Legal Updates

A realtor who misleads a client may forfeit its right to the brokerage fee even if it was the effective factor in executing the transaction

November 9, 2022

A customer refused to pay brokerage fees of over ILS 2.5 million to the realtor even though an agreement was made to sell the property.

The Court rejected the relator’s claim as it failed to disclose the identity of the purchaser and forfeit her right to brokerage fees. Under Israeli law, a realtor is entitled to brokerage fees if it was “the effective factor that brought the parties to enter into a binding agreement". A party to an agreement is obligated to disclose material facts to the other party and non-disclosure may be considered as misleading and justify the termination of the agreement. Here the relator was the effective factor, contributed to the parties entering into a binding agreement to sell a building worth ILS 110 million and demanded 2% of the sale value as brokerage fees. However, the customer terminated the brokerage agreement after learning that the realtor misled the customer regarding the identity of the property's purchaser and made a false representation as if it was a purchaser it did not know, even though it was a purchaser who knew the building and had already received the details directly from the owner of the building who already offered him to purchase the property. Therefore, the customer was entitled to terminate the brokerage agreement due to the misleading because if the identity of the purchaser had been revealed ahead of time, the customer would not have agreed to pay the brokerage fees.