Exclusive agreement with a real estate agent in Poland– the most common legal issues

An exclusive agreement with a real estate agent in Poland, also often referred to as an agreement with an exclusivity clause, an agreement with exclusivity reservation, or a closed agreement (as opposed to an open agreement), is one of the most common forms of cooperation on the real estate market. This type of contract is particularly preferred by professional agents who, investing significant funds in the marketing and promotion of the property offered, want to secure their right to commission.

A characteristic feature of an exclusive agreement with a real estate agent in Poland is that it guarantees the agent the exclusive right to offer a specific property for a period specified in the agreement. This means that only this one specific agent has the right to represent, most often, the owner (seller or landlord) in the sale or rental process. In practice, this means that the agent is the only one who can present the property to potential clients, and the owner cannot use the services of other agencies at the same time. In other words, the agent gains temporary exclusivity over the client’s offer.

The main reason for concluding exclusive agreements is to secure the agent’s investment. Since the agent commits their time, resources, and often also financial means (e.g., for a professional photo shoot, promoting the offer in paid channels, or organizing presentations, etc.), they expect a guarantee that their efforts will not be undermined by the owner’s parallel cooperation with other agencies. It is crucial to precisely formulate the exclusivity clause in an agreement with Polish real estate agent and, in the case of contracts concluded with consumers, to adapt it to the requirements of consumer protection regulations.

However, entering into an exclusive agreement with a real estate agent in Poland involves legal risks, especially on the part of the owner, and the agreements themselves often give rise to much controversy, particularly when concluded with consumers. For example, many agreements with an exclusivity clause provide for the obligation to pay remuneration even if the owner finds a buyer (or tenant) themselves, and even if the transaction is concluded after the end of the term of the agreement, but with a person who became familiar with the offer during its term. In many situations, such provisions may constitute abusive clauses and therefore not be binding on consumers.

It is also worth remembering that, with regard to exclusivity clause in an agreement with Polish real estate agents in brokerage agreements, different rules apply in relations with consumers and in the case of agreements concluded between entrepreneurs. An owner acting within the scope of business activity (e.g., an investor, developer) cannot benefit from the protection afforded to consumers.

The purpose of this study is to organize knowledge about exclusive agreements in real estate transactions and to discuss the most common doubts and legal risks associated with their conclusion.

The right to reserve exclusivity by an agent in the light of the provisions of the Polish Civil Code

Although in the current legal situation there is no general, abstract definition of “exclusivity” as a legal institution, in order to better understand what should be interpreted as “exclusivity,” reference can be made to two provisions of the Polish Civil Code.

First of all, Article 550 of the Polish Civil Code, according to which: if exclusivity has been reserved for the buyer in a sales contract, either in such a way that the seller will not supply goods of a specific type to other persons, or in such a way that the buyer will be the sole reseller of the purchased goods in a designated area, the seller may not, to the extent that exclusivity has been reserved, directly or indirectly conclude sales contracts that could infringe the buyer’s exclusivity.

Although this provision refers directly to a sales agreement, in the context of an agency agreement it should be interpreted as meaning that the conclusion of an agreement with an exclusivity clause in favor of a specific agent precludes the possibility for the client to take actions, either directly or indirectly, resulting in the conclusion of a real estate agreement without the agent with whom the exclusivity agreement was concluded. This provision also stipulates that a breach of the exclusivity clause in an agreement with Polish real estate agent gives rise to liability for damages on the part of the party breaching the exclusivity clause (i.e., the broker’s client) for non-performance or improper performance of the obligation. A more detailed commentary on this issue is provided below.

Another provision relating to exclusivity is Article 761 § 2 of the Polish Civil Code concerning agency agreements, according to which: if an agent has been granted exclusivity in relation to a specified group of customers or geographical area, and during the term of the agency agreement a contract has been concluded with a customer from that group or area without the agent’s participation, the agent may demand a commission from that contract. The principal is obliged to notify the agent of the conclusion of such a contract within a reasonable time. Exclusivity under an agency agreement therefore has specific legal consequences which may give rise to a monetary claim (for commission), even if the agent did not participate in the conclusion of the agreement.

