The agency agreement: legal requirements and how to check yours

An agency agreement (formidlingsaftale) is the written agreement between you as the seller and an estate agent, under which the agent is to handle the sale of your property. The rules are set out in the Danish Act on the Sale of Real Property (lov om formidling af fast ejendom), which is the main source on how the agreement may be drawn up and used. The Act sets a clear formal requirement: the agreement must be in writing and signed by both parties (section 29(1)).

Once you know the Act’s minimum requirements, you can check your own agreement on the points where disagreements most often arise: price, duration, termination and any fee payable without a sale.

This overview describes the Act’s rules on content, the commitment period, termination and the period after the agreement ends, and points out that terms such as ‘sold or not’ (solgt-eller-ej) are contractual terms, not statutory rules. It does not recommend a particular choice in your specific case, but explains what the rules say.

The Act’s requirements for the content of an agency agreement

The Act sets minimum requirements for what an agency agreement must contain, and each point should be covered in the agreement you have in front of you. If a point is missing, you should look into it more closely before you sign or let the agreement continue.

The agency agreement must include:

• The agreement must state who the responsible estate agent is and how much the fee is, or the principles on which it is calculated. If the fee is variable, the agreement must also state how it is calculated, the maximum amount you could end up paying, and a worked example (section 29(2), in force from 1 January 2024).

• If a success-based fee has been agreed, and a fee is payable on termination, the agreement must also state how long the agreement period lasts.

• The agreement must state the price at which the property is offered for sale.

• The estate agent is only entitled to the fee agreed with you (section 32(1)). The agent’s fee and any other costs of a sale should therefore be set out clearly in the agreement.

• The same applies to costs you have to pay whether or not there is a sale. The Act does not specifically require them to be stated in the agreement, but the agent can only charge what has been agreed.

• The terms for termination follow from the Act: both you and the agent can terminate the agreement without notice (section 29(4)). If the agent is to receive a fee when the agreement is terminated, this must be stated in the agreement (section 33(1)).

One final requirement concerns what you cannot be made to accept. The agency service may not be made conditional on you, as a party, buying services that are not necessary for the assignment to be carried out properly.

Commitment period and extension of the agency agreement

The Act sets an upper limit on how long the first agreement period may last. If you have agreed a success-based fee, and a fee is payable on termination, the first period can last no more than 6 months. The limit only applies in that situation. In that case, it cannot be overridden to your disadvantage, whatever else the document says (section 2(2)).

Once the first period has expired, the agreement can be extended by up to 3 months at a time. If the agreement provides for extensions of 6 months at a time, this breaches the Act, and the term cannot be relied on to your disadvantage (section 2(2)).

There is also a limit on when an extension still counts as an extension. According to the explanatory notes to the Act, you and the agent can extend the agreement within a reasonable time after it expires. If more time has passed, it is a new agency agreement rather than an extension of the old one. This matters for which terms apply, because a new agreement must be judged on its own terms.

When the period expires, you can choose not to continue, and you do not have to pay the agent anything for that, not even a termination fee. This is stated in the explanatory notes to section 31 of the Act, on agreements with a success-based fee.

The limits of 6 months and 3 months apply where a success-based fee has been agreed and a fee is payable on termination. If that is not the case, it is the terms of your own agreement that govern how long it runs. So read through this part of your agreement before you work out what applies to you.

Sole agency and ‘sold or not’ are contractual terms, not statutory rules

Sole agency (eneformidling) is not a concept the Act defines separately. In practice, it means you give one estate agent the exclusive right to handle the sale during the agreement period, while the detailed terms depend on the agreement. It is the agreement’s own wording that determines what the exclusive right covers and what it means for you if you find a buyer yourself during the period.

In the same way, ‘sold or not’ is a contractual term, not a statutory rule. The agent can only claim a fee for work done and reimbursement of out-of-pocket expenses if the agreement states clearly and unambiguously that the offer only applied provided the agreement ran for the agreed period. In other words, the wording must be clear in the document if it is to serve as the basis for a claim. If it is not, it does not hold up as a legal basis for a fee without a sale.

The same goes for the phrase ‘no sale, no fee’ (ingen salg, ingen regning). It is a contractual term, not a statutory rule, and the Act does not require the agent to work for free. Whether anything has to be paid when there is no sale therefore depends on what the parties have agreed. Check your own agreement on exactly this point rather than assuming that termination is always free.

