A co-broking agreement is the agreement between two brokers about one deal or one client: who brought what, how the brokerage is divided, and what happens if things go wrong. It is not the agreement between the buyer and the seller, and it is not your mandate from your own client. It sits between those two.
Why it is worth writing down
Under section 10 of the Indian Contract Act, 1872, all agreements are contracts if they are made by the free consent of parties competent to contract, for a lawful consideration and with a lawful object, and are not expressly declared void. The same section keeps in force any law that requires a particular contract to be in writing or registered.[1] In other words, a co-broking arrangement agreed over the phone can be a valid contract. The trouble is proving its terms when the other broker remembers them differently.
The agreement does not have to be on paper. Section 10A of the Information Technology Act, 2000 provides that a contract is not unenforceable only because the proposal, acceptance or revocation was made in electronic form.[2] An exchange of emails or messages that sets out the terms clearly, and that both brokers accept, is far better than nothing. A single signed document is better still.
Before you sign: your own client's consent
Your mandate is from your client, and the Indian Contract Act limits what an agent may hand on. Section 190 says an agent cannot lawfully employ another to perform acts he has expressly or impliedly undertaken to perform personally, unless the ordinary custom of trade allows a sub-agent or the nature of the agency requires one. Section 191 defines a sub-agent as a person employed by, and acting under the control of, the original agent.[1]
The safe practice is simple: before you bring another broker into your client's deal, tell your client and get their consent in writing, even if it is a one-line message.
The clause checklist
1. The parties
- Each broker's name, firm name, address and phone number.
- PAN, and GSTIN if registered. The GSTIN decides how the share is invoiced (see GST on brokerage).
- RERA agent registration number for each broker, where the property is in a registered project. Section 9(5) of the RERA Act requires the number to be quoted in every sale an agent facilitates.[3]
2. The property and the clients
- The property, identified clearly: project and unit, or address and khasra or plot number.
- Which broker introduced which client, and the date of introduction. This is the clause that protects you if the client is later "found" by someone else.
- Each broker's mandate: confirm that each has authority from their own client to act.
3. The commission
- The total brokerage, who pays it, and whether it is a percentage or a fixed sum.
- The split, as a ratio or a fixed amount, and that it is calculated on the fee before GST.
- Who invoices whom: each broker bills their own client, or one broker collects the full fee and pays the other against that broker's invoice.
- Whether tax is to be deducted at source on the share, and who issues the certificate.
How to split commission between two brokers works through these with numbers.
4. When the share falls due
- The trigger: for example, within seven days of the collecting broker receiving the brokerage.
- Part payments: if the client pays brokerage in instalments, whether each instalment is shared as it arrives.
- Mode of payment, and the bank account it goes to.
5. Client protection
- No direct contact with the other broker's client without consent.
- A protection period: if the introduced client buys the same property, or deals with the same party, within a stated period after the introduction, the share is still payable.
- How client details may be used and stored, and that they are not passed on.
6. If the deal changes or fails
- If the brokerage is reduced at closing, whether the reduction is shared in the same ratio.
- If the deal is cancelled after brokerage is paid and the client asks for a refund, who refunds what.
- If the property changes, for example the buyer chooses another unit from the same seller.
7. Disputes
- A first step of direct discussion, then mediation or arbitration if you want to avoid court.
- Which city's courts have jurisdiction.
8. Signatures
- Signatures and date, or a clear electronic acceptance by both brokers.
- Ask a local lawyer whether your state's stamp law requires the document to be stamped. Requirements differ by state.
Keep the record
Section 10 of the RERA Act requires a registered agent to maintain and preserve the books of account, records and documents that the rules prescribe.[3] Keep the signed co-broking agreement with the deal file, alongside the client's mandate and the invoices.
The other agreements in the deal
The co-broking agreement does not replace the buyer-seller agreement. For that, the Buyer-Seller Agreement Builder on this site prepares a draft agreement between the buyer and the seller that you can print or save as a PDF; what you type stays in your browser.