However, it should be remembered that the automatic transfer of the consequences of Article 761 § 2 of the Polish Civil Code to other agreements may be an abuse if there is no contractual basis (e.g., no explicit provision in the agency agreement) or if the agreement with exclusivity has been concluded with a consumer, to whom additional criteria for the assessment of contractual provisions apply (Article 385¹ et seq. of the Polish Civil Code).

In the context of the above provisions, the following practical question arises: 

Is the agent entitled to a commission if the owner has concluded an exclusive agreement but has sold the property on his own?

A common view is that if a real estate brokerage agreement containing an exclusivity clause, the broker is entitled to a commission even if the owner sells the property on their own, i.e., without the broker’s involvement. However, it seems that this position, although popular among representatives of the brokerage industry, is incorrect, especially when the agency’s client is a consumer.

In practice, this leads to a situation where the agent demands payment for activities that he has not actually performed, i.e. he has not brought about the conclusion of a contract by bringing the parties together (seller – buyer, or landlord – tenant), did not participate in negotiations, nor did they perform other activities covered by the scope of the brokerage agreement. Despite this, they expect full payment of the agreed commission, basing their claim on the exclusivity clause in an agreement with Polish real estate agent for offering the property.

However, it seems that such claims will be contrary to the wording of Article 385³(22) of the Polish Civil Code, according to which contractual provisions are prohibited if they provide, in particular, for the consumer’s obligation to perform the contract despite the non-performance or improper performance of the contract by the other party (i.e., the agent). According to this provision, it is therefore not permissible for the consumer to be obliged to pay remuneration if the other party—i.e., the agent—has not performed its obligation, which includes, among other things, bringing about the conclusion of a contract with the counterparty.

Thus, it is likely that a provision which provides for the obligation to pay a commission solely on the basis of the fact that the owner has concluded a transaction (without any involvement of the intermediary) may be considered an unfair contract term in relations with consumers. As a result, it will be an invalid provision and will not be binding on the consumer. This situation may occur in particular when the intermediary fails to prove that it contributed in any way to the finalization of the transaction.

In this context, it is also worth noting that an exclusive brokerage agreement in Poland gives the broker exclusivity to provide sales (or rental) brokerage services, but not exclusivity to sell (or rent) the property as such. Its essence is therefore to prohibit the involvement of other real estate agents and to restrict the owner’s independent actions in terms of using the services of competing agencies, rather than to deprive him of the right to conclude a sales agreement independently. This distinction seems to be crucial, although, as indicated above, much may depend on the content of the contractual obligations and the facts of the case.

The above view has been established in the case law of common courts.

A practical example from case law:

“Since the essence of an agency agreement is for the agent to create opportunities and possibilities for the contracting parties to conclude a real estate purchase agreement -sale of real estate, and then acquires the right to remuneration, it would be contrary to the nature of the legal relationship to consider it permissible to grant the right to remuneration to the intermediary in the case of any transaction with any contractor outside the scope of the intermediary’s activities. In such a situation, there is a lack of a fundamental element of an agency agreement, i.e., the association of contractors” (judgment of the Court of Appeal in Warsaw, 5th Civil Division, of December 12, 2012, file ref. no. VI ACa 838/12).

“The exclusivity clause in an agreement with Polish real estate agent referred to in Article 180(3a) of the Real Estate Management Act in conjunction with Article 550 of the Polish Civil Code does not entitle the intermediary to demand a commission if, in the course of proceedings for payment, it is demonstrated that the conclusion of the real estate sale agreement was the result of the seller’s independent actions unrelated to the activities of the broker” (judgment of the Court of Appeal in Gdańsk, 1st Civil Division, dated April 30, 2009, file ref. no. I ACa 249/09).

