Distinguishing between brokerage authorization contracts

Distinguishing between brokerage authorization contracts is a prerequisite that helps participating subjects correctly establish the nature of their civil relationship and prevent arising disputes. Real estate transactions in Vietnam frequently utilize these two legal instruments to optimize time and resources. The following information clarifies current legal regulations to help you accurately identify the distinguishing between brokerage authorization contracts.

What is a brokerage contract in real estate transactions?

To clearly understand the nature of brokerage relationships in property dealings, distinguishing between brokerage authorization contracts is necessary when examining what constitutes a brokerage contract in real estate transactions.

A brokerage contract in real estate is widely used in the Vietnamese real estate business. Its legal mechanism is primarily established in the 2023 Law on Real Estate Business and related regulations of the 2015 Civil Code. In practice, this contract helps connect buyers and sellers but does not create representative rights to sign the transaction.

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The concept of a real estate brokerage contract

Under Clause 11, Article 3 of the 2023 Law on Real Estate Business, real estate brokerage is the intermediary activity in buying, selling, transferring, leasing, or lease-purchasing real estate. A brokerage contract is an agreement between the service provider and the hiring party to establish the obligation to search for transaction partners. The broker is not a subject of the transaction itself; they solely perform tasks like marketing, connecting clients, and assisting in negotiations.

Parties involved in a brokerage contract

The subjects include the real estate broker, the hiring party, and related transacting parties. Under Article 61 of the 2023 Law on Real Estate Business, brokerage organizations must establish an enterprise, possess compliant physical/technical facilities, have at least 01 certified individuals, and register their information with provincial authorities. Individual brokers must hold a practicing certificate and operate within a real estate trading floor or brokerage enterprise.

Basic contents of a real estate brokerage contract

Pursuant to Clause 4, Article 46 of the 2023 Law on Real Estate Business, a brokerage contract typically includes:

• Names and addresses of the parties;
• Target audience and service content;
• Service requirements and results;
• Service delivery timeframe;
• Service fees, remuneration, service commissions;
• Payment methods and terms;
• Rights and obligations of the parties;
• Methods of dispute resolution;
• The effective date of the contract.

These details must be clearly stated to ensure transparency in brokerage activities.

>>See more: Authorization for Real Estate Brokers to Sign Contracts

Rights and obligations of real estate brokerage businesses and individuals practicing real estate brokerage

In the real estate business, brokerage services play a crucial role in connecting parties who need to buy, sell, transfer, lease, or invest. To ensure that brokerage activities are transparent, professional, and in accordance with the law, current legislation clearly defines the rights and obligations of real estate brokerage businesses and individuals practicing real estate brokerage.

Understanding these rights and obligations not only helps practitioners comply with legal regulations but also contributes to protecting the rights of clients and minimizing disputes arising during transactions.

For businesses providing real estate brokerage services

According to Clause 1, Article 64 of the 2023 Law on Real Estate Business, real estate brokerage service businesses have the following rights:

• Conduct real estate brokerage activities in accordance with the provisions of the 2023 Law on Real Estate Business;
• Request relevant organizations and individuals to provide records and information regarding the real estate transactions;
• Service fees are charged to customers as agreed upon by the parties;
• Refuse to broker real estate that does not meet the eligibility requirements for operation;
• Require the organizations and individuals involved to compensate for damages caused by their negligence;
• Other contractual rights.

Based on Clause 1, Article 65 of the 2023 Law on Real Estate Business, real estate brokerage service businesses have the following obligations:

• Provide complete and truthful documentation and information about the properties you are brokering, and be responsible for the accuracy of the documentation and information you provide;
• Organize annual training and professional development programs to enhance the knowledge and skills of real estate brokers working within the company;
• Fulfill tax obligations to the State;
• Compensate for damages caused by one’s own fault;
• Comply with reporting requirements as stipulated by law and be subject to inspection and auditing by competent state agencies;
• Other contractual obligations.

