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Brokerage Fees


Reuvain, a resident of Israel, heard of an apartment for sale in Jerusalem. Since he had a friend outside of Israel who was interested in purchasing such an apartment, Reuvain approached the seller. Reuvain mentioned to the seller that he was doing a favor for his friend because he wanted to help him fulfill the mitzvah to live in Eretz Yisroel. After many negotiating sessions with the seller, Reuvain succeeded in lowering the price from $500,000 to $450,000. At closing, Reuvain demanded that the seller pay him two percent of the sale price (i.e. $9000) as a fee for acting as the buyer’s agent. The seller refused to pay. He argued that

1) Reuvain never had declared that he was working for a fee and this indicated that

Reuvain initially did not intend to charge him;

2) Reuvain had mentioned that he was not charging the buyer a fee; and

3) Reuvain did him a disservice by negotiating a price $50,000 below his asking price.

Whose claim would prevail in Beis Din?

Before parties participate in a business transaction, their common interest requires that all terms and conditions be specified in writing and agreed to. Many Dinei Torah result from parties’ failure to follow this practice. This procedure is especially important when hiring a worker. The Chofetz Chaim, (Ahavas Chesed in a note at the end of Chapter 10, and Sefas Tomim, Chapter 5), exhorts employers and employees to write explicit employment agreements. These should specify conditions such as what work is to be performed and how much will be paid. The Chofetz Chaim states it is unwise for an employer to leave remuneration issues unspecified because the employer might then underpay and violate several negative Torah commandments. Specifically, he will be classified as a thief and as one who withholds his worker’s wages (osheik). In order to avoid this classification, the employer must be certain not to underpay, even by one cent. Employers who fail to write employment agreements with their workers often pay more to their workers than if they had clearly specified in writing all terms and conditions.

When an agreement, expressed or implied, has unspecified components, the general rule is that the local custom prevails. Therefore, if it is customary to pay for a service, the employer must pay the customary amount. (Choshen Mishpat 331).

Often, however, there is no fixed, customary amount. Then the rule (Bava Metzia 76A and the Ritva there) is that a worker is entitled only to the lowest amount that local workers charge. Thus, if some real estate agents charge a two percent commission and the others charge one percent, an agent whose fee was not agreed upon in advance is entitled to just one percent. The reason for this is (Bava Kama 46A) that the burden of proof rests on the one who wants to charge a higher rate. Even if only a minority of agents (workers) charge the lower rate, an agent who did not specify a commission rate may demand only the lower rate. In a circumstance which requires someone to pay, the applicable rate is the lowest rate not the most widespread rate. (Bava Basra 92)

One other significant issue is, “Whose custom prevails?” A worker may perform his service in one country but his employer may reside in a different country. The Talmud Yerushalmi (cited in the Rama Choshen Mishpat 331:1) discusses a case where the employer resided in Tiberias though his workers worked in Ma’on, a neighboring town with a different custom. The Yerushalmi rules that the determining consideration is where the workers were hired. Thus, if the employees were hired in their own city, the customs of the employees’ city prevail. However, if the employees were hired in the employer’s city, the customs of the employer’s city prevail.

Rav Moshe Feinstein (Igros Moshe, Choshen Mishpat, volume 2, siman 57) discusses an interesting case involving an American who came to Israel to have a shadchan find a shidduch for his child. At the time, the customary shadchan’s fee was higher in the United States than in Israel. When the shadchan asked for the higher American fee, the father replied that the shadchan deserved only the Israeli fee. Rav Moshe ruled that, even without the above Yerushalmi, the father is correct, since he hired the shadchan in Israel and all the work was performed in Israel.

Rav Moshe also discusses a case where the shadchan works with two clients who live in different cities. He rules that the determining consideration is where the shadchan works. Suppose the groom lives in Jerusalem, where parents pay $1000 for a shidduch, and the bride lives in B’nai Brak, where they pay $1200. If the shadchan travels back and forth between the two cities to promote the shidduch, he would be entitled to $1200 from the Jerusalem groom and $1000 from the B’nai Brak bride, since he worked for the bride in Jerusalem and for the groom in B’nai Brak. However, if he works only at home on the phone, the size of his fee follows his city’s custom.

Suppose an American Jewish employment firm hires workers to work in Jerusalem. Absent an employment contract specifying otherwise, they would have to pay Israeli wages and follow Israeli customs. Today, this is the general custom of multi-national companies.

Regarding our original question, all the seller’s arguments fail.

1) The agent’s failure to mention his fee does not imply he intended to work for free. The failure of a worker initially to specify a wage does not serve as a bar to demanding pay for his work later.

2) The fact that the agent worked for free for the buyer does not imply that he ever intended to work for free for the seller because a worker may choose to work for free for one party and not the other. (Choshen Mishpat 77:7) Here, the agent even specified a reason (living in Eretz Yisroel) which is applicable only to the buyer.

3) The agent did no “disservice” because he was instrumental in the sale.

Thus, a Beis Din would rule that the seller must pay the agent the lowest commission rate that is customarily charged in Israel, i.e. one percent of the sale price.

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