“The view of the District Court should be shared that the exclusivity clause in an agreement with Polish real estate agent included in the agreement between the parties did not entitle the claimant to demand a commission, as it was demonstrated in the course of the proceedings that the conclusion of the contract for the sale of the real estate belonging to the defendants was the result of their independent actions” (judgment of the Regional Court in Słupsk, 4th Civil Appeals Division, of March 31, 2015, file ref. no. IV Ca 178/15).

Claims of a real estate agent in the event of a breach of exclusivity by a client

As indicated above, exclusivity gives the agent the right to act exclusively on behalf of the client, with a prohibition on engaging other agents. This raises a practical question: what can the agent demand from the client in the event of a breach of the exclusivity clause in an agreement with Polish real estate agent in the lease agreement? In such a case, the agent is entitled to two claims against the disloyal client.

1. Claim for payment of a contractual penalty in the event of a breach of the exclusivity clause in an agreement with Polish real estate agent

Pursuant to Article 483 § 1 of the Polish Civil Code, it may be stipulated in the agreement that compensation for damage resulting from non-performance or improper performance of a non-monetary obligation shall be made by payment of a specified amount (contractual penalty). In other words, a contractual penalty is a specific amount that the obligated party, i.e., the agent’s client, must pay to the agent in the event of a breach of the contract, regardless of the amount of damage suffered by the agent. This solution is an effective tool for protecting the interests of the agent, simplifying the pursuit of claims and eliminating the need to prove the amount of damage suffered.

Securing an exclusivity clause in an agreement with Polish real estate agent through the use of contractual penalties is a very common practice. However, the following criteria should be taken into account:

• Proportionality of the contractual penalty – the contractual penalty should be proportional to the amount of the agent’s remuneration provided for in the agency agreement. If the agreement includes a contractual penalty, for example, in the amount of two, three, or multiple times the commission, there is a high probability that such a provision may be challenged by the court as an abusive clause that is not binding on the consumer. For example, in Decision No. RGD 18/2013 of November 19, 2013, the President of the Office of Competition and Consumer Protection challenged a clause that imposed a contractual penalty equal to double the remuneration;

• maintaining a balance between the rights and obligations of the parties to the brokerage agreement, i.e., the broker and the client, by allowing the client to also pursue a claim for contractual penalties. Such a situation may occur, for example, if the agent refuses to handle the expected transaction, fails to undertake advertising and marketing activities within the agreed period, does not actively seek potential buyers/tenants, does not regularly report to the client on the progress of activities, etc. Interestingly, an analysis of decisions issued by the President of the Office of Competition and Consumer Protection (UOKiK) indicates that this authority allows contractual penalties to be imposed on the agent even in an amount twice that which the client would have to pay the agent for breach of the exclusivity clause in an agreement with Polish real estate agent (for example: decision of the President of the Office of Competition and Consumer Protection No. RBG – 2/2015 of January 15, 2015).

2. Claim for damages in the event of a breach of the exclusivity clause in an agreement with Polish real estate agent

The second (although seemingly less favorable) option for a real estate agent will be to pursue a claim for damages due to improper performance of the contract by the client, i.e., a breach of the exclusivity clause in an agreement with Polish real estate agent.

This claim may be pursued on the basis of Article 471 of the Polish Civil Code, according to which the debtor (the agent’s client) is obliged to repair the damage resulting from non-performance or improper performance of the obligation, unless the non-performance or improper performance is the result of circumstances for which the debtor is not responsible.

What does the damage cover in practice? First of all, the expenses incurred by the agent for activities undertaken in the performance of the contract (so-called damnum emergens), for example:

• costs of marketing and advertising activities (e.g., advertisements in traditional and online media, advertising campaigns, advertising banners, preparation of promotional materials),

• expenses related to the organization and conduct of property presentations (e.g., rental of space, travel costs, fees for photo shoots or virtual tours),

• fees for consulting, legal, or notary services related to the preparation and execution of the transaction.

