The lawyer in a transaction brokered by an estate agency: whom do they work for and what follows from that

The agent arranges the transaction and sends the parties to the lawyer with whom the agency works. The lawyer prepares the purchase agreement, authorises it, takes the purchase price into escrow and files the Land Register application; for this the agency pays them a retainer or a fee per transaction. It suits everyone. Questions arise only when the buyer asks whose side the lawyer is on, or when the parties start arguing about defects or the handover date.

The lawyer protects the client’s interests

The Act on Advocacy states the lawyer’s basic duty unambiguously:

In practising law, a lawyer is obliged to protect and assert the rights and interests of the client and to follow the client’s instructions.

— Section 18(1) of Act No. 586/2003 Coll. (unofficial English translation)

Who the client is must therefore be determined for each act, and this does not turn on who pays the invoice. Where a lawyer draws up a property transfer agreement for both parties, they must proceed with professional care (Section 18(2)) towards each of them, and therefore prepare a balanced text. In authorisation, the statute ties the lawyer’s duties to the parties to the agreement: the lawyer draws up the agreement, ascertains the identity of the parties, assesses whether the agreement does not conflict with the law, circumvent it or offend good morals, and whether its conclusion will not give rise to loss (Section 1a(1)). On a transfer for consideration, they alert the parties to the payment terms for the purchase price and inform a party to the agreement of the amount of insurance cover and the insurer with which they are insured for authorisation (Section 1aa). Who is responsible when something goes wrong with an authorised agreement is explained in a lawyer’s liability for an authorised agreement.

When the parties’ interests diverge

A balanced agreement for both parties is possible while the parties want the same thing: to transfer the property on the agreed terms. Once their interests diverge, a prohibition applies that cannot be contracted around:

A lawyer is obliged to refuse to provide legal services where a) in the same matter, or in a matter connected with it, they have provided legal services to another person whose interests conflict with the interests of the person requesting the provision of legal services, […]

— Section 21 of Act No. 586/2003 Coll. (unofficial English translation)

A lawyer who has prepared the agreement for both seller and buyer therefore cannot later represent one of them against the other in a dispute about defects, withdrawal from the agreement or return of the purchase price. If a party needs, from the outset, someone who will negotiate hard for them alone, they should have their own lawyer to go through the agreement for them; that is what our purchase agreement review service is for. Equally, the lawyer must refuse the service where their own interests, or those of persons close to them, would conflict with the interests of the person to whom the service is to be provided (Section 21(b)). Even a standing arrangement with an agency must therefore not affect how the lawyer protects the parties to the transaction.

The agency that pays the retainer

The estate agency is the lawyer’s client in its own matters: for templates, AML documents, contracts with agents, or a dispute over commission with a client to whom the lawyer provided no services in that matter. In a transaction brokered by the agency, the clients are the parties to the transfer, even though the services were ordered and paid for by the agency. If the lawyer drew up the purchase agreement for the seller, the agency’s dispute with that same seller over commission from that transaction may be a matter connected with it; the lawyer must therefore assess whether Section 21 prevents them from representing the agency. The agency should reckon with this possibility and have another lawyer in reserve for such a dispute.

Confidentiality follows from this as well. The lawyer must maintain it as to everything learned in connection with the practice of law, unless AML legislation provides otherwise (Section 23(1)), and only the client, or their legal successor, may release them from it, and only in writing (Section 23(2)). What the buyer tells the lawyer about financing, or about the reasons for their hesitation, therefore does not automatically go to the agent. If the agency is to receive information about the state of the transaction, for instance about the filing of the Land Register application and its approval, it is advisable to agree this with the parties in advance and in writing.

The parties should also reckon with the fact that, in the purchase and sale of property, where the service is directed at a movement of money, the lawyer is themselves an obliged entity under the AML Act (Section 5(1)(j) of Act No. 297/2008 Coll.). Questions about identity and, depending on the risk, about the origin of the money, may therefore come from them too, not only from the agent.

How to set the arrangement up

An agency’s cooperation with a standing lawyer can be advantageous for clients if the rules are clear. It is good practice to determine in writing who is the client for each act and who pays; where a consumer client pays directly, they must know the amount of the fee before the act is performed (Section 18(4)). The parties should be told that the agreement is being prepared in a balanced way for both and that each of them may have their own lawyer. It should also be clear in advance what will happen if a dispute arises between the parties, and what information the lawyer may share with the agent. How the fee itself is arranged is examined in the article retainer, or payment per transaction.

We prepare the complete contractual documentation for your clients’ transactions, authorisation, escrow and Land Register registration as part of our preparation of contracts and Land Register applications service. The full scope of a standing arrangement, including templates and training, is described in legal services for estate agencies and, for a regular volume of transactions, in a retainer for estate agencies.