For individuals practicing as real estate brokers

According to Clause 2, Article 64 of the 2023 Law on Real Estate Business, individuals practicing real estate brokerage have the following rights:

• Conduct real estate brokerage activities in accordance with the provisions of the 2023 Law on Real Estate Business;
• Request relevant organizations and individuals to provide records and information regarding the real estate transactions;
• Refuse to broker real estate that does not meet the eligibility requirements for operation;
• Require the organizations and individuals involved to compensate for damages caused by their negligence;
• Receive fees and commissions for real estate brokerage as stipulated in Article 63 of the 2023 Law on Real Estate Business.

Based on Clause 2, Article 65 of the 2023 Law on Real Estate Business, individuals practicing real estate brokerage have the following obligations:

• Provide complete and truthful documentation and information about the properties you are brokering, and be responsible for the accuracy of the documentation and information you provide;
• Fulfill tax obligations to the State;
• Compensate for damages caused by one’s own fault;
• Comply with the operating regulations of the real estate exchange or real estate brokerage business where the individual works;
• Participate in annual training and professional development programs to enhance your knowledge and skills in real estate brokerage.

Brokerage fees, commissions, and eligibility conditions

The regulations regarding fees and commissions for real estate brokers, as stipulated in Article 63 of the 2023 Law on Real Estate Business, are as follows:

• Individuals practicing as real estate brokers are entitled to fees and commissions from businesses providing real estate exchange services or businesses providing real estate brokerage services.
• The fee or commission for real estate brokerage is agreed upon between the individual real estate broker and the real estate exchange or brokerage service business. The real estate brokerage fee does not depend on the price of the real estate transaction being brokered.

What is a power of attorney contract in real estate transactions?

In the context of property transactions, distinguishing between brokerage authorization contracts also requires a clear understanding of the legal characteristics of a power of attorney contract.

A power of attorney contract in real estate transactions is a form of legal representation that An authorization contract in real estate transactions is a form of legal representation allowing an individual or organization to act on behalf of the owner to execute a real estate transaction. The legal basis is stipulated in Article 562 of the 2015 Civil Code.

Unlike a brokerage contract, an authorization contract creates a representation relationship. The authorized person can sign sale and transfer contracts or execute legal procedures at state agencies on behalf of the owner. In practice, it is often used when the owner cannot directly participate, is abroad, or requires legal representation for procedures.

The concept of power of attorney in the real estate sector

Under Article 562 of the 2015 Civil Code, an authorization contract is an agreement between parties whereby the authorized party performs tasks in the name of the authorizing party. In real estate, the scope may include:

• Signing the housing/land purchase and sale contract.
• Executing procedures at the Land Registration Office.
• Submitting dossiers to the People’s Committee.
• Fulfilling related financial obligations.

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Parties involved in a power of attorney contract

A power of attorney contract involves two main parties:

• The grantor must have full legal capacity and be the legal owner of the real estate;
• The authorized party may be an individual or organization capable of performing the assigned task.

The selection of an authorized party requires a high degree of trust because the legal consequences of the act will directly bind the rights of the authorizing party.

Scope and content of authorization in real estate transactions

The scope can be limited to submitting tax dossiers or expanded to signing sale contracts and receiving money. The content must be recorded specifically, avoiding vague terms that cause misunderstandings for notary agencies. Any act exceeding the scope will not generate rights and obligations for the authorizing party.

Under Article 141 of the 2015 Civil Code:

• The representative may only establish and perform civil transactions within the scope of representation based on the authorization content.
• If the scope is undetermined, the legal representative has the right to perform all civil transactions for the benefit of the represented person, unless prescribed otherwise.
• A representative may represent multiple parties but must not establish transactions with themselves or a third party they also represent, unless prescribed otherwise.
• The representative must notify the transacting party of their representation scope.

Rights and obligations of the parties in a power of attorney contract in real estate transactions

In real estate transactions, transfers, or management, power of attorney agreements are often used when one party is unable to directly carry out the relevant procedures. Through this agreement, the grantor authorizes the grantee to act on their behalf in performing certain tasks within the agreed scope.