In addition, the broker’s damage may include so-called lost profits (lucrum cessans), i.e., the potential profit that the broker could have achieved if the exclusive agreement with a real estate agent in Polandhad been performed by the client as agreed. In practice, this will most often be a commission on a transaction that did not take place due to a breach of contract by the client.

In many cases, it may be difficult for the agency to prove the damage and its amount, which is not the case with a claim based on a contractual penalty. In a possible court case based on Article 471 of the Polish Civil Code, the agent must prove a so-called adequate causal link between the damage and the client’s actions. For example, this would be a link between the conclusion of an agency agreement with another person, as a result of which the property was sold to a contractor other than the one indicated by the agent. It will also be necessary to present the court with relevant evidence to confirm the facts of the case.

It therefore seems that a claim based on a contractual penalty is easier to prove in practice, as it does not require proving the amount of damage or the causal link between the breach of contract and the damage incurred.

Exclusivity clause in an agreement with Polish real estate agent in a brokerage agreement with a consumer – when can it be abusive?

When concluding an exclusivity agreement with an entity having the status of a consumer within the meaning of Article 221 of the Polish Civil Code, the agent should bear in mind that the consumer is protected both by the provisions of the Polish Civil Code concerning prohibited clauses (Article 385¹ et seq. of the Polish Civil Code) the Consumer Rights Act, but also indirectly by the decisions of the President of the Office of Competition and Consumer Protection (UOKiK) and the case law of the Court of Competition and Consumer Protection, which shape the interpretative standards of the provisions and market practice in relations with consumers.

First of all, it should be borne in mind that, pursuant to Article 385¹ § 1 of the Polish Civil Code, provisions of a contract concluded with a consumer which have not been individually agreed upon are not binding on the consumer if they shape his rights and obligations in a manner contrary to good practice, grossly violating his interests (prohibited contractual provisions).

Contrary to good practice, as referred to in the above definition, will be contractual provisions which, for example, are unilateral, impose disproportionate obligations, exclude the liability of the intermediary, cause surprise, etc. When analyzing a provision, the content of the contract itself, the circumstances of its conclusion, and whether the consumer would have agreed to the provision if the exclusive contract had not been concluded on the basis of a template used by the intermediary (i.e., if it had been agreed with the customer and customized) are taken into account. Consequently, the introduction of standard clauses into a contract template without the possibility of negotiation by the customer may lead to them being considered prohibited and, therefore, ineffective vis-à-vis the consumer.

A gross violation of interests will occur, for example, if the provision prevents the pursuit of claims, imposes an excessive contractual penalty regardless of the degree of fault, provides for the obligation to pay a commission despite the lack of any action on the part of the intermediary, transfers the entire risk of the transaction to the consumer, prevents or significantly hinders withdrawal from the contract, etc. Such clauses may also be considered prohibited and therefore not binding on the consumer.

Practical example from case law:

“An exclusivity clause in an agreement with Polish real estate agent cannot restrict the consumer from taking steps to transfer ownership of his property or from concluding a contract without an intermediary (judgment of the Regional Court in Warsaw, 17th Division for Competition and Consumer Protection of October 4, 2012, file ref. no. XVII AmC 600/12)

“In the opinion of the Court, the contractual penalty contained in § 5 of the agreement, amounting to double the remuneration due to the agent, calculated on the basis of the offer price, is grossly excessive. It violates good practice by creating a contractual relationship that is inconsistent with the principle of equality of the parties and leads to abuse of consumer trust in the name of the intermediary’s concern for protecting its own interests at the expense of the other party to the contract. The claimant has not demonstrated that the stipulated remuneration was adequate to the costs and effort she incurred in connection with the contract. (judgment of the Court of Appeal in Katowice, 5th Civil Division, of October 14, 2022, file ref. no. V ACa 162/21).

