How should the estate agent's commission for landlords be assessed?
Since 1 June 2015, the "ordering party principle" has applied to residential tenancy agreements in Germany. This means that the broker's commission is paid by the person who hired the broker. Passing on the commission obligation to a third party is no longer permitted when renting flats. A prospective tenant only has to pay the broker's fee if they conclude a brokerage agreement with the broker in text form and the broker receives the flat from the landlord exclusively to fulfil this order. Any deviation from this regulation is invalid (§ 2 para. 1a Act on the Regulation of Housing Brokerage).
However, it should be noted that this regulation does not yet apply to the purchase of property. When buying property, the distribution and amount of the broker's commission in Germany are regulated differently depending on the federal state and individual agreement between broker and seller. In some countries and regions, the buyer bears the entire broker's commission, while in other parts of the country the commission is usually shared between buyer and seller.
Currently, the "Act on the Distribution of Broker Costs in the Brokerage of Purchase Contracts for Flats and Single-Family Houses" was enacted on 12 June 2020. This law re-regulates the broker's commission and stipulates that the entire broker's costs may no longer be passed on to the buyer. Buyers of residential property may no longer be required to pay more than half of the broker's commission. If only one party has commissioned the broker, that party must pay the broker's fee. The seller can agree to pass on the broker's costs to the buyer, but the costs passed on may not exceed 50 per cent of the total commission payable. In cases where the broker is commissioned by both parties, he can only agree on a commission of the same amount with both parties.
The new regulation comes into force six months after the publication of the law. It applies to the sale of single-family houses and owner-occupied flats, but not to commercial properties, multi-family houses and building plots. It applies if the buyer is acting as a consumer, but not if the buyer is acting in the course of a business activity.
It is expected that commission rates will fall as a result of these changes, as sellers will have a stronger incentive to negotiate the amount of the commission if they themselves are obliged to pay half. This could lead to a reduction in broker costs for buyers.
