Engagement letter
The engagement letter is the contractual document by which a broker formally sets out, before any action is taken, the scope of the mandate, the extent of market research to be conducted, the remuneration terms, and the identities of the parties. Mandatory for IOBSP intermediaries, it legally secures the client-broker relationship and is the cornerstone of the compliance file.
Key points
- The engagement letter must be signed by the client before the broker approaches any lender.
- It must include the broker's ORIAS number, contact details, and those of the ACPR.
- It specifies the remuneration structure: client fees, lender commission, or both.
- It sets the duration of the mandate and any exclusivity conditions.
- In the absence of an engagement letter, any commission received may be legally challenged.
Frequently asked questions
Why must the engagement letter be signed before and not after the broker's steps?
IOBSP regulations require the client's informed consent to be obtained before any steps are taken. If the broker contacts lenders first and has the letter signed afterward, the client had no opportunity to freely agree on the scope of the search or the remuneration terms. This irregularity exposes the broker to a risk of the mandate being declared void and losing the right to their commission.
How should an engagement letter be drafted to comply with IOBSP requirements?
It must contain at minimum: the broker's identity and ORIAS number, the client's identity, a precise description of the mandate (type of credit, amount sought, term), the remuneration method and amount (or calculation method), the mandate duration, and required legal notices (ACPR complaint procedure, mediation). A template validated by legal counsel is recommended to avoid omissions.
Is the engagement letter different from a real-estate search mandate?
Yes, they are two distinct documents arising from two different regulatory frameworks. The IOBSP engagement letter governs the financing search and is required by banking regulation. The real-estate search mandate is governed by the Hoguet Act and concerns finding a property on behalf of a buyer. A mortgage broker is typically only a party to the engagement letter.
In practice
Before approaching partner banks to finance a primary-residence purchase, a broker has clients sign an engagement letter stating a 1% commission on the borrowed amount, payable by the lender (no direct client fee), for a mandate duration of 90 days. This document is stored in the client's digital file and will be produced in the event of an ACPR inspection.
Official sources
- Article R519-26 CMF (prior written agreement) · Légifrance
- Article L519-1 of the Monetary and Financial Code · Légifrance
- Prudential supervision and resolution authority · ACPR (Banque de France)