The Supreme Court of Lithuania (SCL) has issued a significant ruling on real estate agency contracts - unilaterally drafted brokerage contracts, which provide for obligations to pay commissions and for non-performed services, are considered unfair to consumers.
The case concerned a dispute over the amount of €1,500 claimed by a real estate agency as commission for its services, even though the property was eventually sold through the owner's own efforts and not to a buyer found by the agency. The Supreme Court ruled in favour of the consumer, annulling the judgments of the first and appellate instance which had upheld the broker's claim.
This is a signal to the whole property sector
As the provision of real estate agent (broker) services is not separately regulated by Lithuanian legislation, the Supreme Court's case law is of particular importance when assessing whether the contracts concluded and services provided by brokers are in line with the legitimate interests of consumers.
According to Eimantas Čepas, attorney at AVOCAD, this case sets an important precedent, in which the court has made it clear: the usual contracts used by brokers are in a standard form and do not automatically imply that the consumer has agreed to their content knowingly or has individually discussed them in detail.
“In this case, the court found that the contract drafted by the broker was a pre-formulated, boilerplate agreement; therefore, it is subject to the criteria of consumer protection and good faith, and the burden of proving that the terms were individually negotiated falls specifically on the business operator—the broker,” notes E. Čepas.
Where a fee is claimed for the mere fact of a contract
One of the key aspects of the dispute is that the broker demanded payment for services even when the actual services were not provided. The client sold the property herself and the agency did not find a buyer, but the broker argued that the sale was advertised on websites and internet sites and other means, and that therefore the costs were incurred and the broker was entitled to remuneration for the services. In this context, the agency claimed a fee of EUR 1 500 on the basis of several clauses of the contract.
LAT pasisakė aiškiai: „tikrieji Sutarties šalių ketinimai – atsakovė siekė ieškovės pagalba parduoti žemės sklypus, o ieškovė – surasti atsakovės žemės sklypų pirkėją, sudaryti su juo avansinę sutartį ir gauti už tai iš atsakovės 2000 Eur atlyginimą... <...> ieškovė atsakovės žemės sklypų pirkėjo nesurado, avansinės sutarties su pirkėju nesudarė, žemės sklypai buvo parduoti be ieškovės pagalbos, taip pat byloje nėra duomenų, kad ieškovė būtų atlikusi kokius nors veiksmus atsakovės naudai vykdydama Sutartį. Dėl nurodytų priežasčių nėra pagrindo konstatuoti, kad ieškovei priklauso atlyginimas pagal Sutarties 8 punktą...“
The Supreme Court noted that "the terms of the contract are not clear and sufficiently comprehensible, do not comply with the requirement of transparency, and are therefore unfair". In the Court's view, there is no reason to conclude that the consumer would have agreed to the condition that the broker's remuneration would be fixed, irrespective of whether the broker had fulfilled its obligations under the contract.
The onus is on the trader to prove that the contract is fair
The Court of Cassation has also clarified that service contracts cannot impose an obligation to pay merely on the basis of the fact that a contract has been concluded, as this does not impose any real responsibility on the service provider for the quality of the performance. Moreover, the agency did not impose any obligation on the basis of the contract to provide information on what it had done specifically for the consumer.
"The mere fact that a contract has been signed does not prove that the services have actually been provided, and if it has not been proven what services have been provided and what costs have been incurred, no remuneration can be claimed," stresses Eimantas Čepas.
In its ruling, the Court identified as many as five contractual provisions that are unfair to the consumer:
- Prohibition to sell the property or change the price without the broker's knowledge.
- Obligation to pay commission even if the broker has not fulfilled the contract and found a buyer.
- The requirement to pay a fixed commission of €1,500 even if no services are provided.
- Prohibiting the consumer from communicating with the buyers found by the broker.
- Provision that the broker is not obliged to provide any information about its actions.
"This is one of the clearest signals from the Supreme Court on consumer protection: service providers cannot hide behind template contracts. If you want a reward, you have to prove that you have actually worked and provided a benefit to the client", says lawyer E. Čepas.
Recommendation to estate agencies to review contract models
According to the lawyer, this case sets an important precedent. "Consumer rights are not a formality. Even if a contract has been signed, it must be fair, clear, and reflect the actual agreement. We invite real estate agencies and brokers to assess whether the contracts they use comply with the principles of fairness, clarity, and transparency and, if necessary, to update them," summarizes Eimantas Čepas.