commission arises,
• who pays for additional services,
• how the relationship may be terminated.

The greatest problems often arise precisely in the gap between what the client expected and what the agreement actually says.

BIGGEST RISKS AND COMMON MISTAKES

With a real estate brokerage agreement, I would pay particular attention to:

• signing an exclusive arrangement without understanding its practical consequences,
• vaguely defined services to be provided by the agency,
• an unclear point at which the right to commission arises,
• commission becoming payable in situations the client did not anticipate,
• unclear rules for a buyer or tenant found directly by the owner,
• clauses dealing with transactions concluded after the brokerage agreement ends,
• an unnecessarily long contractual term and difficult exit arrangements,
• additional charges on top of the commission,
• automatic renewal,
• references to terms and conditions that the client has not actually reviewed,
• contractual penalties for breaching exclusivity,
• confusing “finding an interested party” with certainty that the transaction will actually be completed.

A very typical mistake?

The client carefully reads:

“The commission is 4%.”

But pays far less attention to the sentence:

“The right to commission arises when…”

The second sentence may ultimately be much more important financially than the percentage itself.

HOW TO APPROACH IT: REALITY, NOT THEORY

Before signing, I recommend looking at the relationship from the beginning all the way through to its possible termination.

1. Be clear about what you actually expect from the agent

Do you only need someone to find a buyer?

Or do you expect a complete service, from marketing the property to coordinating the execution of the transaction documents?

What is included in the commission, and what will be charged separately?

2. Check whether the arrangement is exclusive

Exclusive real estate brokerage may restrict not only your ability to engage another broker but also your ability to conclude the relevant real estate transaction without the involvement of the agreed broker.

For consumers, Czech law limits exclusive brokerage to a fixed period of no more than six months at a time, subject to statutory rules on renewal.

3. Find the exact clause dealing with commission

Do not check only the amount.

Also establish:

• when the right to commission arises,
• when the commission becomes payable,
• whether commission may be due after the agreement ends,
• whether VAT is added,
• whether any additional fees apply.

As a general rule under Czech real estate brokerage legislation, commission becomes payable no earlier than the date on which the real estate contract is concluded. Earlier payment may be agreed only subject to specific statutory requirements.

4. Check the duration and termination provisions

For a consumer agreement concluded for an indefinite period, Czech law limits the notice period to a maximum of one month.

But the length of the notice period is not the only issue.

You should also know what happens to potential buyers already introduced by the agent and whether commission may become due after the brokerage agreement has ended.

5. Read every document incorporated into the agreement

Terms and conditions.

Price lists.

Schedules and annexes.

Reservation rules.

It is not sensible to sign the main agreement while assuming that all other documents are merely technical attachments.

PRACTICAL EXAMPLES

👉 The owner found the buyer independently

An apartment owner signs an exclusive brokerage agreement with a real estate agency.

Several weeks later, an acquaintance contacts the owner and wants to buy the apartment. The buyer has never dealt with the real estate agent.

The owner thinks:

“The agency did not find this buyer, so I do not owe them anything.”

But an exclusive brokerage arrangement may restrict the owner’s ability to conclude the transaction independently.

The answer therefore depends on the particular agreement and the statutory limits applicable to exclusivity.

👉 The buyer returned after the agreement ended

During the brokerage relationship, the agent introduces several potential buyers.

The agreement then ends.

Two months later, the owner concludes a purchase agreement with one of those buyers.

The question then arises whether there is still a sufficient connection with the agent’s previous work and whether a right to commission exists under the agreement.

Czech law also provides specific consumer protection for certain situations where the real estate transaction is concluded only after the brokerage agreement has ended due to inactivity, error, or insufficient cooperation on the part of the broker.

👉 “I thought legal services were included”

The client sees an offer for:

“Complete real estate services.”

They naturally assume that the commission covers everything necessary for the transaction.

Only shortly before the purchase agreement is signed do they discover that certain services are charged separately or provided by someone else.

The problem is not necessarily that some services cost extra.

The problem is when the client discovers only at the end what they were actually receiving for the agreed commission.

WHY YOU SHOULD BE CAREFUL WITH “I’LL DO IT MYSELF”

A real estate brokerage agreement is slightly different from a contract that clients typically draft themselves.

Very often, the client receives a ready-made standard agreement from the real estate agency.

And that creates a natural assumption:

“This is their standard contract, so there is probably nothing to negotiate or review.”

But a standard agreement is standard primarily for the business model of that particular real estate agency.

It does not necessarily reflect what you expect from the relationship.

Czech law provides clients with specific protections. It requires a written agreement, prescribes mandatory information, regulates exclusive brokerage and commission, and imposes additional duties on real estate brokers.

Real estate brokers are also required to maintain professional liability insurance while carrying out their activities.

But the law will not decide for you whether a particular exclusivity clause is commercially sensible, whether the commission corresponds to the services provided, whether the exit terms are acceptable, or whether the agreement fits your particular transaction.

Those questions require an individual assessment.

LAWYER’S RECOMMENDATION + CHECKLIST

Before signing a real estate brokerage agreement, I recommend asking one very simple question:

If I found the ideal buyer myself tomorrow, would I know exactly what this agreement allows me to do and whether I would still owe the real estate agency anything?

If the answer is not clear, I would review the agreement again before signing it.

Quick checklist

• The property and intended transaction are clearly identified.
• The services to be provided by the real estate agency are clear.
• I know the total commission and any additional costs.
• I know exactly when the right to commission arises.
• I know when the commission becomes payable.
• It is clear whether the arrangement is exclusive.
• I understand what exclusivity means in practice.
• I know what happens if I find the buyer myself.
• The rules for potential buyers introduced during the relationship are clear.
• I know the duration and termination mechanism.
• I know whether claims may arise after the agreement ends.
• I have reviewed all terms and conditions and annexes.
• It is clear what is and is not included in the “real estate service”.

FAQ

What is a real estate brokerage agreement under Czech law?

It is an agreement under which a real estate broker undertakes to facilitate the conclusion of a real estate contract for the client. This may concern, for example, the sale, purchase, or lease of real property. Real estate brokerage in the Czech Republic is specifically regulated by Act No. 39/2020 Coll., on Real Estate Brokerage.

Does the agreement have to be in writing?

Yes.

Czech real estate brokerage legislation requires written form. Under the Act, only the client may invoke invalidity resulting from failure to comply with this requirement.

What must a real estate brokerage agreement contain?

The Act requires, among other things, identification of the subject matter of the intended transfer or use, the purchase price, rent or other consideration – or the method for determining it – and the amount of the broker’s commission or the method for determining it.

Where certain information concerning the property or price is not yet known, the Act permits a more general description under specified conditions.

What does exclusive real estate brokerage mean?

Exclusivity may restrict the client’s ability to enter into another brokerage agreement concerning the same property and may also restrict the ability to conclude the relevant real estate transaction without the involvement of the agreed broker.

Where the client is a consumer, exclusivity may be agreed for a fixed period of no more than six months at a time, subject to the statutory rules governing renewal.

When is a real estate agent’s commission payable?

As a general rule, Czech law provides that commission is payable no earlier than the date on which the relevant real estate contract is concluded.

Earlier payment may be agreed under specific statutory conditions, including appropriate wording and information in the brokerage agreement.

Do I have to sign the purchase agreement if the agent finds a buyer?

If the client is a consumer, the real estate brokerage agreement may not impose an obligation on the client to conclude the real estate contract or a future real estate contract.

That does not automatically answer whether a commission claim or another contractual consequence may arise. This must be assessed under the particular agreement and the applicable statutory rules.