Exclusivity clause in an agreement with Polish real estate agent in an agency agreement with an entrepreneur – liberal rules of protection

The conclusion of a real estate brokerage agreement with an entity that is not a consumer but conducts business activity is not subject to the regime of provisions protecting consumers against abusive clauses, in particular Article 385¹ et seq. of the Polish Civil Code. The liberalized (in terms of consumer protection) rules for the protection of entrepreneurs as parties to a contract result from the legislator’s assumption that professionals have the appropriate knowledge, experience, and negotiating skills to consciously shape the content of a contract and assess the risks of concluding it. Thus, they do not require the same protection as consumers. This distinction has been in place for years in the Polish and European legal systems and is not disputed.

When concluding an agency agreement with an entrepreneur, the parties therefore enjoy greater contractual freedom, the limits of which are primarily set out in Article 353¹ of the Polish Civil Code. According to this provision, the parties may arrange the legal relationship at their discretion, provided that its content or purpose does not conflict with the nature (nature) of the legal relationship, the law, or the principles of social coexistence. This means that in relations between professionals, more stringent and unambiguous contractual provisions are permissible, provided that they do not violate essential legal or ethical standards.

Practical example from case law:

“(…) In contracts based on mutual trust, such as a contract of mandate, the parties may exclude or limit the admissibility of termination without valid reasons. It must be recognized that this is also permissible in an exclusive real estate brokerage contract concluded in favor of the broker. Such an agreement concluded for an indefinite period is beneficial to both parties, but these benefits may be negated by the possibility of terminating the agreement at any time and without any reason. This would be particularly disadvantageous for the agent, who would bear the entire financial risk of such termination. Therefore, the parties may contractually limit the possibility of terminating the brokerage agreement without valid reasons. Such a limitation may be the establishment of a contractual penalty for terminating the agreement without a valid reason. (Supreme Court judgment of December 20, 2005, file ref. no. V CK 295/05)

What contractual provisions should a correctly and safely constructed agreement containing an exclusivity clause in an agreement with Polish real estate agent contain?

It seems that the general rule and key element of a correctly constructed brokerage agreement with an exclusivity clause in an agreement with Polish real estate agent is to ensure the precision of the provisions and the balance between the parties, especially when the agreement is concluded with a consumer. The agent should therefore strike a balance between securing their contractual interests on the one hand and the client’s interests on the other, and ensure compliance with the law, in particular the provisions on unfair terms.

In particular, it seems that an exclusive agency agreement should include the following elements:

• An exclusive agreement with a real estate agent in Poland should clearly state that it is an exclusive agreement and a draft should be sent to the client before it is concluded.

It seems worthwhile to indicate clearly and visibly in the title of the exclusive agreement, e.g. in capital letters, that the document being signed is an “exclusive brokerage agreement” and not just a “brokerage agreement.” Although the legal title of the document has no legal significance as such (its content is more important), it may minimize the risk that the client will try to challenge the exclusivity provisions in the future, citing a lack of awareness of the nature of the agreement or even claiming that the exclusivity clause in an agreement with Polish real estate agent was “hidden” from them by the broker.

It is also good practice to send the client a draft of the exclusivity agreement by email well in advance, preferably before the first property is presented. This will allow the client to analyze the agreement and formulate any questions regarding the exclusivity provisions (or other elements of the brokerage agreement).

In practice, however, agreements are often signed “on the spot,” at the property being viewed or even in front of the property, during or before the presentation of the property. This type of practice may raise doubts as to whether the consumer has a real opportunity to familiarize themselves with the content of the agreement, including the consequences of introducing an exclusivity clause in an agreement with Polish real estate agent, as well as provisions regarding contractual penalties in the event of a breach of the agreement.

It is therefore in the interest of the agent to ensure that the conclusion of an exclusive agreement with a real estate agent in Poland is preceded by transparent and calm communication, and that the client has the opportunity to freely familiarize themselves with the content of the agreement, including the provisions that are most legally significant for them. It seems that the exclusivity clause in an agreement with Polish real estate agent is precisely such a provision. It should be assumed that this is not only good business practice, but also a safeguard against possible allegations of a lack of individual agreement on the provisions, which in the case of consumers may result in them being considered prohibited (abusive).

