Brokerage law when concluding a real estate purchase or rental agreement

The real estate market is subject to fluctuations and the search for an apartment takes time, so it can make sense to hire a reat estate agent. A real estate agent is a service provider who, as an intermediary, brings about an opportunity to conclude a contract between parties. There is no law on specific agents in Germany. There are provisions on Brokerage Law in Section 652 et seqq. BGB (German Civil Code), but otherwise Brokerage Law is case law.

TYPES OF BROKERS AND BROKERAGE CONTRACTS 

There are different types of brokers regulated by law. A broker receives a commission if he provides evidence of the opportunity to conclude a contract or if he mediates this contract.

There are different types of brokerage contracts. In the case of a general commission, several estate agents can be commissioned at the same time to market the property. The client her-/himself is entitled to identify interested parties and to bring about a conclusion of the sale. In the case of a sole mandate, only one agent is commissioned. However, the client may also act and handle the sale. In the case of a qualified sole mandate, only the commissioned broker may identify interested parties for the property and bring about a sale.

PROVISIONS OF BROKERAGE LAW AND THE FORMATION OF THE BROKERAGE CONTRACT

A brokerage contract is a contract between the broker and his principal. For an effective brokerage contract, the principal can be a seller as well as a buyer or a prospective buyer. A brokerage contract is already deemed to have been concluded when the prospective buyer accepts the broker’s offer to view real estate with him. However, the prospective buyer should be informed about his right of withdrawal beforehand.

Since 23 December 2020, a new regulation applies to the sale of owner-occupied apartments and single-family houses to consumers according to Section 656b BGB. According to Section 656a BGB, these brokerage contracts require text form; an agreement made verbally is not sufficient. According to Section 2 (I) WoVermG, text form is also required for brokerage or proof of the conclusion of a tenancy agreement.

The brokerage contract should at least include the type of contract, the name of the client, the property to be marketed, the sales price, the agreed brokerage commission, the term of the contract and the duties of the real estate agent.

PAYMENT OF A BROKER BY CONTRACTING PARTIES

In brokerage law, when it comes to payment, terms such as “broker’s commission”, “broker’s fee” or simply “broker’s fees” are used. This amounts to a percentage of the sum received by the seller. The commission should already be regulated in the contract, as the amount of the broker’s commission is not regulated by law. The question of who has to pay the broker has been answered differently at Land level. In most federal states, the seller and buyer shared the commission. In Berlin and Brandenburg, for example, the buyer had to pay the commission of 5-7 per cent.

As of 23 December 2020, a new law will apply to many real estate purchases and commissions: the agent may then only demand his commission from the buyer and the seller in equal shares, i.e. half each, in accordance with Section 656c BGB or 656d BGB when selling owner-occupied apartments and single-family houses to consumers. This also applies if the broker agrees with one party to work for him free of charge.

In the case of renting, on the other hand, this so-called “buyer principle” has long been in force: the agent is paid by the party who has commissioned him. This is usually the landlord. The broker’s commission may not exceed two net monthly rents.

TERMINATION OF THE BROKERAGE CONTRACT

In the case of a contract for an indefinite period, it may be terminated at any time without giving reasons. In the case of a fixed-term contract, it may be terminated either with due observance of the notice periods or extraordinarily for good cause. Good cause exists if the broker does not fulfil his contractual obligations, the term of the contract is too long or the relationship of trust is disturbed.

COMPENSATION FOR DAMAGES IN THE EVENT OF BREACH OF DUTY BY THE CLIENT

If the principal breaches his contractual obligations under the brokerage contract, the broker is entitled to claim damages pursuant to Section 280 et seqq. BGB. He must be placed in the position he would have been in if the breach of duty had not occurred. In addition, he can demand reimbursement of his expenses according to Section 652 (II) BGB, if agreed. However, the broker is only entitled to a commission if he can prove that the apartment or property has been sold or arranged elsewhere.

Furthermore, there is also a special need for protection in the area of housing in the law on estate agents. To protect the person seeking housing, there are therefore additional protective provisions that can be found in the Wohnungsvermittlungsgesetz and are always applied when the broker mediates housing on a commercial basis.

LIMITATION OF THE BROKER’S COMMISSION UNDER COMMERCIAL TENANCY LAW

In commercial tenancy law, there is no corresponding limitation of the broker’s commission. The Wohnungsvermittlungsgesetz restricts the contractual autonomy in favor of the person seeking housing. According to Section 4a (I) WoVermG, no down payments may be agreed in the brokerage contract as payment for a partial service already rendered. According to Section 4a (II) WoVermG, only furnishment or inventory items are exempt from this. The estate agent may only offer a apartment if he has been commissioned to do so. In addition, he has to observe certain compulsory details in advertisements for  apartment. In the event of violations of the provisions of the Wohnungsvermittlungsgesetz, a fine can be imposed on him.

 

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