Property transactions
What is a real estate agent?
Since Act no. 70-9 of 2 January 1970, known as the Hoguet Act, lawyers have been able to act as agents in property transactions to obtain a mandate to sell, buy, rent or seek to rent a property.
The role of the legal professional, the ethical principles and the rules governing the representation of funds that apply to the lawyer acting as agent in property transactions are all guarantees for the client, who wishes to secure the transaction both legally (the lawyer's role as advisor) and financially (deposit of funds with the CARPA).
Pursuant to article 2, paragraph 2, of the Hoguet Act, a lawyer does not have to meet the conditions laid down for estate agents in order to act as a property broker "in view of the supervision to which their professional activity is subject and the financial guarantees they offer for the exercise of this activity".
Lawyers may therefore carry out the activity of estate agent on an ancillary basis.
By analogy with article 1 of the Hoguet law, the property transaction mandate given to the lawyer authorises him "to engage in or lend his assistance, even on an ancillary basis, to transactions involving the property of others and relating to :
- The purchase, sale, exchange, rental or subletting, seasonal or otherwise, bare or furnished, of built or unfurnished property;
- The purchase, sale or management lease of a business;
- Transfer of live or dead livestock ;
- Subscription, purchase or sale of shares or units in property companies giving entitlement to the allocation of beneficial ownership or ownership of premises;
- The purchase or sale of non-negotiable shares when the company's assets include a building or a business.
- Property management.
- With the exception of press publications, the sale of lists or files relating to the purchase, sale, letting or subletting, whether furnished or unfurnished, of built or unbuilt property.
- The conclusion of any timeshare contract governed by articles L. 121-60 et seq. of the French Consumer Code". On 21 April 2009, the Conseil de l'Ordre des avocats au barreau de Paris adopted a new article P.6.2.0.4 in the Rules of Procedure of the Paris Bar and an appendix XIV in order to specify the terms and conditions under which lawyers may act as agents in property transactions.
This article states that :
"A lawyer may act as a real estate agent within the limits authorised by law.
The lawyer must notify the Ordre by letter to the President of the Bar.
This activity must be carried out with a view to drafting a contract or preliminary contract and constitutes an ancillary activity for the lawyer.
Lawyers must open a special sub-account with Carpa to carry out their duties as "property transaction agents" subject to supervision by the Ordre.
When acting as an agent in property transactions, the lawyer is bound by the essential principles of his profession and the rules governing conflicts of interest; he may only act on behalf of one of the parties and will only receive fees from that party.
The lawyer will comply with Appendix XIV of the Rules of Procedure concerning the rules relating to negotiation.
Annex XIV of the internal regulations stipulates that :
- the mandate must indicate the method of calculating the fees and its duration;
- the exercise of this activity must be declared by the lawyer to the Bar Association
- lawyers must respect the ethical principles of independence, loyalty, impartiality and objectivity.
- the funds, and in particular the immobilisation indemnities, must be deposited in a sub-account with the Caisse des Règlements Pécuniaires Des Avocats (CARPA),
- lawyers may only receive fees from one of the parties, which guarantees their independence and loyalty and avoids conflicts of interest,
- the lawyer has a financial guarantee of non-representation of funds and civil liability insurance.
On 5 and 6 February 2010, the Conseil National des Barreaux (French National Bar Council) ruled that this task falls within the scope of lawyers' activities.
The advantage of using a property transaction lawyer lies in his dual expertise.
As a legal professional involved in litigation, the lawyer is in the best position to anticipate difficulties in the application and enforcement of a deed, and thus to foresee the points likely to give rise to litigation and how to avoid them.
In practical terms, the lawyer's role is to introduce his client to potential sellers or buyers, lead the negotiations on the property transaction, visit the properties and inform the buyer and seller of the content and consequences of the promise to sell and the deed of sale that he will draw up.
Finally, it should be emphasised that in the event of a dispute, the lawyer has a financial guarantee of non-representation of funds to the value of 35 million euros and civil liability insurance to the value of 3.5 million euros, which is much higher than that offered by estate agents.
With regard to the financial aspect of the lawyer's involvement, it should be emphasised that the fees for mediation, advice and drafting deeds (synallagmatic promise of sale, preliminary sale agreement, unilateral promise of sale, protocol, etc.) usually represent a degressive percentage of the sale price of the property concerned, which may be lower than the fees charged by estate agents or notaries (between 2 and 5 % excluding VAT).
FINALTERI AVOCATS can advise and assist you with your property purchase or sale project.
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