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What are the standard clauses for a Real Estate Commission Agreement?

Table of Contents

1. Introduction

2. Standard Clauses for a Real Estate Commission Agreement 2.1. Parties 2.2. Property Description 2.3. Commission Rate 2.4. Payment Terms 2.5. Marketing and Advertising 2.6. Duties and Responsibilities 2.7. Termination 2.8. Dispute Resolution 2.9. Governing Law and Jurisdiction 2.10. Entire Agreement 2.11. Notices 2.12. Severability

3. Conclusion

Introduction

This response will outline the standard clauses typically included in a Real Estate Commission Agreement in Kenya. These clauses are essential for establishing a clear understanding between the parties involved in the real estate transaction, ensuring that both the real estate agent and the client are aware of their respective rights and obligations.

Standard Clauses for a Real Estate Commission Agreement

2.1. Parties

• Identification of Parties: The agreement should clearly identify the parties involved, including the name and contact information of the real estate agent and the client (seller or buyer).

• Capacity: The agreement should state that both parties have the legal capacity to enter into the agreement. This means that they are of legal age and have the mental capacity to understand the terms of the agreement.

Source: This clause is based on general principles of contract law, which require that parties to a contract have the legal capacity to enter into the agreement.

2.2. Property Description

• Detailed Description: The agreement should provide a detailed description of the property subject to the commission agreement, including its address, size, and any other relevant features.

• Legal Status: The agreement should state the legal status of the property, including whether it is freehold or leasehold, and any encumbrances or restrictions on the property.

Source: This clause is essential for ensuring that both parties are aware of the specific property involved in the agreement. It helps to avoid any confusion or disputes regarding the property's identity.

2.3. Commission Rate

• Percentage: The agreement should clearly state the commission rate that the real estate agent will receive. This is typically expressed as a percentage of the sale price of the property.

• Negotiation: The commission rate should be negotiated between the parties and agreed upon in writing.

Source: This clause is crucial for establishing the financial terms of the agreement. It ensures that both parties are aware of the financial obligations involved.

2.4. Payment Terms

• Payment Trigger: The agreement should specify the event that triggers the payment of the commission. This is typically the successful completion of the sale or purchase of the property.

• Payment Schedule: The agreement should outline the payment schedule, including the due date for the commission payment.

Source: This clause ensures that the real estate agent is paid for their services in a timely manner. It also clarifies the payment process and avoids any potential disputes.

2.5. Marketing and Advertising

• Marketing Strategy: The agreement should outline the marketing and advertising strategy that the real estate agent will use to promote the property. This may include listing the property on online platforms, conducting open houses, and distributing marketing materials.

• Client Approval: The agreement should require the client's approval for any marketing or advertising activities undertaken by the real estate agent.

Source: This clause ensures that the client is involved in the marketing process and that the real estate agent is using appropriate methods to promote the property.

2.6. Duties and Responsibilities

• Agent's Duties: The agreement should outline the duties and responsibilities of the real estate agent, including finding a buyer or seller, negotiating the sale or purchase price, and handling the closing process.

• Client's Duties: The agreement should also outline the duties and responsibilities of the client, including providing accurate information about the property, cooperating with the real estate agent, and completing the necessary paperwork.

Source: This clause clarifies the roles and responsibilities of each party, ensuring that both parties understand their obligations.

2.7. Termination

• Termination Conditions: The agreement should specify the conditions under which either party can terminate the agreement. This may include the failure of the other party to fulfill their obligations, the sale or purchase of the property, or the expiration of the agreement's term.

• Termination Notice: The agreement should require a specific notice period for termination, allowing both parties to prepare for the termination of the agreement.

Source: This clause provides a framework for ending the agreement in a fair and orderly manner. It ensures that both parties have the opportunity to address any issues before the agreement is terminated.

2.8. Dispute Resolution

• Dispute Resolution Mechanism: The agreement should specify a mechanism for resolving any disputes that may arise between the parties. This may include mediation, arbitration, or litigation.

• Governing Law: The agreement should specify the governing law that will apply to any disputes.

Source: This clause provides a clear process for resolving disputes, minimizing the risk of costly and time-consuming litigation.

2.9. Governing Law and Jurisdiction

• Governing Law: The agreement should specify the law that will govern the agreement. This is typically the law of the jurisdiction where the property is located.

• Jurisdiction: The agreement should specify the jurisdiction where any disputes will be resolved.

Source: This clause ensures that the agreement is governed by the appropriate legal framework and that any disputes are resolved in a designated jurisdiction.

2.10. Entire Agreement

• Complete Agreement: The agreement should state that it constitutes the entire agreement between the parties and supersedes any prior agreements or understandings.

• No Oral Modifications: The agreement should state that any modifications to the agreement must be in writing and signed by both parties.

Source: This clause prevents any misunderstandings or disputes regarding the terms of the agreement. It ensures that the written agreement is the sole and complete expression of the parties' agreement.

2.11. Notices

• Method of Notice: The agreement should specify the method for delivering notices between the parties. This may include email, postal mail, or courier service.

• Effective Date: The agreement should specify the date on which notices become effective.

Source: This clause ensures that both parties are properly notified of any important information related to the agreement.

2.12. Severability

• Severability Clause: The agreement should include a severability clause, which states that if any provision of the agreement is held to be invalid or unenforceable, the remaining provisions will remain in full force and effect.

Source: This clause ensures that the agreement remains valid and enforceable even if one or more provisions are found to be invalid or unenforceable.

Conclusion

The standard clauses outlined above are essential for a comprehensive and legally sound Real Estate Commission Agreement in Kenya. By including these clauses, both the real estate agent and the client can ensure that their rights and obligations are clearly defined, minimizing the risk of disputes and ensuring a smooth and successful real estate transaction.