Therefore, the law clearly stipulates the rights and obligations of the parties in a power of attorney contract in real estate transactions to ensure the proper execution of the power of attorney, protect the rights of the parties, and limit risks and disputes during the transaction process.

For the authorizing party

According to Article 567 of the 2015 Civil Code, the authorizing party has the following obligations:

• Provide the necessary information, documents, and resources for the authorized party to perform the work.
• Responsible for commitments made by the authorized party within the scope of authorization.
• Reimburse the reasonable expenses incurred by the authorized party in performing the authorized work; pay the authorized party remuneration, if there is an agreement on remuneration.

According to Article 568 of the 2015 Civil Code, the authorizing party has the following rights:

• Require the authorized party to provide full notification regarding the performance of the delegated work.
• The authorized party may request the return of assets and benefits obtained from performing the authorized work, unless otherwise agreed upon.
• Compensation for damages is provided if the authorized party violates the obligations stipulated in Article 565 of the 2015 Civil Code.

For the authorized party

The obligations of the authorized party are stipulated in Article 565 of the 2015 Civil Code, specifically:

• Perform the work as authorized and report to the authorizing party on the completion of that work.
• Inform the third party involved in the authorization relationship about the duration and scope of the authorization, and any modifications or additions to the scope of authorization.
• Safeguard and maintain the documents and resources entrusted to you for the purpose of carrying out the authorization.
• Keep confidential any information you learn while carrying out the authorization process.
• Return to the authorizing party the assets received and any benefits obtained while carrying out the authorization, in accordance with the agreement or the provisions of the law.
• Compensation for damages resulting from breach of obligations as stipulated in Article 565 of the 2015 Civil Code.

The rights of the authorized party, as stipulated in Article 566 of the 2015 Civil Code, are as follows:

• Request the authorizing party to provide the necessary information, documents, and resources to carry out the authorized work.
• They are entitled to reimbursement for reasonable expenses incurred in performing the delegated work; and to remuneration, if agreed upon.

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Distinguishing between brokerage contracts and power of attorney contracts in real estate transactions

A proper legal analysis of real estate transactions often involves distinguishing between brokerage authorization contracts in order to identify the differences between brokerage contracts and power of attorney contracts. Distinguishing these helps identify the correct legal mechanism for each contract type. They possess fundamentally different legal natures in the Vietnamese legal system.

Differences in legal nature

• Brokerage Contract: An intermediary service contract under Clause 11, Article 3 of the 2023 Law on Real Estate Business. The broker does not represent the parties in signing the sale contract.
• Authorization Contract: Creates a legal representation relationship under Article 562 of the 2015 Civil Code.

Differences in the parties involved in the transaction

• Brokerage: The broker is usually a professional, certified real estate service unit. The relationship is commercial. The broker is not a signing subject in the transfer contract.
• Authorization: The authorized subject can be any individual with full civil act capacity. It is often based on personal trust or professional fiduciary duty. The authorized party can sign the transaction on behalf of the owner.

Differences in scope of authority

• Brokerage: Only performs connection and negotiation support. A broker cannot sign a transfer contract on behalf of the owner based solely on a brokerage contract.
• Authorization: The authorized person has full rights to execute transactions within the scope recorded in the notarized document. Their authority is greater and directly impacts asset ownership.

Differences in legal liability

• Brokerage: Responsible for the accuracy of provided information and consulting service quality.
• Authorization: The authorizing party must bear responsibility for the results of all actions performed by the authorized party within the scope. The risk is higher as the authorized party directly participates in asset disposal.

Differences in remuneration and costs

• Brokerage: Remuneration/commissions are usually calculated as a percentage of the successful contract value under Article 63 of the 2023 Law on Real Estate Business.
• Authorization: Fees can be a fixed remuneration or performed unpaid (civil authorization). Task execution costs are typically paid by the authorizing party unless agreed otherwise.

When should a brokerage contract or a power of attorney contract be used?