The Act does not fill in these points for you. It sets the framework for what an agency agreement must contain, but sole agency, ‘sold or not’ and ‘no sale, no fee’ are contractual terms whose content and scope are set out in the document. If you are unsure what your own agreement means on these points, that is a job for an independent adviser, such as a lawyer. Complaints about an estate agent can be brought before Disciplinærnævnet for Ejendomsmæglere (the disciplinary board for estate agents), and disputes about the size of the fee can be brought before Klagenævnet for Ejendomsformidling (the complaints board for property sales).

How to terminate the agency agreement without notice

You can terminate the agency agreement without notice, and so can the estate agent (section 29(4) of the Danish Act on the Sale of Real Property). Your right to terminate without notice cannot be restricted by agreement (section 2(2)), so a term requiring notice or a notice period does not bind you. The Act sets no formal requirements for the termination, but it is a good idea to terminate in writing, for example by email, so that you can document it.

On termination, the agent is only entitled to a fee if this has been agreed in the agency agreement. In other words, no claim arises automatically just because the agreement ends. But a fee on termination may have been written in, and then you need to take it into account.

If a success-based fee has been agreed, there is a limit. In that situation, if you terminate, the agent is only entitled to a reasonable fee for the work actually done. The Act does not set a specific amount for what is reasonable.

So you cannot simply assume that you will never have to pay anything on termination. If the agreement includes a fee on termination, the agent can claim it, but when the fee is success-based, the Act limits the claim to a reasonable amount.

Can the estate agent claim a fee after the agreement has ended?

Once the agency agreement has ended, the agent must stop all efforts to sell. The starting point is that you do not have to pay the agent’s fee once the agreement has expired. A claim for a fee can only arise if the Act’s exception applies, and you need to know that exception to understand when the agent can claim anything after the agreement has ended.

The exception is found in the Danish Act on the Sale of Real Property, specifically section 32(2). Under that provision, the agent is entitled to a fee if, after the agreement has ended, a purchase agreement is concluded as a result of the agent’s efforts and without the involvement of another estate agent. Both conditions must be met: the sale must be traceable to the agent’s work, and no other agent may have stepped in.

The provision covers two different situations. One is where you and the buyer wait to sign the purchase agreement until the agency agreement has ended, in order to avoid the fee. The other is where the purchase agreement is genuinely based on the agent’s work, regardless of when it is signed. In both cases, it is the agent’s efforts that determine whether a claim for a fee can be made.

If you have switched to a new agent from another estate agency, and the new agent has taken on the instruction and started marketing the property, for example with a new sales brochure and new photos, the previous agent is not entitled to a fee under section 32(2). According to the explanatory notes to the Act, however, whether the new agent has been involved depends on an assessment of the specific case. If you simply ask a lawyer or an agent to do a limited task, such as drawing up the purchase agreement, that does not in itself count as another agent’s involvement.

Checklist for the agency agreement when selling your home

Before you put your name to an agency agreement for the sale of your home, you can use the list below to go through the terms that the Act and the agreement itself ask you to consider.

• Check that the agreement is in writing and signed by both parties, and that it states who the responsible estate agent is and how much the fee is, or the principles on which it is calculated.

• Check how long the agreement period runs and what options there are for extending it. If a success-based fee has been agreed, and a fee is payable on termination, the Danish Act on the Sale of Real Property limits the first agreement period to no more than 6 months, and each extension to no more than 3 months at a time.

• Read through the ‘sold or not’ term and find the costs that must be paid whether or not there is a sale. At the same time, check what the agreement says about the situation where you find a buyer yourself, and what applies if you switch agents along the way.

• Have the agreement reviewed by an independent adviser if you are unsure about the terms, so that you can decide whether you want to sign.

Summary of the Danish Act on the Sale of Real Property

The Danish Act on the Sale of Real Property gives you, as the seller, four key protections:

• The agreement must be in writing and signed by both parties.

• The first agreement period has a maximum length when a success-based fee has been agreed and a fee is payable on termination.

• You can always terminate the agreement without notice.

• The fee on termination, or on a sale after the agreement has ended, is limited.

Although the Act sets the framework, many terms are left to freedom of contract. So always check what your own agreement says about the agent’s fee, about costs payable whether or not there is a sale, and about ‘sold or not’. The Act does not lay down a standard that covers every case.

If you want an assessment of your specific agreement, you should contact a lawyer or another independent adviser. This article only covers the general rules.

If you believe an estate agent has breached good estate agency practice, you can complain to Klagenævnet for Ejendomsformidling (the complaints board for property sales).