Hanseatic Higher Regional Court Issues Far-Reaching Decision in the Field of Agency Law

If a real estate company receives an agent's property report including a note on commission duty, it cannot raise an objection with respect to a subsequent commission claim that the property had not been purchased by the company itself, but by a subsidiary. This has been established by the Hanseatic Higher Regional Court in a decision that has become final as of July 2, 2009 (Case: 9 U 253/08).

The decision was based on the complaint of an agent represented by Dr. Frank Mitzkus, Partner of law firm Heuking Kühn Lüer Wojtek in Hamburg. The agent had sent a property report on a shopping center to a real estate company and pointed out her commission. The company showed interest, led negotiations and had the property in the end acquired by a newly established special purpose entity, its subsidiary. A few weeks after notarization of the purchase price, financing fell through. The subsidiary filed for insolvency and paid neither the purchase price nor the agency commission. Subsequently, the real estate company also denied payment of the commission to the agent on grounds that it was not purchaser of the property.

Heuking Kühn Lüer Wojtek was able to enforce its client's claims in two instances. The Hanseatic Higher Regional Court regarded the sending of the property report and the starting of negotiations as entering into an agency agreement with the real estate company. The notarization of the purchasing agreement by the subsidiary had achieved the objective pursued by the real estate company. In consideration of the close connection with the subsidiary, the real estate company could not invoke in good faith that it had not itself been purchaser of the property.

"The decision of the Higher Regional Court is significant far beyond the specific case. Each agent would be well advised not to waive commission claims against a holding company or other parent company if such company has the property acquired by a subsidiary," Dr. Franz Mitzkus comments on the decision.