In practice, distinguishing between brokerage authorization contracts helps parties determine whether a brokerage contract or a power of attorney contract is more appropriate for a particular real estate transaction.

Distinguishing between brokerage contracts and power of attorney contracts in real estate transactions helps determine the correct legal framework to apply in each real estate transaction situation. These two types of contracts have different legal scopes and functions as stipulated in the 2015 Civil Code and the 2023 Law on Real Estate Business. Choosing the appropriate contract helps clients control their representation rights, legal responsibilities, and financial obligations arising from real estate transactions.

In the Vietnamese real estate market, brokerage contracts are typically used when property owners need to find clients or partners for transactions. Conversely, power of attorney contracts are used when property owners require an individual or organization to act on their behalf in conducting transactions and handling legal procedures related to the property.

Correctly identifying the appropriate use of a brokerage contract or power of attorney helps to mitigate the risk of disputes and ensure the legal validity of the transaction.

When should you sign a real estate brokerage contract?

Understanding the legal framework and distinguishing between brokerage authorization contracts allows property owners to identify the appropriate circumstances for signing a real estate brokerage contract. Real estate brokerage contracts are used when property owners need assistance in finding clients or transaction partners. In this case, the broker facilitates connections and assists in negotiations but does not represent the property owner in signing land transfer contracts.

In the real estate market, brokerage contracts are commonly used in transactions involving the purchase and sale of apartments, land plots, individual houses, or commercial real estate projects. The broker can be an individual holding a brokerage license as stipulated in Clause 2, Article 61 of the 2023 Law on Real Estate Business, and must establish a real estate service business as prescribed in Clause 5, Article 9 of the 2023 Law on Real Estate Business.

Common situations in which brokerage contracts are applied include:

• Property owners are looking for buyers or tenants for their property;
• Real estate investors need to reach customers in the market;
• Real estate project owners need to distribute their products through a trading platform.
• Clients need assistance finding properties that suit their needs.

In these cases, the broker performs tasks such as promoting the property, providing market information, organizing client outreach, and assisting with price negotiations. However, the broker does not have the legal authority to sign a property purchase agreement on behalf of the owner.

According to Article 63 of the 2023 Law on Real Estate Business, brokers are entitled to a commission when a real estate transaction is successfully concluded between the parties. The commission mechanism is usually determined as a percentage of the transaction value.

When should you draw up a power of attorney for real estate transactions?

Similarly, distinguishing between brokerage authorization contracts assists parties in deciding when it is more suitable to execute a power of attorney for real estate transactions. A power of attorney for real estate transactions is used when the owner needs another entity to act on their behalf in transactions or legal procedures related to the property. This representation mechanism is stipulated in Article 562 of the 2015 Civil Code.

In a power of attorney agreement, the authorized party has the right to act on behalf of the authorizing party to carry out legal transactions within the scope of the authorization. This includes the right to sign transfer contracts, submit documents for ownership transfer, and fulfill financial obligations related to real estate. Some common cases requiring a power of attorney agreement in real estate transactions include:

• The property owner is residing abroad or in another location;
• The owner is unable to participate directly in the transaction due to time constraints or personal circumstances;
• Businesses delegate the management and transaction rights of real estate to their representatives;
• Family members act on behalf of the owner to carry out the procedures for transferring ownership of the house and land.

For transactions involving the transfer of land use rights or the purchase and sale of housing, the power of attorney contract usually needs to be notarized at a Notary Office or Notary Chamber.

When drafting a power of attorney agreement, the content of the authorization must clearly define the scope of representation, the duration of the authorization, and the legal responsibilities of each party. This helps to minimize the risk of disputes arising during real estate transactions.

