Supreme Court: Brokerage Fee Regulations Under the Licensed Real Estate Agents Act Apply to Auctioned Real Estate Brokerage

Supreme Court, Seocho-gu, Seoul. Photo by Honam Moon munonam@

[Asia Economy Reporter Kim Daehyun] The Supreme Court has ruled that real estate agents must comply with the 'compensation limit regulations' under the Real Estate Agent Act when mediating the acquisition of auctioned real estate.

On the 20th, the Supreme Court's Third Division (Presiding Justice Kim Jaehyung) overturned the lower court's ruling that dismissed A's claim for damages against real estate agent B and remanded the case to the Seoul Central District Court.

Previously, in 2014, A was introduced several times to auctioned real estate by B and paid a total of 173.07 million KRW for fees and expenses. However, the balance loan for the purchased land was canceled due to A's tax delinquency, resulting in the forfeiture of the 101.7 million KRW bid deposit to the national treasury.

Subsequently, A filed a civil lawsuit claiming that "B deceived him into being unable to obtain the loan." In the appeal, he also argued that "B must return the excess amount over the statutory fee according to the Real Estate Agent Act."

The first and second trials ruled against the plaintiff. They held that B's actions did not constitute brokerage as defined in Article 2, Clause 1 of the Real Estate Agent Act, but rather involved analyzing real estate rights and mediating acquisition, so the compensation limit regulations did not apply. The Real Estate Agent Act defines brokerage as "mediating acts related to the acquisition or loss of rights such as sale, exchange, or lease between transaction parties."

However, the Supreme Court stated that the compensation limit regulations should apply and ordered a retrial and reconsideration of the case. The court pointed out, "Auctions inherently have the nature of sales, differing only in the subject matter," and "there is no difference from mediating sales as defined in the Real Estate Agent Act."

It added, "The lower court erred by misunderstanding the meaning of brokerage under the Real Estate Agent Act, the scope of application of the compensation limit regulations, and the legal nature of auctions, and failed to conduct necessary investigations, which affected the judgment."

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