• The duration of the exclusivity agreement should be specified

Of course, it is impossible to specify a specific “permitted” duration of an exclusivity agreement, as this may vary, primarily depending on the type and characteristics of the offer. However, it seems that in practice it is accepted that an exclusivity clause in an agreement with Polish real estate agent should not be concluded for less than three months, as the agency needs a minimum amount of time to prepare and implement effective marketing activities. The upper limit is often 12 months, although there are no contraindications for the parties to agree on a longer or shorter period, provided that this is justified by the specific nature of the offer.

It seems that the more “standard” the property is, for which there is high market demand (e.g., a two-room apartment of average standard in a provincial capital), the shorter the exclusivity period should be. On the other hand, in the case of unusual, luxury properties with original features, commercial real estate, where the circle of interested buyers is narrower and promotion requires a significant investment of time and resources, it may be reasonable to set a longer period of exclusivity.

• The scope of the agent’s obligations should be precisely defined

An agency agreement with an exclusivity clause in Poland should define the agency’s obligations as precisely as possible, i.e., clearly indicate what specific actions will be taken and within what time frame in order to perform the agreement. Although it is obvious that an agent can never (and certainly should not) guarantee the client that a transaction will be finalized, they should indicate what specific actions they will take to realistically increase the chances of concluding an agreement with the contractor.

For example, simply stating in the contract that the contractor undertakes to “place an advertisement on specific portals, including premium versions” may prove insufficient and, as a consequence, lead to different interpretations of the scope of the agent’s obligations by the parties to the contract. In this case, it is necessary to specify precisely when and on which specific portals (indicating their names) the advertisements will be published, whether and how premium bids will be made, and when and for how long the advertisements will be visible.

Similarly, in the case of a provision concerning the “preparation and display of an advertising banner,” the parties should specify precisely what banner (dimensions, materials, content) will be prepared, where and when it will be displayed and for how long, as well as who will bear the costs associated with its production and installation.

With regard to “ongoing reporting to the client on the progress of activities,” it is necessary to specify in detail how often and in what form reports will be provided (e.g., by email, by phone), what specific information they will contain (e.g., number of advertisements posted, view statistics, audience responses), and how the client will be able to submit comments or questions regarding the performance of the service.

• Precise definition of penalties for breach of the exclusivity clause in an agreement with Polish real estate agent

An exclusivity agreement should contain provisions that are as precise as possible regarding penalties for breach of the exclusivity clause in an agreement with Polish real estate agent by the broker’s client. As indicated above, the penalty will generally be the possibility of claiming a contractual penalty. Therefore, it is important that the contractual penalty clause specifies, above all:

–    the amount of the contractual penalty,

–    the circumstances under which the contractual penalty will be due,

–    the date and method of payment of the contractual penalty,

–    whether the intermediary has the right to claim damages in excess of the amount of the contractual penalty, which, pursuant to Article 484 § 1 of the Polish Civil Code, is only permissible if the parties have expressly stipulated this.

At the same time, the contractual penalty should be formulated in a proportionate manner and in accordance with applicable law, so as to avoid it being considered an unlawful clause.

Summary

An agency agreement with an exclusivity clause in an agreement with Polish real estate agent is a frequently used instrument in the real estate market. An exclusivity agreement gives the agent the exclusive right to offer the client’s property for a specified period of time, but its use involves many legal risks, especially in relations with consumers. When drafting an agreement, the agent should always take into account, among other things, issues related to their right to remuneration in the event of non-participation in the transaction, the rules for calculating contractual penalties for breach of exclusivity, differences in the protection of consumers and entrepreneurs, as well as the need to precisely define the obligations of the parties, the duration of the agreement, and reporting mechanisms. Particular attention is paid to the need to formulate provisions in a clear, balanced manner and in accordance with the provisions of the Polish Civil Code relating to abusive clauses, in order to limit the risk of their invalidation and to ensure fairness and transparency in contractual relations.