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Brokerage and power of attorney contract consulting services at Long Phan Consulting Company

Our expert team provides in-depth advisory services to help you correctly distinguish and apply brokerage and authorization contracts, ensuring absolute safety for your real estate transactions through rigorous risk control. We structure our professional support into the following key area:

• Consulting on distinguishing between brokerage authorization contracts and the appropriate contract type for each transaction: Analyzing your specific needs to recommend the most effective brokerage or authorization method.
• Drafting and reviewing brokerage or authorization contracts: Developing clauses that optimally protect client interests and eliminating legal blind spots that disadvantage clients.
• Assisting in verifying the legality of real estate transactions: Reviewing the planning status, disputes, and restrictions on properties intended for transaction.
• Assistance with notarization and authentication procedures: Guidance on preparing documents and connecting with notary offices to ensure the procedures are completed quickly and legally.

Some frequently asked questions about distinguishing between brokerage authorization contracts in real estate transactions

Below are common inquiries regarding distinguishing between brokerage authorization contracts in real estate transactions:

Is a person authorized to sell land allowed to sign the contract themselves as the buyer?

An authorized representative is not permitted to enter into transactions with themselves. According to Clause 3, Article 141 of the 2015 Civil Code, a representative is not allowed to enter into or execute civil transactions with themselves or with a third party for whom they also act as a representative, in the name of the represented party, except as otherwise provided by law. Therefore, the act of an authorized representative signing on behalf of both the seller and the buyer violates this prohibition.

Can a power of attorney contract be terminated if either the grantor or the grantee dies suddenly?

A power of attorney contract will automatically terminate upon the death of one of the parties. Clause 3 of Article 422 and Point d, Clause 1 of Article 569 of the 2015 Civil Code clearly state that the power of attorney relationship terminates upon the death of the participating individual, unless otherwise agreed upon or stipulated by law. This aims to protect inheritance rights and prevent the abuse of representation rights over the estate.

Do real estate agents receive a commission if a transaction is unsuccessful?

The broker is still entitled to a certain fee if the parties have agreed on this in advance in the contract. According to Article 63 of the 2023 Law on Real Estate Business, in the event that the brokerage does not yield a final result, the broker may still receive a service fee or other reasonable expenses incurred during the process of finding clients if this clause is included in the signed agreement between the two parties.

Is it permissible to delegate authority to a third party to conduct real estate transactions?

Sub-delegation is only permitted within very limited scopes. According to Article 564 of the 2015 Civil Code, an authorized person may only sub-delegate authority to another person with the consent of the original authorizing party or due to force majeure events where failure to do so would harm the interests of the original authorizing party.

Does the principal have the right to unilaterally terminate the power of attorney agreement at any time?

The authorizing party has the right to unilaterally terminate the contract but must comply with the obligation to notify and compensate. Article 569 of the 2015 Civil Code stipulates that if the authorization is for remuneration, the authorizing party must pay the remuneration corresponding to the work done and compensate for damages; if the authorization is for non-remuneration, the authorizing party must give the authorized party reasonable notice.

Is a professional license a mandatory requirement for individuals working as freelance brokers?

Individuals practicing as real estate brokers are required to possess a professional license and are not permitted to practice entirely independently; they must work within a real estate service business. Clause 2, Article 61 of the 2023 Law on Real Estate Business stipulates that individual brokers must have a license and must practice within a business providing real estate exchange or brokerage services.

Does the real estate agent have the right to sign the “Deposit Agreement” on behalf of the homeowner?

The broker is only permitted to sign on behalf of the owner with a separate, legally valid authorization document. According to Article 151 of the 2005 Commercial Law, the broker is not allowed to participate in the execution of contracts between the brokered parties, except in cases where authorization is given. Therefore, based solely on the brokerage contract, the broker does not have the legal standing to sign any documents transferring ownership or depositing funds on behalf of the property owner.

Conclusion

Correctly distinguishing between brokerage authorization contracts helps you identify the proper legal mechanisms, representation rights, and arising responsibilities in a real estate transaction. Selecting the right contract type mitigates disputes, clarifies financial obligations, and ensures full transaction validity, please contact us Long Phan Consulting Company via Hotline 1900636389 To receive timely and effective support for distinguishing between brokerage authorization contracts from our team of experts.