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The exclusivity clause in the brokerage contract

The exclusivity clause brings more guarantees to the broker / real estate agent and must be expressly mentioned in the brokerage contract specifying the effects for both parties according to article 16, n. 2, “g” from the Law 15/2013. This clause ensures that only the real estate company that was hired can carry out the business mentioned in the contract – which consists in publicizing the property available for selling and introducing parties interested in buying it to the client – and be compensated for the service during the period defined in the contract.

However, this clause is not obligatory and must be agreed between the broker and the client, which is why many brokerage contracts do not include this clause and this allows the client to contact other brokerage companies and finish the purchasing process with a buyer that was prospected by another company. Due to the importance of this theme, I interviewed two real estate consultants that work in Portugal, Anne Brightman and Thibault Lassale, and asked their opinions about the exclusivity clause. Moreover, I will also complement their quotes briefly with a few legal aspects.

Anne Brightman works as a real estate consultant at KW PR1ME - Cascais and explains why she always works in an exclusivity regime:

“In a market where Exclusive Contracts are not mandatory I am constantly being asked to justify why I insist on working with an exclusive agreement. The answer is both simple and complex. In Portugal there are no regulations for Real Estate agents. They do not need to acquire a license or even take a course to work in the business. This lack of compliance results in a lot of unqualified agents working in the field who do not know how to price property, do not know about documentation and create confusion and delay throughout the process that costs time and money for all concerned.

The quality of the agent is far more important than the number of Real Estate companies the client chooses to work with. One professional is all clients need if the agent is qualified, dedicated and knows the market. Working with a single agent simplifies the process of buying and selling because this agent should be partnering with other agencies in an aggressive manner so the client is being represented through ALL other agencies.

I invest in my clients through specific paid advertising that targets the best market for their properties. Professional images, videos and drones along with a number of additional expenses such as open houses, marketing material and signage are necessary costs that I assume to properly market the properties I take on. More valuable than anything is the time I invest in each of my clients/investors to maximize the potential of their property or deal. It would be impractical to imagine that I would invest in my clients if they are not invested in me. This partnership generates a level of trust that is not viable in a non-exclusive relationship. My belief is that I am not only selling a property I am developing a lasting relationship with my clients that expands way beyond the deal.” (BRIGHTMAN, Anne)

 

It makes sense that a client looks for a real estate agent that will dedicate more time and attention to his needs as seller or buyer, considering how delicate and important this moment is for him, because this will be a long-term investment that includes many steps. An agent that does not have the exclusivity guarantee will probably not dedicate enough time and financial resources to this client as an agent that works in exclusivity regime.

Regarding the opinion of Thibault Lassale, who works as a real estate consultant at IAD Portugal, his belief is that some of the reasons why some clients do not want to hire an agent with an exclusivity clause included in the contract is the rush they have to sell their properties or find a perfect property to buy:

“Today most customers are afraid of exclusive contract due to some bad experiences, considering that they are afraid to be trapped with only one agency or not being able to sell themselves if they have the opportunity.” (THIBAULT, Lassale)

 

It is important to highlight that there is a major understanding in the national jurisprudency that the exclusivity clause only refrains the client to hire other realtors or companies to work as mediators but does not refrain her to directly contact a third party interested that she found herself, or that contacted her spontaneously without the realtor’s intervention. However, it is also possible to enter into a contract with an absolute exclusivity clause (expressly mentioned) and, if this is the case, the client breaches the clause when she contacts third party that was not prospected by the agent hired in the contract in any case.

Thibault continues:

“Regarding those problems some companies have developed a solution by offering contract without exclusivity. From the seller’s point of view, it’s a good thing because they sign with multiple agencies and they can have their place offered in different agencies, so they think they have more chances to sell their place.

In fact, if the seller has too many agencies, his place will be proposed four or five times in the offers and the potential buyer is going to be lost or suspicious. You can also imagine the consequences if the price is different from one agency to another!

So, considering those facts, we need to think how to find the best option for the seller and for the consultant. For me the first thing is to spend some time to discover the seller, to know why they are afraid of exclusivity and take the commitment for concrete and professional actions to reassure him.

The best option would be a contract in which the seller can still sell the apartment himself if he has the opportunity, because that option can free the seller from the feeling of being trapped.

Another way of reassuring the seller is the duration of the contract. Six months can be scary when he is quite in a hurry to sell if there’s no action from the consultant. With a renewable contract he can sign an exclusivity which can be stopped every quarter, so the seller would feel more comfortable and free.” (LASSALE, Thibault)

 

Knowing that there is a possibility to sell his property on his own, even though he does not have the same tools, contacts and market knowledge that a qualified real estate agent has, the client can hire an agency in an exclusivity regime and, at the same time, have the freedom to sell his property alone, as long as the exclusivity is not absolute according to the contractual terms. I also believe, as does Thibault, that this possibility is beneficial both for the agent that will dedicate more time to the client and ensure a quality service, and for the client himself.

Finally, Thibault reminded that the average prices in the market must be considered before selling a property and the seller needs to be conscious of that. He also mentioned that it is difficult to work as a real estate consultant, but he believes that it is worth to work in this market and his agency is also looking to hire more consultants.