What Tenant Representation Is and How It Is Regulated in Georgia
Tenant representation means acting in the interests of a tenant in the process of finding office or industrial space and concluding a lease agreement: selecting properties, negotiating terms and preparing the document. The Civil Code of Georgia does not contain a separate, special status of a tenant representative: the commission-based model tied exclusively to the tenant's side, widespread in American practice, is not singled out as a distinct institution under Georgian legislation. Instead, such a relationship is governed by the general rules of brokerage, the norms on brokerage in the lease of a dwelling, and lease contract law. This means that the representative's fee, authority and responsibility must be clearly documented in the agreement by which the brokerage is undertaken, and it is precisely that document which determines who pays for the service and when.
General Rules on the Brokerage Fee
The core of the brokerage fee lies in Article 744 of the Civil Code: a person who promises another a remuneration for brokerage aimed at the conclusion of a contract must pay that remuneration only if the contract is concluded as a result of the brokerage. This rule is fundamental for a tenant representative as well: the fee is generated only by the result, that is, by the actual conclusion of the contract. Where the contract is concluded subject to a condition, the remuneration may be demanded only after the condition has occurred. Where the amount of the remuneration is not determined, the customary remuneration is deemed agreed. Regardless of whom the representative serves, tenant or lessor, knowledge of these rules protects a party from groundless payment demands.
An important protective norm also exists: an agreement concluded to the detriment of the client deviating from the first and second sentences of this article is void. In practice this means that a clause under which the client pays the fee even where no contract has been concluded is void by law. A result-linked fee is therefore the correct structure for formulating a representative's mandate.
The Housing Broker and Its Scope of Application
For brokerage connected with the lease of a dwelling the Code contains a separate norm. Under Article 749 of the Civil Code, for the contract by which a person undertakes brokerage aimed at concluding a dwelling lease contract, called a housing broker, the general rules of brokerage apply, unless something else follows from brokerage in the lease of a dwelling. Representation focused on finding residential space therefore operates under exactly this regime. At the same time, the norms on dwelling-lease brokerage do not apply to contracts whose subject is brokerage during tourism and business travel. In the case of commercial space, the general rules of brokerage apply directly, and the representative's agreement must be built precisely on them.
The Exclusive Mandate and Its Limits
A frequent further question is whether representation can be structured exclusively. Article 746 of the Civil Code gives this an order. Where the client is to refrain for a defined period from using another broker, such an exclusive mandate creates a mutual obligation: the broker must facilitate the conclusion of a contract during this time. If the client acts against that obligation and a contract is concluded using another broker, the broker may demand compensation of damage. The contract may provide a lump-sum amount for damages without proof of the existence of damage, but this sum may not exceed two percent of the contract price where the brokerage was aimed at the conclusion of a sale contract.
At the same time, the client is entitled to conclude a contract with a third party without using the broker. It may be agreed that the client pays the fee even when concluding the contract without the broker, but this fee likewise cannot exceed two percent of the contract price in the case of brokerage aimed at a sale. It is also noteworthy that an agreement deviating from these rules to the client's detriment is void, and that an agreement on an exclusive mandate requires written form. This construction applies directly in the tenant-representation context as well: exclusivity is possible, but only in writing and within the limits set by law.
The Lease Terms a Representative Works On
The value of representation is ultimately expressed in the contract the tenant obtains. Article 581 of the Civil Code establishes the base around which the negotiation runs: under a lease agreement the lessor must transfer specified property to the lessee for temporary use and ensure during the lease period the possibility of receiving fruits, while the lessee must pay the lessor the agreed rent. The rent may be determined in money or in kind, and the parties may agree on other means of determining it as well. A representative works on precisely these parameters: which property passes into use, for what term, at what rent, and by what rule the rent develops over time.
Sublease and the Further Use of the Space
A tenant often needs to hand part of the space to another person, and this must be built into the negotiation in advance. Article 587 of the Civil Code is strict here: the lessee has no right to sublease without the consent of the lessor. A representative serving the tenant's interests will therefore fix in the draft contract the manner and conditions under which the lessor's consent to a sublease can be obtained, because without it the tenant's business plan is not implementable.
How We Can Help
Our team conducts tenant representation on the real foundations of Georgian law: we prepare the brokerage agreement, linking the fee to the conclusion of the contract and protecting the client from void clauses; we structure the written form of an exclusive mandate within the limits of the law; and we review the draft lease agreement with respect to rent, term, sublease and return conditions. Contact our specialists so that your interests are protected at every stage of the lease.