[Ryu Taemin's Real Estate A to Z] Do You Have to Pay Brokerage Fees Even When Cancelling a Contract?

Payment Principle Applies When Seller or Buyer Changes Mind
Depends on Contract Conclusion in Case of Preliminary Agreement

[Asia Economy Reporter Tae-min Ryu] #Office worker A discovered a house he liked after much effort to buy his own home. After confirming that it met his desired conditions, A signed the contract and paid the deposit to the homeowner, but shortly after, he received a call from the real estate agent saying, "The house price has risen, and the homeowner has changed their mind," and that the contract was canceled.

Recently, as housing prices continue to rise, cases of contract cancellations due to sellers changing their minds are increasing. In the jeonse market, there are also cases where contracts are canceled because buyers cannot pay the intermediate or final payments after commercial banks consecutively stopped mortgage and jeonse loans. At first glance, since the contract was not finalized, it may seem unnecessary to pay a separate brokerage fee, but under civil law, when a contract is canceled due to a change of mind by the seller or buyer, not attributable to the broker, it is standard to pay the agreed brokerage fee. This is because the role of a licensed real estate agent is to show the property, provide legal consultation on rights and issues, and connect buyers and sellers for the 'contract conclusion.'

If a contract is canceled at the 'pre-contract' stage, whether brokerage fees must be paid depends on whether the contract was concluded. Legally, a pre-contract, called a sales reservation, is considered an expression of intent to enter into a sales contract in the future before the formal contract is signed. Therefore, if details such as contract amount, payment timing, and transaction property are clearly specified, the Supreme Court has ruled that a contract can be considered concluded even by text or oral agreement. However, if the specifics are insufficiently defined, some rulings consider that a formal contract has not been concluded, and thus there is no obligation to pay brokerage fees, so caution is needed during pre-contracts.

There is no exception when canceling an existing contract and entering into a new contract without a broker. For example, if a landlord and tenant cancel a jeonse contract just before signing and later contact each other to sign a contract without a broker, they still have an obligation to pay a portion of the fee to the licensed real estate agent who introduced the property, depending on the similarity to the previous contract. This is because the agent is recognized as having connected the landlord and tenant and mediated important contract matters. Additionally, according to the Licensed Real Estate Agent Act, even if a contract is not concluded, if the agent provides assistance such as explaining rights or fulfilling the obligation to return the deposit, they can claim a certain amount of actual expenses.

There are also cases where a contract is canceled without agreeing on the brokerage fee rate during the contract process. In such cases, rather than charging the maximum rate, it is common to determine the fee based on an appropriate level of 'customary fees.' Attorney Jo Se-young of Law Firm Rowin advised, "It is best to negotiate the brokerage fee rate before signing the contract to prevent major disputes later," and added, "If prior negotiation is impossible due to unavoidable circumstances, I recommend including the phrase 'to be negotiated later' in the contract terms."