Question:
I have a finance question regarding a real estate transaction. I was planning to purchase a property in a coastal city in Israel. The seller disclosed that there had previously been water and mold issues, but claimed these had been resolved. I was close to signing the contract when a heavy rainstorm occurred, and water entered a room adjacent to an outdoor area. A tenant later informed me that this had happened before, and provided both old and recent videos as proof. After further investigation, including speaking with neighbors and other contacts, I learned that water problems have persisted for several years in the building. Given this information, I decided not to proceed with the purchase. However, the lawyer who assisted with the contract is very upset. Her full fee would be several thousand dollars. She did a lot of work for me and regularly checked at each stage if I wanted to continue. I was interested until the major rainstorm. Am I obligated to pay her the full fee, a partial fee, or anything at all, given that the transaction was never completed?
Answer:
From both a legal and halachic perspective, you are generally not obligated to pay the full lawyers fee if the real estate transaction was not completed, unless you signed an agreement specifying payment for services regardless of outcome, or the custom of your locality is for real estate lawyers to charge for their time regardless of the outcome of the sale.
Explanation:
Legal/Contractual Obligation: If you did not sign a retainer or engagement agreement that requires payment for time spent even if the sale does not go through, you are not legally required to pay the full fee. Most legal fees for real estate transactions, including lawyer fees, are contingent on the completion of the sale. Indeed, lawyers and agents often spend time on transactions that do not close, which is reflected in their standard fees for successful deals. However, in some countries this may not be the case, and hence in the event that it is the custom of real estate lawyers in your area to collect fees for their time even if the deal does not close, then you are bound by this custom even if no agreement was signed and you backed out of the deal for legitimate reasons.
Halachic Perspective: According to halacha, when someone is hired for a job, the person who hires cannot just decide to back out and say since I did not benefit from your services I do not have to pay. Hence a lawyer may have serious Halachic claim against the person who hired him, as not only should he need to pay you for the work you already did, but he would even have to pay you for the work you didn’t do! However, this only applies when there is no custom to the contrary, as all customary practices in the world of commerce are binding between the two parties unless they explicitly agree otherwise, even if the custom is not aligned with the technical ruling of Torah law. The reason for this is because many of the Torah laws relating to commerce are merely considered the default agreements whenever there is no other agreement in place between the two parties. However, when there is an explicit agreement in place between the two parties, then this agreement overrides the halachic default ruling. Now, Halacha accepts the customary practices of a profession as an unspoken agreement between the two parties and hence whenever there is a common practice in the world of commerce that becomes the default condition of employment even if it contradicts the default Jewish law. The only way to override this is by signing an explicit agreement to the contrary. Now, being that we are ready explained above that by real estate legal services payment is typically required only if the sale is finalized or if there is a specific agreement to pay for services regardless of outcome, therefore if no such agreement exists, you are exempt from payment.
Ethical Consideration: Despite the above legal and civil ruling, we do want to take into account some ethical considerations. If the lawyer invested substantial time and effort, and you feel it is appropriate, you may choose to compensate her voluntarily for her work, travel, or expenses. This is considered an act of kindness (chesed), not an obligation.
Recommendation to lawyers: If your lawyer wishes to avoid future misunderstandings, she can request a clear retainer agreement outlining payment terms for time spent, regardless of outcome.
Sources: Sefer Mihalchei Mishpoat Mihaleich Tes; See regarding Dimei Tivuch that there is no need to pay broker’s fee if a cancellation occurs prior to the deal being closed: Rama C.M. 185:10; Or Zarua 3:257; Terumas Hadeshen; Shaar Efraim 185:50; Aruch Hashulchan C.M. 185:11; Hayashar Vehatov 5 p. 19 [Rav M.M. Shpern] in great length; Chukei Chaim [Freidman] Tivuch; See regarding payment obligations by cancelations: See Bava Metzia 76b; Michaber and Rama C.M. 333:1-2; Beis Yosef C.M. 335; Sefer Sechirus Poalim 333; See regarding that according to Halacha, the conditions of payment for labor and employees follow the customs of the area, unless explicitly stated otherwise See Michaber C.M. 331:1; Bava Metzia 83a; See also Rama C.M. 356:7 and Shach 356:10 regarding Dina Demalchusa Dina; See regarding the practice of real estate lawyers to have their fee contingent on the sale being finalized: Sefer Mihalchei Mishpoat Mihaleich Tes “We were told that a lawyer who accompanies a transaction, and in the end the transaction is not completed, does not have the right to demand compensation for the time spent accompanying the transaction as long as it was not completed—even if the reason for the cancellation was not dependent on the lawyer. However, if it was agreed between the lawyer and the client to pay a certain amount regardless of the outcome, the resolution will be determined according to the agreement reached between the parties. Likewise, it is not customary for courts to require payment for claims by attorneys of this type, except where there is a written agreement obligating the client to pay the attorney regardless of the outcome of the transaction, such as payment for hours worked.”; https://www.forbes.com/sites/joshuastein/2023/03/30/pay-the-lawyers-only-if-the-deal-closes/ ; How Much Do Real Estate Lawyers Charge? – LegalClarity
| Aspect | Summary |
| Legal Obligation | Unless you signed an agreement requiring payment regardless of outcome, or if local custom dictates payment for time spent, you are not required to pay the full fee if the transaction wasn’t completed. Most legal fees for real estate deals are contingent on completion. |
| Halachic Perspective | Halacha generally requires payment for services rendered, even for incomplete work, unless local custom states otherwise. Customary practice overrides default halachic rules unless explicitly contradicted in a signed agreement. |
| Customary Practice | Payment is typically only required if the sale is finalized or if there is a specific agreement for payment regardless of outcome. Standard practice in many places is not to charge if the deal falls through. |
| Ethical Consideration | Even if not obligated, you may choose to compensate the lawyer for time, effort, or expenses as an act of kindness (chesed), but this is voluntary and not required. |
| Recommendation | Lawyers should use clear retainer agreements outlining payment terms to prevent misunderstandings about fees if the transaction is not completed. |
